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  Jeff Bailey   3/26/03,  4:48:02 PM
Pivot Matrix for tomorrow. Link

Starting to get some resistance levels building in the DAILY/WEEKLY matrix, and many looked to have been some areas of resistance today. With some cash looking to move into the 10-year YIELD, my bias near-term is for the indexes to pull back.

The S&P Banks Index (BIX.X) lagged the move higher, at least in the MONTHLY matrix and appeared to "lead" the decline today. From a correlative point of view, this has the SPX/OEX the better indexes to trade against and using the BIX.X for a feel. As it relates to the WEEKLY matrix, the BIX.X closed the furthest below its WEEKLY pivot.

My general feel is that the WEEKLY S1's are in play right now. As soon as I say this, Saddam will surrender or go into exile.

It would be hard to argue that the past rally from the lows was very much a "war trade" unraveling, and the "one thing" that may have the indexes vulnerable much below their WEEKLY S1's in my opinion, is the still fragile economy, that the BIX.X looks to represent in our matrix.

Should the markets "edge into" their weekly S1's, I'll be keeping an eye on the Treasuries. One thing an equity bull doesn't really want to see is some type of "mad dash" or quick rate of buying in Treasuries where YIELD would drop quickly. To buy a pullback at this point, I'm looking for more of a gradual type of pullback.

Today's index "ranges" were almost identical to yesterday's, and will have little change to the charts shown in last night's Index Wrap.

I've been given tonight off, to celebrate my b-day at reasonable hour.

Thanks to all subscribers and fellow traders (one in the same) for the kind e-mail today. I'd like to think that the recent year under my belt, which has now grown to 40, makes me a wiser trader with another year of experience and lessons learned!

  Jeff Bailey   3/26/03,  4:07:31 PM
Talking to Kent Barton about eBay (new 52-week high) and closing in on bullish count of $91 Link

and how about Yahoo! Inc. (YHOO) new 52-week high and room to bullish vertical count of $33.50. Link

Had Kent mentioning United Online (UNTD) $18.57 +9.04% Link . Looks like the bulls are hungry for these Internet stocks doesn't it? Recent double-top buy signal of $16.00 and break of bearish resistance trend looks bullish longer-term and institutions may have been lurking at the pullback to support at $13.50. Vertical count (current column of X) builds bullish to $30.50 right now.

  Jonathan Levinson   3/26/03,  4:00:05 PM
Another rangebound day. Of note is that the QQV appears to have held its support, but without much bounce, currently down 1.21 at 38.21 after breaking 38 briefly this afternoon. A close below 38.00 would generate a sell signal, which would be bullish for the QQQ. As ever, the market will leave us today holding a question mark.

  Linda Piazza   3/26/03,  3:58:35 PM
For the sake of reference ahead of tomorrow morning's update on the European markets, the DAX closed the day down 56.77 points, back below 2600, to 2579.33. I must have looked at the clock wrong earlier when I reported the closing values for the FTSE 100 and CAC 40. The FTSE 100 closed up 31.10 points at 3793.10, but the CAC 40 did close down 8.23 points at 2787.56. The FTSE closed below the day's high, but still near the top of its range. The CAC closed well off its high, and the DAX closed on the day's low.

  Jeff Bailey   3/26/03,  3:56:31 PM
Endo Pharmaceuticals (ENDP) $13.66 +9.10% ... was looking for some patterns and noticed this name as a "runaway gap" which I call a "running gap". The "pharmaceuticals" part caught my eye. While the "running gap" is a bar chart pattern, this stock also triggered a "bullish triangle" pattern at $9.00 in early January. Volume has built to 1 million shares each of last two days. Link

Might be a name to jot down for pullback entry near $12. New 52-week high today and spread-triple-top gives thought to stock reaching bullish vertical count of $18.00.

  Steven Price   3/26/03,  3:49:08 PM
Jeff's favorite is BBQ? I could have sworn it was crow.

  Steven Price   3/26/03,  3:47:25 PM
Have you noticed that this market is very well bid considering all the major bad news. Political, Geo-political, bad earnings and bad economic numbers. Do you think this can turn on a dime this time around??

