Option Investor
Archive
HAVING TROUBLE PRINTING?
Printer friendly version
  Linda Piazza   3/20/03,  8:32:48 AM
Although I'm in Texas and not in the Denver snowstorm, my cable broadband keeps going down this morning. If I disappear for a while during the day or am slow answering your email, that's why.

 
 
  Jonathan Levinson   3/20/03,  8:31:38 AM
Initial jobless claims off by 4,000, down to 421,000, bringing the 4 week moving average up to a 10 month high. Link

 
 
  Linda Piazza   3/20/03,  8:24:00 AM
Currently, the FTSE 100 trades down 2.20 points, the CAC 40 trades up 8.73 points, and the DAX trades up 18.67 points.

 
 
  Jonathan Levinson   3/20/03,  8:21:13 AM
By my count, the fed has 14.75B in expiring repos coming due today, of which 5B is a 28 day repo. No announcement has yet been made.

 
 
  Jonathan Levinson   3/20/03,  7:58:25 AM
I was a choppy night for US equity futures and the dollar, but all are nearly unchanged to slightly lower from their afternoon closing prices. The US Dollar Index is currently trading 101.13, the ND contract 1074, ES contract 873, QQQ 26.62 and gold down 1.80 to 333.80.

I won't be harping on the irregular action we might be seeing in the markets, as my job presumably is not to spout my own political views. But traders need to be cognizant of the fact that intervention in the markets is a reality. What that tells me is that unless a "perfect storm" or "rogue wave" or significantly irregular confluence of unlikely events line up at once, a "waterfall decline" in the markets won't be permitted to happen. The statement from Yasuo Fukuda, in concert with Al Green, tells me that is their agenda for the markets, and they control more money than all of us combined many times over. Trade safe.

 
 
  Linda Piazza   3/20/03,  7:54:28 AM
Iraq denies that it has or has used any scud missiles. It is banned from owning any scuds, as their range would exceed that allowed to Iraq.

 
 
  Jonathan Levinson   3/20/03,  7:46:40 AM
Worth repeating this morning, a story from the BBC:

A deal was struck last week in the US between a former Japanese finance minister and the head of the US central bank, the Federal Reserve's Alan Greenspan.

"There was an agreement between Japan and the US to take action co-operatively in foreign exchange, stocks and other markets if the markets face a crisis," Chief Cabinet Secretary Yasuo Fukuda said.

Link

 
 
  Linda Piazza   3/20/03,  7:17:03 AM
Good morning. "The opening stages of the disarmament have begun," Ari Fleischer announced last night just after the first reports of air raid sirens going off in Baghdad. So began the campaign dubbed "Operation Iraqi Freedom." That campaign began differently than many had imagined, with strike against a "target of opportunity" in or near Baghdad rather than with the fast and furious pounding that Bush had promised. This morning, news reports indicate that the CIA had given Bush information about possible leaderships targets. Reports indicate that U.S. forces launched at least 40 Tomahawk cruise missiles, and a CNN reporter inside Iraq this morning mentions that the Iraqi information ministry reports that at least four targets were hit. About three hours after the attack, Iraqi television aired an edited tape of Saddam Hussein. The fact that the tape was edited leads some to question whether it was taped before or after the U.S. attack. (Note: After originally submitting this post, I found notations in a Reuter's article that Hussein had mentioned the time of the attack.)

All this information was obtained from credible news sources and, in many cases, confirmed through more than one news source. As we saw with the information that the U.S. had moved into the demilitarized zone yesterday morning, even credible news sources can differ or offer erroneous information, so read any war-related information here with that in mind. Further developments this morning include an Iraqi launch of two medium-range missiles at Kuwait, with a Patriot missile bringing down one scud missile north of Kuwait City. In the last few moments, I've begun hearing of a Cessna-type plane that left Iraqi airspace, headed toward a Marine encampment, but crashed before it reached that encampment. The Iraqi's were known to have outfitted these types of aircrafts to disperse chemical or biological weapons and have used them in the past for that purpose, so there is some concern about what might have been on the plane. Officials do not yet offer an explanation for the crashing of the plane.

I'm not a war correspondent, but I thought the early information might be useful to us as we plan our trading days. Let's look at how Asian and European markets were reacting. Exporters led the Nikkei to early gains in Thursday's trading as the dollar gained against the yen and crude oil prices fell. Although closing nearly 100 points off its highs, the Nikkei still managed a 144.01 point or 1.8% gain, closing at 8,195.05. Of special interest to U.S. investors might be the lowered guidance from Advantest, offered after the Nikkei closed. This semi-conductor equipment testing company blamed the global economy and war uncertainties for loss forecasts that now will number 12 billion yen, increased dramatically from the originally forecast 6.3 billion yen loss. Traders should note that the Nikkei will be closed tomorrow.

Of importance in European trading were the release of a U.K. retail sales number that showed an unexpected drop in the volume of retail sales and a jobless claims number that showed an unexpected rise in unemployment. Across Europe, consumer confidence numbers declined. German insurer Allianz posted an annual loss and announced plans to sell shares and bonds to raise 5 billion euros. As of this writing, most European markets managed small gains despite the economic numbers released today. Currently, the FTSE 100 is up 6.00 points, the CAC 40 is up 11.93 points, and the DAX is up 18.67 points. All these markets have traded both sides of the flatline today.

 
 
  Jeff Bailey   3/19/03,  11:05:16 PM
S&P futures (sp03m) 876.40 ..... Signing off for now, but futures market now looks quite calm.

 
 
  Jeff Bailey   3/19/03,  11:01:40 PM
Pivot Matrix I haven't had a chance to look over the OI web site to see if an updated matrix has been presented. I do not have one at home to have updated, but for most part, I'm trying to focus with my own account on the WEEKLY and MONTHLY levels at this point, with each day at this point, understanding that DAILY S2 and R2's could easily be traded within hours.

I was somewhat "pleased" to see the Dow finish it's session strong, and earlier mention in today's 01:00 PM EST update that NYSE Composite was only major index at that time in the green, hints to me that institutions are at work and have a more bullish bias.