I agree that we are holding onto gains impressively. So far even the prolonged effort in Iraq hasn't really taken us back very hard, in spite of Monday's dip. The rising bullish percents also seem to indicate we should see bulls more in control than bears, at least for the moment. However, I do think we can turn on a dime ( as this afternoon's jitters on the code red rumor suggests) and although the technicals are pointing higher right now, I wonder how long it will last. Where we will hang our hat after the war is over? Certainly not on this morning's economic data.

  Jeff Bailey   3/26/03,  3:41:39 PM
Wells Fargo (WFC) $46.06 -0.86% ... here's a stock I was day-trading short March 13th-15th and got a bit of a feel for. I wouldn't say there were "big buyers" in the stock, but there were definately buyers at the $45.50 level. I had traded short just above $45.70, which was just below a pivot analysis level and this bugger wouldn't break the $45.28 level I needed for a decline back into the $43.27 area, which would have been a gap fill. This is my "pulse stock" for the BIX.X that I like to follow from time to time. 21-day SMA has been serving support last three sessions as the major indexes trade somewhat sideways after Monday's decline. Link

  Steven Price   3/26/03,  3:41:04 PM

Pronunciation: 'drift

Function: noun

Etymology: Middle English; akin to Old English drIfan to drive

b : an easy moderate more or less steady flow or sweep along a spatial course c : a gradual shift in attitude, opinion, or position d : an aimless course; especially : a foregoing of any attempt at direction or control e : a deviation from a true reproduction, representation, or reading

That about sums up today's action.

  Kent Barton   3/26/03,  3:30:36 PM
The 3:15 update has been posted: Link

And on a totally unrelated note, I'd like to join the rest of the MM crew in wishing Jeff a very happy 40th birthday. Here at the office we just gorged ourselves on a BBQ lunch (Jeff's favorite) and chocolate cake.

  Jonathan Levinson   3/26/03,  3:22:51 PM
US confirms that it has no plans to change the terror alert level. Link

  Linda Piazza   3/26/03,  3:20:46 PM
I'm like Vlada on the Futures Monitor--I've drawn so many trendlines that my fingers cramp. The trendlines are important, too, for all of twenty minutes. The OEX tests them, breaks them, tests them, moves above them . . . well, you get the picture. This is not a good trading environment.

  Jeff Bailey   3/26/03,  3:18:30 PM
10-year YIELD ($TNX.X) finished out with a closing YIELD of 3.944%, and that's an exact peg of the WEEKLY pivot. Very little change in the grand scheme of things on today's sessions Same might be said for the major indexes today. All look to "peg" the close at/near their WEEKLY pivots.

Kind of like being 40-years old I guess. Right in the middle. While I may be "over the hill," I don't think the major indexes have seen a top just yet. How fitting it is for my "favorite" index and the Dow Industrials Bullish % ($BPINDU) to be "bull alert" at 40%.

At 40-years old, I too feel like a "young bull" and still have some kick in me! Despite the b-day cards I received earlier today that may have suggested otherwise. (GRIN)

  Jonathan Levinson   3/26/03,  3:06:29 PM
Rangebound trading at its finest as the COMPX chops along at 1394. The TRINQ remains buried at .37 with the TICK.NQ flat. Many of my short term oscillators are topping here, as they should near the top of a persistent range. HUI is up 1.09 now and XAU +.36, but the QQV is down .92 and there continues to be strength in the COMPX, but within what is beginning to seem like an endless range between 1380 and 1400, actually 1382-1398.

  Steven Price   3/26/03,  3:05:38 PM
Swing Trade Signals
If there is any doubt what is driving us, I'd say a sell-off on the rumor that the terror alert was being shifted to red, and then a ramp up on the news that the U.S. had attacked the Iraqi military convoy moving south to engage U.S. troops answered that doubt.

I will be gone tomorrow, but I have not yet seen anything that changes the current recommendation. I would still leave stops on the suggested long at OEX 440 just below OEX 436. If anything that last test of 440 reinforced the plan.

  Linda Piazza   3/26/03,  2:55:27 PM
Adv/dec ratios fall a little lower, and down volume on the NYSE draws a little further ahead of up volume, but up volume still measures twice down volume on the Nasdaq. Someone is doing some concentrated buying in some issues.

  Linda Piazza   3/26/03,  2:35:32 PM
The VIX languishes at or near the day's low, currently at 32.39.

  Steven Price   3/26/03,  2:25:44 PM
Swing Trade Signals
I'd call that a successful test of OEX 440, with a low of 440.46. However, the news in Iraq certainly seems to be getting worse rather than better and we may have a hard time establishing a rally until we get some significant additional victories. Oil futures also pulled back from the last $29.00 test as the equities bounced, with a high of $28.95.

  Linda Piazza   3/26/03,  2:18:41 PM
The Russell 2000 currently trades just above its moving-lower simple 50-dma at 366.22. The Russell is currently at 368.18. Just below the 21-dma at 360.33 coincides with the level of an ascending trendline that has been supporting the Russell since October, except for the brief recent move below that trendline.

  Jeff Bailey   3/26/03,  2:18:12 PM
10-year YIELD ($TNX.X) was looking at some different time intervals and saw this. Might "fit" with my looking for pullback bullish entry in the Dow at 8,050. Here's a 30-minute interval chart of the 10-year YIELD ($TNX.X). Link

So you can get some "spacial reference" here's the Daily Interval chart we looked at earlier this morning, with the exact same retracement levels. Link

Current impression I have is "nothing major" to the downside at this point. Just a little "defensive" action coming in from the MARKET. However, this gives us some levels AWAY from equities to monitor next several sessions. For bullishness, I have alerts set just above today's high YIELD of 3.975 and I can assure you, that bears don't want to see anything north of 40.60, or 4.6%.

  Jonathan Levinson   3/26/03,  2:17:07 PM
Apparently that dip was caused by a rumor circulating that the national terror alert would be raised from orange to red. However, it remains but a rumor.

  Jonathan Levinson   3/26/03,  2:10:58 PM
The COMPX put in a triple bottom just above 1382, currently at 1386. FVX is now down 4 bps, TRINQ still at .51, TICK.NQ -92.

  Jeff Bailey   3/26/03,  2:04:59 PM
McKesson (NYSE:MCK) $25.35 -0.07% ... now fractionally lower. For now, will hold the bearish position, but today's initial thought of closing out partials, will have me a little more eager to do so as I gather "more information" on the rate of the move lower. Not only in the stock, but the 10-year YIELD.

  Steven Price   3/26/03,  2:04:37 PM
Current levels: Dow 8192/OEX 440.84/SPX 867.04/COMP 1384

  Steven Price   3/26/03,  2:04:01 PM
Swing Trade Signals
We are getting a test of OEX 440 now, with a drop in the Dow below 8200. If this level holds, I'm not terribly worried about longs in spite of the pullback. If we breakdown below 437, however, I'd have a stop set just below 436.

  Jeff Bailey   3/26/03,  2:02:10 PM
Dow Industrials (INDU) 8,193 -1% ... starting to "soften up" a bit here, and session low with decline of 88 points. Could that 10-year YIELD ($TNX.X) action alert have been the clue? I think so.

  Jeff Bailey   3/26/03,  2:00:48 PM
American Express (AXP) $35.13 -0.36% ... Hmmm... per 01:00 update, it looks like Sears (NYSE:S) isn't only one looking to do a little selling of credit business. While today's $995.5 million sale of asset-backed securities by AXP isn't the selling of its business, it does represent a shift of risk and some raising of cash. Story: Link

This may partially explain the recent 2-day decline from $37.98? Not sure. How would I interpret this? Not sure to be truthful, but I'm leaning slightly toward the bullish side in AXP, but cautiously so at this point. I'm monitoring the stock every hour or so. I've got an "upside" alert set at $36 at this point, just in case that "bearish signal reversed" from the p/f chart comes into play longer-term.

  Steven Price   3/26/03,  1:58:02 PM
Swing Trade Signals
It looks like the May Crude Oil contract is stalling below $29, but if it breaks above that level, it could signal another leg sdown in stocks - currently trading $28.90

  Steven Price   3/26/03,  1:56:44 PM
Swing Trade Signals
The endless drift just about put me to sleep, but as Linda and Jonathan noted, we are sitting on new lows for the day in equities and yields. The consolidation has been accompanied by light volume, so is tough to take direction from here, but bearish signals (drops) don't need very heavy volume to be reliable the same way rallies do.