 
 
  Jeff Bailey   3/19/03,  10:48:15 PM
I've spent better part of this afternoon trying to dig out of approximately 3.5' of wet snow, with drifts at 4.5'. Was making progress when neighbor decided to show me how his Jeep with new lift kit and offroad tires could forge where my Dodge Cummins Diesel couldn't. He's now high centered and blocks my path of exit. I will be here at my house (as will the next door neighbor at his) tomorrow, armed with Toshiba Satellite laptop computer, on telephone line that Alexander Graham Bell would be proud of. Compared to the T1 line I usually work from at office with 3 large screen monitors, I feel like I'm stuck in quicksand. However, snow is supposed to let up by tomorrow, and I think neighbor should have his Jeep unlodged by tomorrow at some point.

 
 
  Jeff Bailey   3/19/03,  10:37:07 PM
S&P futures (sp03m) 875.00 ... "first strike" now looks to be specific targets where Saddam Hussein was thought to be. Coalition ground forces still outside of Iraq's borders.

Some analyst's already commenting that main attack may be days away, and for now, will wait for intelligence data to see if Saddam Hussein is still alive.

 
 
  Jeff Bailey   3/19/03,  10:23:32 PM
Early strike on Iraq CNN reports from Pentagon, that early strike was characterized as "target of opportunity" with strikes targeted at buildings where Saddam Hussein was believed to be.

S&P futures (sp03h) 873.30 after dipping to a low of 870.50.

 
 
  Jeff Bailey   3/19/03,  10:15:11 PM
Early stages of attack on Iraq now underway. S&P futures (sp03m) 875.00.

 
 
  Steven Price   3/19/03,  4:10:57 PM
When are you going to stop being a bear and start giving us some bull signals????????? the downisde is over for the moment and clearly we are headed to 8700 by next week????

I have tried to assess the pivot points at which I think traders can look to go long. I reviewed my posts today and they are about evenly split, if not leaning to the bullish side. I do think the upturning bullish percents are important, as are the tests of resistance and I have made references to those bullish signs in almost all of my content. I am trying to present an unbias view and certainly have not recommended bearish entries after the breakthrough of Dow 8160. Does that mean I have given up my bearish bias entirely? Probably not, as I still am concerned about what can go wrong in a war scenario and also with the economy. However, if a trader disagrees with me and is confident in their own analysis, then I say go for it! I do my best to help guide our readers, but I am certainly not always right and have received many emails that I did not agree with at the time, but were eventually correct. I have also received many that were wrong, but I do believe you need to take our opinions into account and then make an informed decision that you feel comfortable with.

 
 
  Steven Price   3/19/03,  4:01:25 PM
This morning you posted for aggressive bulls to open a small long play on spx trade above 870,and nasdaq above 1400.Jim Brown and his partner keep shorting the spx above 870,curious here???

I actually qualified my recommendations with the need for a confirmation breakout in the COMP over 1400, which we really have not gotten yet. But Jim and I are targeting much different moves here, with him trading intraday smaller moves. I am trying to pick a direction for 2-3 days or longer. He is trading futures and does not have to recover as wide of a bid-ask as I do in options so can profit off of smaller moves. A 5 point move in the futures can be profitable, while it wouldn't even cover the bid-ask in an option trade. It is also the reason I have not given any official signals - I am not fond of opening a 2-3 day trade before the start of a war. While everyone seems convinced it will be a quick affair, there are simply too many unknowns to commit for that period of time when we are about to go in.

 
 
  Linda Piazza   3/19/03,  3:58:52 PM
The SOX may squeak by with the close in the green today, or may close barely in the red. The SOX successfully tested its simple 200-dma today--bullish--but is printing a bearish-looking candle. Daily MACD looks bullish, but RSI may be turning from the most overbought levels seen in a long time. Mixed evidence.

 
 
  Jonathan Levinson   3/19/03,  3:51:28 PM
For those who have accused me of paranoia in referring to possible manipulation and intervention in the markets, a story from the BBC:

A deal was struck last week in the US between a former Japanese finance minister and the head of the US central bank, the Federal Reserve's Alan Greenspan.

"There was an agreement between Japan and the US to take action co-operatively in foreign exchange, stocks and other markets if the markets face a crisis," Chief Cabinet Secretary Yasuo Fukuda said.

Link

 
 
  Kent Barton   3/19/03,  3:49:04 PM
3:15 update has been posted at Link

 
 
  Steven Price   3/19/03,  3:48:55 PM
Swing Trade Signals
This run is making a real effort at bearish resistance breakthroughs on the PnF chart in all three indices SPX/OEX/Dow. The OEX pulled a breakthrough on the 2.5 point box at 445, while the SPX came within 0.01 of 875. The Dow has to cross 8300 and then the breakthrough comes at 8350. The COMP just faded at 1400 once again.

Current levels: Dow 8275/OEX 445.32/SPX 874.73 (the OEX traditional chart has bearish resistance at 448 and is sitting right up against it with the move over 444).

 
 
  Jonathan Levinson   3/19/03,  3:45:15 PM
I spoke too soon as the COMPX revisits the highs of the day, currently trading 1400. The TRINQ is 1.06, TICK.NQ +610 showing some very focused selling against broadbased buying. QQV +.15, VXN flat. The 5 minute chart shows price ascending in a rising wedge, but tripping off the buy stops for shorts hidden above the highs of the day could power the COMPX higher from here.

 
 
  Linda Piazza   3/19/03,  3:44:03 PM
The OEX isn't giving me the information I wanted today. I wanted to see it break out of the rising wedge formation and then test support. Watching it test next support and immediately bounce or else plunge deeper and bounce tepidly would have given me a lot more confidence in future direction. Prices still climb the underside of that rising wedge, a rising line that is far too steep to be maintained. The 60-minute 21(3)3 stochs have now been fully overbought for 33 hourly candles. That's probably not a record, but it sure scares me out of wanting to plunge in on the long side, especially with daily 21(3)3 in overbought territory and daily RSI beginning to roll. I want to get that pullback and see where the OEX goes first. Still, I note that the OEX now trades above that exponential 100-dma and that it looks to be headed toward a close on the high of the day. That close may be smack up against next resistance, however. Maybe tomorrow.