  Linda Piazza   3/26/03,  1:53:09 PM
The current OEX drop took the OEX beneath the trendline I showed earlier today and also beneath a lower trendline, a trendline that formed from the move off the low of the 17th, possible to see on a 15-minute chart.

  Jonathan Levinson   3/26/03,  1:51:19 PM
Yields are headed deeper south, FVX now -3.5 bps. The COMPX is back below 1390, next support 1380-82. The TRINQ is up to a whopping .53 (extreme sarcasm), TICK.NQ -305, QQV -.67, coming up off its lows.

  Linda Piazza   3/26/03,  1:49:32 PM
I'm looking at the SOX daily chart, studying only the candles. There, I see Monday's bearish engulfing candle, produced after an ascent. That's a bearish reversal signal and it's given extra significance because the engulfing candle was produced right at the 200-ema. Then I see yesterday's candle, a spinning top that indicates indecision. Today's candle, so far, is a doji, but that may well change in the last few hours of trading. Today's and yesterday's candles have not been able to move above the midpoint of Monday's candle. Taken together, these candles have a slightly bearish cast. They would have a very bearish cast, except that today's and yesterday's candles indicate some indecision. There's also the possibility that these candles may be setting up for a "three methods" pattern. This is a pattern in which a large red candle is followed by three small-bodied candles that stay within the red candle's high and low. (Yesterday's candle actually breached Monday's low, but only the shadow did so, and this is an index and can sometimes be given leeway.) The fifth and last candle is another red candle that closes at a new low. This pattern is analogous to a steep drop and then a bear-flag pattern that moves in a tighter countercyclical move of higher highs and higher lows until it collapses. This is speculation for now, though: something to do on a slow trading day.

  Jeff Bailey   3/26/03,  1:46:47 PM
01:00 PM EST Update posted at this Link

  Linda Piazza   3/26/03,  1:36:24 PM
Observations about volume patterns echo Jonathan's about confusing an already confusing pattern. Advancers and decliners are nearly even on both NYSE and Nasdaq-traded issues, with decliners slightly ahead. Down volume is 1.2 times up volume on the NYSE, but up volume is more than double down volume on the Nasdaq. New highs are above new lows. Total volume is 673 million shares on the NYSE and 808 million the Nasdaq.

  Jonathan Levinson   3/26/03,  1:31:13 PM
The COMPX has been languishing at current levels, chopping up the oscillators and generally confusing an already confusing picture. The skinny is that 1401 COMPX continues to hold, while breadth indicates strong but narrowly focused buying, TRINQ .47 and TICK.NQ -56. QQV is still down 1.22 on the day. HUI is up .96, +116.71, XAU +.09 to 63.55. Perhaps Al Green and To Fukui have taken a little siesta, grabbing a quick shiatsu and sorbet before getting back to the business of ramping the markets and the dollar, suppressing precious metals and treasury yields, and generally mistaking the tape for a scratch pad.

  Steven Price   3/26/03,  1:18:03 PM
Swing Trade Signals
Watching the intraday action in the TNX and so far there has been an impenetrable top at 39.70 (39.65 for the past couple of hours). Until we break that level, I doubt we'll see much of a run in equities.

  Linda Piazza   3/26/03,  1:08:45 PM
The VIX is down to 32.56 today. Below current levels, next support might be at 29-30.50.

  Jeff Bailey   3/26/03,  1:06:56 PM
McKesson (MCK) $25.54 +0.63% ... have been sitting an offer in the May $25 puts(to close out partial holdings) at $1.25. Will remove that offer here and see if we cant get a little weakness to creep in.

  Jeff Bailey   3/26/03,  1:05:46 PM
10-year YIELD ($TNX.X) 3.945% ... have received a "downside alert" at 3.943% YIELD level that I had set this morning here. Might be alert to some type of "defensive" near-term trade action.

Dow = 8,247, SPX=873, OEX=444, NDX= 1,070, QQQ= $26.64 as benchmarks.

  Jeff Bailey   3/26/03,  1:03:31 PM
Verity (VRTY) $16.29 +0.61% ... Jeff: I really enjoyed and think I learned something from your column this weekend regarding VRTY and how a sector bullish % can influence or impact a stock in that sector. I don't subscribe to Dorsey Wright at this point, but can you tell me if the sector has changed?

No, the sector status has not changed at this point and still remains in "bull correction" status. I looked through the various sector bullish % this morning and didn't see any sector status changes. Still.... did you know that Dorsey offers a free trial of the p/f charts? For the sector bullish %, you can follow along for awhile. I'm not here to sell Dorsey's service, but it is one tool I have in my tool box that I use quite often.

If memory serves me correct, Dorsey gets their sector data from chartcraft. A fellow subscriber/trader is using their p/f charts too! Here's a link to chartcraft.com, but I don't think they offer a free trial. Link

  Steven Price   3/26/03,  1:03:27 PM
Swing Trade Signals
Notice our highs of the day are at the bearish resistance breakthrough levels from last week of SPX 875/OEX 445 and yesterday's high in the Dow fell just shy of that breakthrough level of 8350. Last week's breakthrough looked bullish and I still think it does, but those levels seem to be capping us and I'd like to see some support there, as well as a COMP break above 1400 before suggesting adding to any longs now.

  Linda Piazza   3/26/03,  12:58:57 PM
Reader Request concerning XMSR: I've been cutting any wins short lately for minimum gains. I'm looking to let this one run, but am a little concerned about how the candles are above top bollinger band- pull back imminent? Tomorrow is earnings report as well, but analysts are stating good subscription numbers. What do you think?

Response: I understand what you mean about cutting wins short for minimal gains, as that's sometimes a problem for me, too, but taking gains in this trading environment has extra appeal. In addition, in any trading environment, holding over an earnings announcement can be a dangerous venture. Analysts may be stating good subscription numbers, but that may also mean that everyone who wants into the stock on that expectation is already in. Ask yourself what your original profit target was when placing the trade. Has that target been reached? If so, maybe it's time to take the profits the table, or at least reduce your exposure by taking a portion of your profits. If you're profitable enough that you can close some positions to pay for the trade and let the others run, depending on your risk profile, that's a possibility, too.

Here's what I see on the daily chart. OBV has been increasing since early January, a bullish sign. Volume has been strong on the move over the 200-ema. XMSR has moved above its exponential and simple 200-dma's. MACD looks positive and the two lines are separating, perhaps indicating a stronger move up. However, RSI is at levels indicating overbought conditions and so are the 21(3)3 stochastics, indicating some risks to those in bullish plays. Today's move has bumped XMSR above the 6.26 level that was the September '02 high, but just barely. The daily graph is an interesting one, because from October to January, the stock formed a loose reverse H&S formation, predicting a move up to 6.35. (To the 4 neckline, add the difference of [4-1.65].) In addition, that reverse H&S formation actually was the head of a larger and somewhat looser reverse H&S formation, with that neckline coinciding with the 200-ema, if I've drawn it correctly. Although I don't follow this sector and so can't give you much information about sector strength, the P&F chart shows it on a double-top breakout signal, with XMSR above the bullish support line.

It's been my experience, as I'm sure it has been yours, that stocks tend to retest important breakout or breakdown levels, and the coincidence of the 200-ema and the neckline of that reverse H&S formation would be one of those points. Will XMSR fall back this afternoon or tomorrow to retest that average? Will the retest be successful if it does? I don't know, but ask yourself if you'd feel comfortable holding over earnings if that possibility exists. I hope this helps.

  Jonathan Levinson   3/26/03,  12:56:05 PM
The Birthday Boy's observation is a good one, and yields have reversed, with FVX now down 2.6 bps in what is a relatively sudden move.

  Jeff Bailey   3/26/03,  12:48:30 PM
S&P 500 Index (SPX.X) 873.75 -0.11% ... has tried to make a couple of intra-day rally attempts, but can't seem to pull free of the WEEKLY pivot of 873 at this point. Morning low of 868.78 just about pegged the MONTHLY R1 of 868.40. For me, this defines the "range" range right now.