 
 
  Steven Price   3/19/03,  3:20:01 PM
I am thinking of closing my LLY put trade for a loss and move on. With the stock above 56 most of the day, the sector not looking weak and the war getting closer it seems that it just wants to move up. What do you think?

LLY $56.27 (+0.29) I don't like LLY's bounce back over $56 and I don't have a good argument to prevent put holders from closing out, other than this: The recent news (Affinitak, Zyprexa, Strattera) in the stock has been almost all negative and there is heavy resistance on a closing basis at $57 (our closing stop is at $57.10). However, it has not managed a close above its 21-dma since January and it is now flirting with that level ($56.22). I still think the overall downtrend remains in tact and if it fails the 21-dma, I'd probably give it another day. It is back at the breakdown level and there is still quite a bit of congestion to get through on the upside. I probably would not recommend new entries here, until I see a roll over, but I plan on leaving the play open and re-examining tomorrow.

 
 
  Jonathan Levinson   3/19/03,  3:15:54 PM
That could be a lower low for the COMPX as the move toward the day high fails just above 1395. FVX +4.9 bps, TRINQ 1.73 and TICK.NQ -65.

 
 
  Steven Price   3/19/03,  3:05:56 PM
Dear Carnac - I'm just glad I get the first peak at where the market will be 3-6 months from now. As Mel Brooks once said, "It's good to be the editor!" (or something like that)

 
 
  Mark Phillips   3/19/03,  3:02:56 PM
Stop The Presses!

All right guys, I got the message! We're way over the threshold here with votes in favor of my article topic for tonight. So, I'm heading for the closet now to find and dust off my Carnac hat. Thanks for all the votes!

 
 
  Steven Price   3/19/03,  3:01:05 PM
Swing Trade Signals
Not that patterns mean much right now but i am looking at a small H&S on the 2 day 10 min chart on the dow James

I pulled up the chart and left in place the resistance lines I had drawn previously. The upside breakout looks bullish on a short-term basis. Link . I'm still not going long 5 hours before the invasion deadline, especially with bearish resistance and previous significant support at 8300 just above, but the strength and conviction of the continued rally is very impressive. Bulls are still in control. I keep hearing that the war rally is really a pre-war rally and that it may end when the bombs start falling. Not sure if that will be the case, but the SPX is above bearish resistance at 870 (although a complete break comes at 875).

 
 
  Jonathan Levinson   3/19/03,  2:53:19 PM
I'm hearing that MSNBC is reporting US bombing of missile sites in Iraq.

 
 
  Linda Piazza   3/19/03,  2:51:23 PM
With the move up to new day's highs, the OEX is now attempting to climb back into the rising wedge on the hourly chart. So far, since breaking just below that level, it's been climbing up the underside of the steeply rising former support.

 
 
  Jonathan Levinson   3/19/03,  2:41:12 PM
The TICK.NQ is at +603, which is one of the highs I've seen this week. TRINQ down to 1.28, but yields are off their intraday highs. QQV +.29, VXN -.09. The COMPX is up to 1393 and above earlier afternoon resistance, with nothing between it and the highs of the day printed earlier this morning. HUI and XAU are near their lows.

 
 
  Mark Phillips   3/19/03,  2:24:54 PM
Mark, You seem to have a knack for seperating youself from the daily events to look at the broader picture...care to give us a brief forecast on MM that you envision for the markets in the next, say, 3-6 months if we assume the Iraq conflict goes according to "script", whatever that means? C'mon, take a stab at it! Thanks, DS

Wow! Thanks for the challenge, DS! I've gone into my thoughts on the topic in the not too distant past, but sure -- I'm willing to go for an update. but I don't think the MM is the right venue -- I tend to get a bit wordy when I put on my "Great Carnac" hat. So how about this? I'm due to write an article for the site tonight, so if I can get more than a half-dozen emails by the close confirming that ya'll would like something along those lines, then I'll go for it. Put the word "Carnac" in the subject line.

 
 
  Linda Piazza   3/19/03,  2:17:25 PM
At the risk of sending the VIX plummeting again, I note that it is again up on the day, although minimally, measuring 35.84.

 
 
  Kent Barton   3/19/03,  2:16:17 PM
GSO.X software index (106.94 -3.94) giving back most of Monday's gains in reaction to the ORCL sell-off. This constitutes an unsuccessful test of the late-January highs in the 111 region, which should now provide formidable resistance. The daily chart shows possible underlying support at the 50-dma (105.71) and 200-dma at 101.72.

 
 
  Mark Phillips   3/19/03,  2:13:15 PM
See why I don't trade news?

Hi Mark, Isn't the USAI -EXPE deal a stock swap deal of 1.93 shares of USAI as opposed to a 3.3 B cash purchase? At yesterdays USAI closing price (26.49) EXPE would be slightly over 51 but at current 24.25 1.93 shares would be 46.80 and only a .50 premium at current level. Am I missing something? Thanks

Nope! I don't think you're missing a thing, but I did. In reading the news release in greater detail, I see that it is indeed a stock deal, not cash. So the "fair value" of EXPE will now float with the value of USAI. That means that there really isn't any premium built into the stock at current levels. Every time I try to decipher the way to play one of these aquisition deals (which isn't often!), I am reminded that the arbitrage guys know that game far better than I and I am more than happy to let them have it. Sorry for any confusion I may have caused!

 
 
  Linda Piazza   3/19/03,  2:07:45 PM
After mentioning the OEX exponential 100-dma several times yesterday, I neglected to mention the OEX's position in relationship to the exponential 100-dma today. Currently, the OEX trades at 440.43, just below that 440.88 average, and has so far been unable to maintain levels above that average.

 
 
  Mark Phillips   3/19/03,  2:04:31 PM
Hi, I have traded options on ROOM and are currently flat and trying to figure out what is happening. I know its a Barry Diller company. Any thoughts?