Rather "bullish" look to the SPX seems to be offset by marginal buying in the 10-year ($TNX.X) with YIELD just sitting here at 3.959%, while S&P Banks Index (BIX.X) 272.60 -0.4% fractionally weak today, with session high of 273.75 right at the WEEKLY and MONTHLY pivots of 274.20 and 273.20 respectively. BIX.X really "locked in a range" too from 21-day SMA and 50-day SMA of 274.50-270.

  Jonathan Levinson   3/26/03,  12:47:40 PM
We have yet another failure so far at 1400 COMPX, but treasury yields have come up to nearly flat, while the QQV and VXN have sunk lower, with QQV down 1.22 to 38.20. The TRINQ is .37 now, TICK.NQ +170. It looks like a teeth-grinding crawl higher, but 1400 continues to hold back the advance.

  Linda Piazza   3/26/03,  12:31:16 PM
While the hourly OEX stochastics cycle up and down, the daily 5(3)3 stochastics have been cycling down toward oversold conditions again, too, while the 21(3)3's remain at levels indicating overbought conditions and slowly tip over. MACD is somewhat inconclusive, flattening as it tried to rise. RSI is particularly interesting. It had been forming a series of higher lows, then broke below that ascending line on the January decline. RSI stayed below that line until March 13, at which point it broke above it. RSI then declined on Monday's fall, touched the line and is now attempting a move up from that line, although it appears to be flattening again. From this accumulated evidence, it wouldn't be surprising to see the OEX attempt another bounce while the 5(3)3 stochastics cycle back up or partway up one more time.

  Linda Piazza   3/26/03,  12:20:37 PM
Looking again at the OEX hourly chart shows that while the aimless drifting has been occurring, stochastics have been cycling down toward oversold levels again and may be trying to hinge up on this latest push, a situation that appears somewhat bullish, at least on the surface. This means that the OEX has been relieving its overbought conditions by consolidating rather than by falling deeply from yesterday's 447.56 high. To continue that potential bullishness, though, an upward move should push the OEX through 446-447 and should sustain that move. A sustained fall through 441 would move the OEX below a longer-term (when compared to the five-minute chart, that is) ascending trendline that began forming last week. This trendline takes some guesswork to draw, however, so it would be safer to wait until a move below 440 or preferably 337 to draw too many conclusions. As I mentioned yesterday, I'm not personally entering new positions right now when "TV trading" guides the markets, but watching to see how the markets sort through all the news and decide on a clearer direction.

  Jonathan Levinson   3/26/03,  12:17:46 PM
If COMPX continues past 1400 on this move up, the trendline I identified could be the neckline of a reverse h&s formation and would project to approximately 1410 COMPX.

  Linda Piazza   3/26/03,  12:09:23 PM
Today sees the transports hovering near 2200 again, in the 2200-2220 support area. Currently trading at 2202.63, the TRAN has been unable to move above the midpoints of Friday's big white candle and Monday's big red candle--a tweezer-top candle formation that is a minor reversal formation. That inability to move above the midpoints or 50% retracements of those big moves is somewhat bearish, but is balanced by the transports ability to cling to the 2200 area. As long as the index clings to those levels, there's the possibility that it could move up again before it moves down. Currently, oscillators show some bearish indications and the index remains below both simple and exponential 200-dma's.

  Jonathan Levinson   3/26/03,  12:08:54 PM
The COMPX seems to have just topped at resistance on a trendline connecting the highs from around 1:15PM EST yesterday, on the 5 minute candles. The aimless drift of today's price action has me skeptical of any apparent trends, and it's a poor environment for forecasting. The TRINQ remains low/neutral at .50, TICK.NQ flat at +15, FVX -1.6 bps, QQV now down .98 to 38.44 as QQQ volatility dries up. HUI lightly positive, XAU lightly negative, and gold tried to take the 330/oz level.

  Jeff Bailey   3/26/03,  11:59:09 AM
McKesson (MCK) $25.65 +1.10% ... stock opened marginally weak, but I'm goint to suggest bears in this previously profiled bearish trade move bulk of open positions to the sidelines at this time.