ROOM $53.32 (+0.08) Hotels.com is a travel stock, just like EXPE and today's volatility appears to be related to two factors. The first is Barry Diller's resignation as CEO and Chariman of Vivendi's Entertainment unit, while the second is the announcement that USAI is making a bid for all the shares of EXPE that it doesn't already own (see my 13:47 post). All told, the competing news items have produced an exceptionally volatile day for ROOM, with a 14% range, although the stock is now trading near the flat line. Can you say volatility? I knew that you could! GRIN

I am not a news or events trader like Jim, so I wouldn't even hazard a guess as to how to play these competing news stories. Technically, I liked the breakout over the 200-dma earlier this week, and it has to be encouraging to the bulls (at least those that weren't shaken out this morning) that the stock is holding above that level this afternoon. The PnF charts looks quite constructive as well, with the late February Buy signal generating a bullish price target of $62. That would enable a trader to make an argument for new bullish positions on another rebound from the $48-49 area. but given the news-driven volatility today, I think the prudent course of action is to leave it alone and pick another target.

 
 
  Jonathan Levinson   3/19/03,  2:03:34 PM
The five year yield is near its best levels of the day, +6.4 bps, as the COMPX trades 1386, with the TRINQ 1.85, TICK.NQ +35, QQV flat and VXN +.46. The market seems pretty impervious to the rumors flying around this afternoon, and it's turning into a quiet afternoon (famous last words).

 
 
  Mark Phillips   3/19/03,  1:47:04 PM
Hello Mark, Would you agree that EXPE is a good put candidate here? Thanks jk

I think I see where you're going...fade the big spike on the news of the USAI purchase of the remaining outstanding shares. Reading the news announcement, I see that the $3.3 billion acquisition price effectively values EXPE at just over $51. That is still a $5 premium to where the stock is currently trading. So throw out the technicals and look at the pricing, and EXPE is currently "undervalued" by $5 per share. I wouldn't be a fan of a bearish play on the stock here, as I would expect it to trade flat to slightly up from here until the completion of the deal. Right now, that $5 discrepancy is the "pricing in" of the risk that the deal doesn't happen, but as it gets closer to certainty, EXPE should move closer to that "fair value" of $51. The only way I see a bearish play on EXPE paying off is if the deal fell through, and then we ought to see the stock trading back down near the $38-39 area, where it was yesterday before the news broke.

 
 
  Linda Piazza   3/19/03,  1:44:32 PM
I mentioned this morning that the OEX had not traded below its 60-minute 21-pma since March 12. During the day's trading, that moving average has climbed to 436.24, and still points straight up. This 436.24 number brings the moving average just below the 436.95 daily S1 level, for those of you watching pivot analysis levels. The OEX still has not crossed below the short-term ascending trendline (mid-day on the 17th to current trading), but it has fallen outside the rising wedge. Well, "fallen outside" may be too strong a term. So far, it has moved below the supporting line, risen the next hour to retest it from the bottom, and then appears to be turning down from that former support again.

 
 
  Linda Piazza   3/19/03,  1:35:12 PM
Here's how the European markets ended: The FTSE 100 was up 18.10 points or .48% to 3765.40; the CAC 40 was up 42.79 points or 1.53% to 2837.68, and the DAX was up 22.62 points or .88%. The DAX once again this week clung to a close above 2600, with a 2607.23 number. These markets closed in the upper-middle section of their more than 100-point ranges.

 
 
  Steven Price   3/19/03,  1:32:36 PM
Trader will notice also that the VIX 35% level acted as resistance until the H&S breakdown in mid-January right around the level we are at now. That was the first close below 8300 and the neckline break right around 8220. Now that we are back to that H&S breakdown level, we are back at 35%. Because we have tested the VIX down to 35% frequently over the past two months, I'd wait for a close below 34% before concluding that we are out of the woods and beyond equity pullback territory - at least until a test of 30%.

 
 
  Jeff Bailey   3/19/03,  1:29:36 PM
01:00 PM Update posted at this Link

 
 
  Linda Piazza   3/19/03,  1:27:22 PM
The Dow Jones Transportation Index falls back from its day's high of 2148.69, and now trades at 2135.51. An important level to watch today is 2120, the support from late January/early February consolidation. Below that, the 2090 level was the July low and 2055 is the 21-dma. If the TRAN should move back up again, next overhead resistance lies at the simple 50-dma at 2170.35.

 
 
  Steven Price   3/19/03,  1:26:57 PM
Good observations from a reader:

Steve, Looks like the 4.0% yield level is the next resistance point. This rally is starting to look like another bear market rally. There's been a lot of money flowing into ETFs and index funds of late and on the shorter-term the put/call ratio (I use 21-sma/50-ema is heading into overbought levels.Look at chart link for $CPC. Link

As for the VIX and the volatility in the markets, well it's been acting weird of late. I agree with Rick Utt's remarks last night that it could be reflecting that this rally is not real. That said thought last Tuesday the last time it hit the 40 level it put in a "Island" reversal candle formation. It has come down to 35.65, I'm watching the 34 level and a break below that would be bullish.

Thanks, Tab

 
 
  Linda Piazza   3/19/03,  1:16:33 PM
What's happening with volume? Decliners continue to lead, but not by as big a proportion as they did earlier. Down volume barely leads up volume on the NYSE now, although down volume remains 2.3 times up volume on the Nasdaq. New highs continue to lead new lows. Total volume is 713 million shares on the NYSE and 970 million on the Nasdaq.

 
 
  Jonathan Levinson   3/19/03,  1:15:14 PM
I don't know why I do this to myself, but am listening to Bloomberg radio. This incisive analysis just in: treasuries are seeing selling as bond traders factor in the expectation of a quick and decisive military victory. Not a peep about Al Green reeling in 1.25B via reverse repo, the double bottom on the yield chart, or the credit bubble or US Dollar Index. I'm sure that bond traders are standing around saying "Gee, I think we'll have a quick and decisive military victory, better SELL MORTIMER, SELL!" I'm closing down Bloomberg for awhile and will listen to my computer fan.

 
 
  Linda Piazza   3/19/03,  1:10:48 PM
Today, the simple 50-dma appears to be turning back further advances on the Russell 2000. Current Russell prices are 365.93, and that 50-dma is overhead at 368.53. Yesterday, the Russell closed only a little more than a point below that MA. Near 360 lies the October-to-March supporting trendline that was broken to the downside in early March, and then to the upside on Monday.