While stock still looks bearish, this company sells/markets drugs and from what we've noted in FRX and BRL I'm thinking that MCK may begin to see some "lack of sellers" near-term. Also, with S&P 500 Bullish % ($BPSPX) showing internal strength (after bearish profile of MCK), the "rising tide" may also begin lifting many boats.

  Jeff Bailey   3/26/03,  11:49:06 AM
11:00 Update posted at this Link

  Linda Piazza   3/26/03,  11:43:45 AM
The OEX has now risen to test the broken support line that had begun forming yesterday morning. As I've mentioned before, it's often the retest that tells us about strength or weakness of a movement. In this climate, it's still dangerous to draw too many conclusions, especially based on a five-minute chart, but here's the chart. Link

  Linda Piazza   3/26/03,  11:43:41 AM
The OEX has now risen to test the broken support line that had begun forming yesterday morning. As I've mentioned before, it's often the retest that tells us about strength or weakness of a movement. In this climate, it's still dangerous to draw too many conclusions, especially based on a five-minute chart, but here's the chart. Link

  Linda Piazza   3/26/03,  11:37:33 AM
The FTSE 100 closed up 29.80 points, while the CAC 40 closed down 8.23 points. The DAX currently trades down about 23 points, moving around a bit as I was typing this entry.

CNBC is talking about a newly coined term, "TV trading," to describe the way market participants are tuned to war news and trading based on their interpretations of that news. Also, I know at least one reader will understand my happiness to hear the term "sticking point" used on CNBC World. One my earliest forms of technical analysis was to notice "sticking points" that tended to be price magnets for a particular stock or index, a not-so-technical term that I've prohibited myself from mentioning in the Monitor heretofore. Maybe I can safely use the term again.

  Steven Price   3/26/03,  11:29:51 AM
Steven, Any suggestions on OTM puts in case chemicals are used in Bagdad. I've got a couple possitions for safety but no index puts open. Any thoughts would be appreciated. Mike

If you are looking to get short on a breakdown, the likely levels to signal a breakdown would be around Dow 8000 or 7900. Depending on how much you are willing to invest, the DJX or DIA puts seem the cheapest for the major indices. A look at current prices shows the following:

DJX Ap 80 put offered at $1.50; DJX Ap 79 put offered at $1.15

DIA Ap 80 put offered at $1.40; DIA Ap 79 put offered at $1.15

You could certainly spend less buy buying further out of the money puts (DIA Apr 76 puts offered at 0.60), but the out of the money puts highlighted above are likely to represent breakdown levels earlier on.

  Linda Piazza   3/26/03,  11:23:28 AM
The OEX did fall through that ascending trendline and now trades in a tight, upward slanting regression channel: a suspected bear-flag pattern when this occurs just after a decline. However, every downside point and every upside point is hard-fought in the last two days. It's going to take that move below 437-438 to draw any kind of bearish conclusion today.

  Linda Piazza   3/26/03,  11:18:17 AM
Happy Birthday from me, too, Jeff! As the oldest writer on this side of the Monitor, I can assure you that life does go on after 40!

  Jonathan Levinson   3/26/03,  11:16:32 AM
LOL! I might have just ruptured myself!

Just click this Link

  Linda Piazza   3/26/03,  11:13:04 AM
Reader Request: When you get time, give me a comment on the Dow monthly chart.

Response: That Dow monthly chart has been the subject of much debate over the last six months. Is that a massive H&S formation setting up? Is the head too out of proportion for this to be a proper H&S formation? Some credence might be given to the H&S theory when the Dow appeared to break through the neckline and then rise and test it again when the Dow approached 9000 once again in early November. The failure from that level would also give credence to the H&S proponents.