 
 
  Steven Price   3/19/03,  1:08:05 PM
Swing Trade Signals
Bullish signs - Ten, Thirty and Five year yields all broke through their 50-dmas yesterday, and then jumped again this morning. However, we are running into some heavy resistance in the ten year at 4.0% and five year at 3.0%.

 
 
  Jonathan Levinson   3/19/03,  1:07:53 PM
The COMPX is back up to 1390. FVX is up 4.6 bps, TRINQ down to 1.43, TICK.NQ +42. This up-phase off the lows has pulled the price back to resistance, and its action here will be telling- a failure should be sufficiently discouraging to bring the lows of the day back into view. Of course, a break higher will target the day highs. Lttle else to report, as HUI and XAU continue to trade in the red, -1.72 and -.55 respectively. QQV and VXN are flat, and the put to call ratio has made it up to .86, which is pretty much neutral within the recent range.

 
 
  Linda Piazza   3/19/03,  12:49:36 PM
Currently at 440.39, the OEX rises to test the underside of that broken rising wedge. Again, this is a normal and natural event to happen. As it does so, it again tests the 440.50 S/R from earlier this morning. If you're in the market, either bullish or bearish, the gyrations are difficult to endure, but we may be on the brink of gaining useful information that will help us plan future trades.

 
 
  Jonathan Levinson   3/19/03,  12:37:43 PM
Jonathan, referencing your latest entry about the war having already started: I live in London, and it's a conincidence that just a few minutes ago I purchased the Evening Standard newspaper, and the Headline on the front page is "War Has Started," with a caption claiming that the "first shots were fired by British special forces engaging Iraqi troops behind the lines newar Basra." Thanks for all the excellent analysis!

Thanks, Tim.

 
 
  Linda Piazza   3/19/03,  12:24:14 PM
I bet you didn't know that I have the power to change the value of the VIX, all by myself. For several days, I've been posting updates on the VIX, only to have the values switch direction the moment I click the button to enter the post. Just now I was writing a post about the VIX being positive and this time was wise enough to hold my finger above the button before clicking, only to see the VIX go red again. Currently at 35.53, the VIX is in the middle of its range for the day, down .25.

 
 
  Jonathan Levinson   3/19/03,  12:16:15 PM
News of US and UK troops engaging Iraqi troops near Basra: Link

 
 
  Linda Piazza   3/19/03,  12:10:32 PM
Most volume patterns look negative this morning, with adv/dec ratios of .74 on NYSE-traded issues, and .65 on Nasdaq-traded issues. Down volume is 1.4 times up volume on the NYSE and 3.7 times up volume on the Nasdaq. New highs outnumber new lows, by almost two to one. Total volume is 549 million shares on the NYSE and 747 million shares on the Nasdaq.

 
 
  Linda Piazza   3/19/03,  12:06:01 PM
For cautious traders who wait for throwbacks or pullbacks to assess the first movement above or below support, the current action provides necessary information. I would note that if the OEX continues to fall today, the 60-minute 21-pma lies below at 434.38. The OEX has not been below that MA since the 12th, so it will be important to watch the behavior of the OEX as it approaches that MA, should the OEX continue to fall. The simple 50-dma lies just below that, at 433.64. As I scan Jeff's pivot analysis printout, I see that 433.50 is the daily S2 and 434.80 is the weekly R1, so there's some rough correspondence between pivot levels and those MA's. (Note: daily S1 is 436.95, a level between current OEX price and those MA's.)

 
 
  Jonathan Levinson   3/19/03,  11:57:24 AM
Little bounce off the lows so far. Yields holding up, FVX +2.5 bps.

Now what/how do you read with yields rising and market down today and market internals weak. I would short had the yields been red along with the internals as they are now. Not all things are coming together to short comfortably.

Perhaps they are. Thinking about it, high yields should be bearish for stocks, as stocks compete with bonds for investor dollars. Perhaps it's because most investors have either packed it in or no longer care. But rising yields give investors more incentive to buy bonds- thus the inverse bond/yield relationship. I use yields as a leading indicator for equity moves. But if bonds sell off big, and yields spike, and the credit bubble gets pricked, a very bad environment for equities will ensue.

 
 
  Linda Piazza   3/19/03,  11:49:23 AM
The OEX has moved below the lower supporting line of the rising wedge on the 60-minute chart, at a higher price than I estimated that it would, but it's also possible to draw a shorter-term supporting line on the hourly chart, beginning about midday on the 17th. The OEX has not yet crossed beneath that supporting line and wouldn't move below that line until it traded 437.50.

 
 
  Jeff Bailey   3/19/03,  11:48:56 AM
11:00 Update posted at this Link

 
 
  Linda Piazza   3/19/03,  11:44:36 AM
The VIX remains negative, but is moving off its low of the day.

 
 
  Jonathan Levinson   3/19/03,  11:42:23 AM
Another breakdown to new lows, 1378 COMPX and 26.36 QQQ. TRINQ 2.68, TICK.NQ -261 and QQV +.13. FVX +1.6 bps on the day.

 
 
  Steven Price   3/19/03,  11:42:04 AM
I'm wondering about straddles too. If one thing is certain, it's that these markets aren't going to stand still. How would you play a straddle? Would you pick a put/call atm? Or would you pick each just otm? Thanks & keep up the good work

A straddle is generally an ATM trade, although the purchase of the same strike at any level is a straddle. The purchase of an OTM put and call is a strangle. If you are more bearish, then you might want to go with a higher strike, where the put is in the money (i.e. a DJX 82); if more bullish, then possibly the lower strike, where the call is in the money (i.e. DJX 81). In either case, owning a straddle allows you to buy the underlying (possibly DIA) on dips and sell on rallies in order to recoup some of the premium costs, as well as just holding for a big move either way. The trick is never trading more of the underlying instrument than you are hedged with options.

 
 
  Linda Piazza   3/19/03,  11:25:17 AM
Watch that 315.54 simple 200-dma level on the SOX. I mentioned earlier today that the SOX was trading between its simple and exponential 200-dma's, and this move down should test the support of the simple 200-dma. Currently, the SOX trades at 319.41.

 
 
  Linda Piazza   3/19/03,  11:22:40 AM
So far, the VIX remains negative on the market decline, down .45 to 35.33.

 
 
  Steven Price   3/19/03,  11:19:52 AM
Swing Trade Signals
Looks like that war jitter slide is starting to take root. Picking a pullback entry for bulls would be awfully risky right now and I think playing short term moves intraday, possibly following Jim and Vlada in the futures monitor, might be the best course for aggressive traders at this time.

 
 
  Jonathan Levinson   3/19/03,  11:19:23 AM
This latest wave of selling is making the trading range look increasingly like a topping pattern. Too flat for a classic head and shoulders, but it looks almost like a reverse cup and handle printing. Anybody's guess, but the depth of this pullback and its behavior at the 1365 and 1352 levels, if we get there, will be very telling.

 
 
  Linda Piazza   3/19/03,  11:19:09 AM
Yesterday, I mentioned a possible rising wedge formation on the OEX. While some instead drew a rising regression channel or drew a rising wedge with a different top line, all agreed on the bottom supporting line. The OEX currently challenges that line, with a move below about 37.50 being a move below the line. If the OEX should violate that line, this should be seen as an opportunity to assess the strength of this index. Pring and Meyers warn that bear-market rallies often produce such rising wedge shapes and that violations of them often produce precipitous drops. There's been an underlying bid in the markets, lately, though, so bulls might defend the rising trendline, keeping the OEX from dropping through it, at least during opex week. Even if the OEX does violate the line, that precipitous drop might not occur and the bearish implications might not be realized. At least in the beginning stages, the rising wedge produced higher volume relative to recent volume, and volume should have dropped as it formed. If the violation does occur, this is the opportunity many of us have awaited to assess the strength of the rally.

 
 
  Jonathan Levinson   3/19/03,  11:13:54 AM
A rash of lows is breaking out as QQQ prints 26.48, COMPX 1384. TRINQ 2.16, QQV +.36, TICK.NQ +2, FVX +3.1 bps, HUI -.6 and XAU -.02.

 
 
  Linda Piazza   3/19/03,  11:01:24 AM
Reader Question: I'm looking at GE the last two days and see that it seems to be having trouble near the 200 MA. Thoughts?

Response Studying GE's chart reveals some of the same mixture of bullish and bearish possibilities seen on a lot of charts. On the P&F charts, I note that GE is still on a sell signal, but will create a new buy signal with a move over 28. I note some historical resistance at 28, too. I note, however, that a move above 28 will also confirm a double-bottom pattern in GE, portending a move up to somewhere near 34.

GE is below its bearish resistance line, too, so the reader was wise to worry about the possibility that GE may turn over here, just below its 200-dma (actually, just below both the simple and exponential 200-dma's). 21(3)3 stochastics are the most overbought they've been since last August, when prices were much higher, of course. RSI is even higher now than it was in August. There's a kiss on the stochastics and both stochastics and RSI have flattened, but neither have yet rolled over. MACD looks strong, however, crossing above zero. The 22-dma has turned up and crossed above the 50-dma, a bullish sign, and the 100-dma has turned up, too, although it's far from crossing the 200-dma's, and the 50 is far from crossing the 100, too.

On the weekly charts, the RSI approaches overbought levels, but hasn't quite reached it and hasn't yet turned down. MACD is turning up.

Perhaps most important of all, GE has crossed above the descending trendline that's been capping its prices since early last year. That trendline is now at about 24.70, so it's perhaps possible that GE would stop near that level on any pullback. Just below are the crossed 21 and 50-dma's, at 23.96 and 24.19, so they might lend their support, too, and the shorter-term descending trendline (from last August to March) crosses below them.

So, there's still a P&F sell signal in play, with resistance (MA, historical, P&F) near the level at which it would create a new buy signal. Stochs and RSI indicate that GE expended a lot of energy to get to current levels. Yet, MACD looks strong and GE has moved above two descending trendlines, one of several month's duration and one of a year's duration. Bulls and bears both could construct a convincing argument here.

 
 
  Mark Phillips   3/19/03,  10:57:01 AM
MME $38.74 (+1.21) Well, would you look at that! Despite the braod market being mired in a very tight trading range this morning, our MME Call play is launching to new recent highs, solidly taking out the 438 resistance level, which has twice turned back the bulls over the past couple weeks. There is likely to be some mild resistance in the $39-40 area, and then we could be looking at a strong run at the October highs near $43. Patient traders that took advantage of the recent dip near $36 have got to be happy with themselves this morning, as MME is clearly showing strength relative to the broad market. I'm not a fan of buying the breakouts in this stock, so for those of you still looking for an entry, I would say the next solid opportunity will be on the next pullback, which ought to find support in the $37-38 area, continuing the pattern of higher lows.

 
 
  Jonathan Levinson   3/19/03,  10:42:34 AM
Any guess as to why Greenspan would do a reverse repo? I guess I don't understand the logic. It was actually mentioned moments ago on CNBC.

Yes, I have a guess. The double bottom in the yield occurred at a level that satisfies Al Green, as a collapse in the yield could melt down the US Dollar. So the fed is trying to maintain yields and bond prices in a range. We now apparently know where the yield bottom will go. More importantly will be where the top comes in. Al Green will begin unleashing huge repos when it is near.

 
 
  Jonathan Levinson   3/19/03,  10:35:20 AM
COMPX is showing weakness and SPX strength for a change- quite a dramatic divergence today.

 
 
  Jonathan Levinson   3/19/03,  10:31:40 AM
The last time we had a trading range this narrow and this long was one month ago, during the last opex week, affectionately known by some traders as "scam week". While it's obvious that many forces are work, it's strange how price keeps reverting back to the narrow ascending range on the 15 minute chart. Hypothesis: If market makers saw that they were going to miss the optimal expiry targets to the upside, they could have hedged their positions by buying calls in the open market (thus the low p/c ratios and high QQV/VXN readings seen lately) or the underlying stocks (witness the massive volume on the QQQ this week). If so, expect the range to last for the week, and then to give it up next week, just as we saw last month. This is just a cute hypothesis- we'll have to watch to see how it plays out.

 
 
  Steven Price   3/19/03,  10:29:06 AM
Swing Trade Signals
As we continue to hover around unchanged in the SPX/OEX/Dow and the COMP is lower, it appears we are going to go into a holding pattern ahead of tonight's deadline. I can see a logical scenario for a pre-war jitters sell-off this afternoon, but so far that hasn't been the case. The VIX sitting just over 35% also indicates we are in possible pullback territory. We never got the bullish moves I highlighted this morning, and as time passes I am growing less inclined toward recommending a bullish entry if we do. Divergence is not usually a bullish sign after a big run and with the COMP staying in the red I am happy on the sidelines at the moment.

 
 
  Linda Piazza   3/19/03,  10:24:01 AM
As a helpful reader reminds me, the SOX trades down today. At 324.59, the SOX remains above its 315.57 simple 200-dma, but below its 337.23 exponential 200-dma. Daily RSI turns over from overbought levels and daily 21(3)3 stochastics have kissed in overbought territory, but without turning over. ADX is high enough that the moving-average evidence is probably more important than the oscillator evidence, so it might be important to watch the SOX's behavior in relationship to those MA's today. As I've mentioned several times, I'm particularly concerned because the rise in the SOX has not been attended by a rise in OBV.

 
 
  Linda Piazza   3/19/03,  10:09:42 AM
The OEX achieves a new day's high, with the opening level providing support, as Steve mentioned. Bulls now want that 50% retracement of the first five-minute candle (440.92) to provide support on pullbacks this morning.

 
 
  Jonathan Levinson   3/19/03,  10:06:01 AM
QUOTE OF THE DAY: "They totally punted. That's just unacceptable." -- James Bianco, president, market-data firm Bianco Research comments on the lack of guidance by the Fed yesterday.

 
 
  Jonathan Levinson   3/19/03,  10:05:14 AM
Al Green has just announced a reverse repo in the amount of 1.25B for a net drain today in that amount.

 
 
  Linda Piazza   3/19/03,  10:02:15 AM
The Dow Jones Transportation Index trades up today. At 2139.24, it faces next strong resistance at the confluence of its simple 50-dma at 2170.46 and historical S/R in that same area.

 
 
  Jonathan Levinson   3/19/03,  10:00:51 AM
Gold is down 1.40, up off its morning lows, but HUI and XAU are seeing light selling, -.44 to 123.04 and -.06 to 66.56 respectively. The CRB is down .11 or .05%, nearly flat, and the wave of selling in that index has been disturbing me for days now. Selling commodities in a monetary inflation, geopolitically unstable world economy is beyond confusing, and other than as a technical correction, I've been unable to understand what I've been seeing there for the past days. It's either a great buying opportunity on the CRB, or my analysis is off.

 
 
  Linda Piazza   3/19/03,  9:56:57 AM
The OEX keeps testing that 50% retracement of the first five-minute candle, moving just above it and then failing from that level. The failure to sustain a move over that level (440.92) portends lower prices ahead, but so far, the OEX keeps bouncing from that upper line of the regression channel. It's a battle best observed on the one-minute charts.

 
 
  Steven Price   3/19/03,  9:51:56 AM
Swing Trade Signals
Bulls cotninue to step in and buy pullbacks, with the OEX finding support at 439.90, which looks bullish. But really just drifting now around unchanged. Except for COMP, which seems to have fallen and so far can't get up.

 
 
  Jonathan Levinson   3/19/03,  9:51:29 AM
A bounce at 1390 support. The market feels very "light" here, as the bounce was a mere spike on the 5 minute candles. But, on the bounce, the QQV has actually risen. Yet again, volatility seems to be doing the 180 degree opposite of what it would usually- rising as price rises, falling as price falls. Usually we see the reverse.

 
 
  Linda Piazza   3/19/03,  9:49:50 AM
Here's a one-minute chart of the OEX showing a regression channel I'd snapped on it yesterday. This morning's early bounces have been from the top of that regression channel, so perhaps it does have some validity. As I was typing this entry, the OEX fell beneath the top line, reaching a low of 440.07, and then popped above it again. Link

 
 
  Steven Price   3/19/03,  9:47:59 AM
Swing Trade Signals
Staunch defense of bearish resistance witht he SPX trading a high of 869.70 and OEX trading 441.93. The high of 1401 in the COMP is not exactly a convincing breakthrough either and it reversed hard, now down 9 points. Yields found support on the pullback and rounded higher.

 
 
  Jonathan Levinson   3/19/03,  9:46:35 AM
The COMPX is printing new lows above 1390, with the TRINQ up to 1.9, QQV negative at 41.55, down .50. FVX is positive with bonds selling, FVX +2.8. The market feels helter skelter this morning, conflicting indicators and choppy action.

 
 
  Linda Piazza   3/19/03,  9:43:26 AM
Turkey will allow the U.S. to use their airspace.

 
 
  Linda Piazza   3/19/03,  9:41:09 AM
The 50% retracement of the first five-minute OEX candle was at 440.92, a level that the OEX has since violated, of course. According to theory, we should look next for a move down to the day's low at 439.90, but theories and technical analysis are worse than useless these days. I mean that literally, too. As a technical trader, I love studying charts, but when emotions rule the markets, a technical setup can seduce you into a losing trade. Be careful and set appropriate stops. Then honor them.

 
 
  Steven Price   3/19/03,  9:37:00 AM
Swing Trade Signals
We are over the January bounce resistance in the SPX, now trading just under 869. I'd suggest aggressive bulls stepping into a small long over 870. However, only if COMP is able to break 1400.

 
 
  Steven Price   3/19/03,  9:31:50 AM
Swing Trade Signals
I am also looking at the weekly chart of the ten year yield and notice the bounce into strong resistance heading back to last October. I also notice the bounce last week from the same level we tested last October.

 
 
  Jonathan Levinson   3/19/03,  9:31:19 AM
4 point gap down open on the COMPX, QQV +.6 to 42.65, TRINQ 1.41, TICK.NQ -53.

 
 
  Steven Price   3/19/03,  9:25:52 AM
Swing Trade Signals
I've heard many explanations to describe the recent move in hindsight - short covering last week - then institutional money this week. Technical bounce, then war certainty. Yesterday I heard about profit takers selling into the rally and then European markets pulling back on the possibility that war doesn't go as well as planned. I then heard how we would still have to face a struggling economy and not to get too excited about this rally. I also heard that instead of a war rally, this time it took place ahead of time on the expectation of a repeat of 1991. Phew!

I think OEX 440 is a significant level that I would be leaning long above (we are just above that now), but with bearish resistance at 442.50, I can see bears defending that level. In the Dow, I think the fact that we broke above 8160 is significant and the previous H&S neckline around 8220 could provide an upside test, as it did yesterday. Above that is Dow 8300, which was the pivotal equivalent of OEX 440 and a move back above that level could lead to another run to 8800. Keep in mind bearish resistance coincides at 8300 and a trade of 8350 is required to break throught bearish resistance. SPX has resistance at 868 that corresponds to Dow 8160 and bearish resistacne at 870. A break above 870 also looks bullish.

I am not planning on entering a trade with a 2-3 day window just ahead of a possible invasion, but if the above levels are broken, I'd be looking to step into small long positions at each one. I'd love to see the COMP over 1400 to confirm and after a bounce from last night's ORCL sell-off, we may get that move.

I can also make a case for being short, or at least owning some protective puts in case the war effort does not go as easily as everyone seems to be expecting. Any terrorist retaliation can also send us into at least a temporary tailspin. The purchase of a call and put at the same strike is called a straddle and traders looking to capture a move in either direction may want to consider one. Volatility came down a bit the past few days and straddles have come down as well. If we do continue to head higher from here, volatility will contract (leading to contraction in a straddle, but if we head high enough, the move will cover the cost of both options and more).

I plan on making suggestions over the next day or two and will possibly step in officially on the swing model, but I am favoring the suggestion method and letting traders decide on their own if they want to play in this environment.

 
 
  Jeff Bailey   3/19/03,  9:18:52 AM
09:00 Update has been posted at this Link

 
 
  Jonathan Levinson   3/19/03,  9:14:37 AM
Yields are coming off their best levels of the morning, FVX +.7 bps, TNX +1.8 and TYX +2.6. QQQ now 26.94, ES03M back down below 870 at 868.75.

 
 
  Linda Piazza   3/19/03,  9:12:04 AM
As of this writing, the FTSE 100 now trades at 3803.70, the CAC 40 now trades at 2851.22, and the DAX now trades at 2629.87. The FTSE 100 and CAC 40 are up from my earlier report, while the DAX trades at about the same level as previously reported.

 
 
  Jonathan Levinson   3/19/03,  8:48:52 AM
We have gold down sharply by 2.50/oz on the spot price, and treasury yields are positive, with FVX +3.2 bps, TNX +3.6 and TYX +4 bps. The fed has no repos expiring today, and so any amounts that get added with be net additions.

 
 
  Linda Piazza   3/19/03,  8:14:21 AM
Despite verifying the earlier report of U.S. troops moving into the demilitarized zone between Kuwait and Iraq through four sources, I now read this headline, supplied by reader A.B.: DJ US Denies Moving Troops Into Iraq Demilitarized Zone-BBC As A.B. mentions, "it's going to be one of those days." What is certain is that the U.S. is moving troops on the Kuwaiti side of the border. The information about their moving into the demilitarized zone may or may not be true, with four sources saying yes, and one saying no.

 
 
  Jonathan Levinson   3/19/03,  8:05:02 AM
Hats off to Jim for his excellent market wrap last night. I did a lot of reading online last night, and detected a level of chaos and confusion amongst most experts and sources that was unprecedented in my experience. There's little to do but to watch the indicators, the price, and keep our thinking caps on. That, and to exercise extra caution. Like a tide warning on the beach, I'm feeling that it's more treacherous and less predictable out there than usual, and so we must conduct ourselves accordingly.

The ES03M contract is bidding at 871.25, which is above the 870 area but not in the breakaway zone. QQQ is trading 27.09, and the NDX future contract 1093. The european Corynthian Geyser fired on cue at 3AM EST, igniting the futures and boosting the USD Index from below 100.80 to its current 101.30+.

 
 
  Linda Piazza   3/19/03,  7:05:57 AM
Good morning. If Asian and European markets are any guide, anything goes today. In early trading, the Nikkei made a fresh 20-year intraday low, but then climbed more than 200 points off that low to close at its high for the day, over 8000 once again at 8051.04. Market pundits attributed the early losses to war fears, the U.S. Fed's reluctance to give a bias statement, the declining U.S. housing starts, and Oracle's earnings report. Apparently, dip buyers overcame those worries in order to drive the Nikkei sharply higher.

European markets continue the Nikkei's pattern, with most opening down but then climbing into the green as the day progresses. After reaching a low of 3716.50, the FTSE 100 currently trades at 3783. After trading a low of 2770.80, the CAC 40 currently trades at 2848. After reaching a low of 2524.52, the DAX currently trades at 2633.

This morning's war reports include the news that U.S. troops are moving into the demilitarized zone between Kuwait and Iraq, although some feel that a sand storm occurring today may reduce visibility enough to thwart an imminent invasion. News reports last night mentioned that Turkey was amassing troops on its border with Iraq, leading some to speculate that Turkey would move into Iraq on its own once a U.S. invasion began, with the intention of seizing oil fields. Turkey's government decided against asking for a second parliamentary vote to allow U.S. troops on its bases, but talks continue over the use of Turkish airspace. Hans Blix and Mohammed ElBaradei will report to the U.N. Security Council today, with a list of further disarmament demands for Iraq to resolve.

 
 
  Jeff Bailey   3/18/03,  11:48:56 PM
The Index Trader Wrap has been posted: Link

 
 
  Vlada Raicevic   3/18/03,  11:48:48 PM
The Futures Trader Wrap has been posted: Link

 
 
  Steven Price   3/18/03,  11:48:40 PM
The Swing Trade Game Plan has been posted: Link

 
 
  Steven Price   3/18/03,  11:47:41 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.

 
 

Market Monitor Archives