I'm on the fence on this one. The head does seem too out-of-proportion to me to draw any conclusions about possible further downside. However, when I see even a loose or sloppily formed H&S, I think of the psychology behind these formations and know that I'm still seeing that psychology at work, even if it didn't work as well in this particular case. A larger-than-normal head would mean that the "second-tier investors"--the ones who are intelligent, but not as savvy as those first investors to buy near a bottom--kept buying for a prolonged period.. Therefore, I'm warned, but I would usually need a stronger signal to convince me to act on that warning when the H&S possibility seems so questionable. For some reason, I could not access the oscillator portion of the chart this reader sent along with his question, but I've looked at my own. Looking at monthly RSI and 5(3)3 stochastics, I do see a series of lower highs, but both now look somewhat inconclusive, with the RSI perhaps hinging up in the middle of its fall, and with the stochastics also trying to hinge upward in the middle of its fall. MACD still cycles down, but is far into territory indicating oversold conditions. CCI is negative. None of these give me a strong signal as to final direction, either.

However, there's another perspective that might bear watching. This is a snippet of a historical chart from Stockchart.com, a monthly chart of the Dow. Take a look at the blue trendline. So far, it's still intact. Barely. Link I know some of my co-writers have addressed the H&S possibility on the monthly chart in the past, and perhaps one of them would like to weigh in, too.

  Jonathan Levinson   3/26/03,  11:10:26 AM
The COMPX is drifting lower, with the TRINQ rising to neutral bullish at .66, TICK.NQ +35, QQV down .33 to 39.21, FVX -1.1 bps. There's absolutely no guidance in the indicators, except to show that the buying has been very concentrated on the COMPX, but that's commensurate with the slow, indecisive weakness on the index overall. The fade lower could be a bull flag on the 3 minute chart I'm watching, but it's coming off a short term top, which doesn't quite fit the profile. As Steve aptly noted, it's "beef jerky time", though Eddy Murphy's cameroon accent no doubt does it better justice. HUI is showing a bit more strength, while XAU is negative. The market is currently choppy, directionless, and for all but "religious" long term traders and nimble short term traders, treacherous.

  Steven Price   3/26/03,  10:59:25 AM
Current levels: Dow 8236/COMP 1389/OEX 442.60/SPX 870.61

  Steven Price   3/26/03,  10:57:43 AM
Swing Trade Signals
We are sitting on the bottom here, with the Dow testing a new intraday low. It is finding support at the 38.2% fitted retracement of the opening range on the 5 min chart. A 5 min close below that level (8221) will signal another test of 8200. That would correlate to an OEX move between 440 and 441.

  Jeff Bailey   3/26/03,  10:53:02 AM
Barr Labs (BRL) $56.96 +1.85% ... I saw Steve mention this one from 10:35:08. I see "bullish triangle" pattern on BRL that was triggered at $53. Yesterday when we looked at the sector bullish % bell curve, we noted that the "drug" sector had reversed up into "bull alert" status. The bullish triangle pattern is profitable 71.4% of the time, average gain of 30.9% in 5.4 months. From $53, a 30.9% gain would be $69.37. I bet a trader that has been "practicing" his/her channeling, would find a nice bullish channel with bullish resistance right now at about $60.00.

If memory serves me correct, OI was bullish on BRL back in the mid-40's too, when stock was just breaking above its bearish resistance trend.

Maybe a bull that owns both FRX Link and BRL would be known as a "lab rat?"

  Mark Phillips   3/26/03,  10:52:32 AM
Getting a late start here today, so first things first -- Happy Birthday Jeff! Let me wish you success in finding a Bday trade to rival that one from last year!

With the first hour under its belt, the broad market is showing very little conviction in either direction, and this is showing up in the OIN playlist. With the exception of the BRL play that Steve commented on earlier, there is very liitle movement in any of our plays. Until breaking news arrives to motivate buyers/sellers, I'm going to call this one a nice tight consolidation session. Now that I've said that, it's time for the bulls to launch another 200 point ramp in the DOW! GRIN

  Linda Piazza   3/26/03,  10:51:22 AM
The OEX has had one five-minute close beneath that supporting line from yesterday morning. In this climate, one five-minute close counts for almost nothing, but it does lead us to next watch the 440 area for support, then 437-438.

  Jeff Bailey   3/26/03,  10:47:18 AM
American Express (AXP) $34.90 -1.02% ... per last night's Index Trader Wrap, stock not finding bidders at this point. I was flipping through the Dow charts and saw this one, which is "bearish signal reversed" pattern Link .

I checked the sector bullish %, and Dorsey/Wright has it as "finance," which is still "bull correction" status, which means the bullish % chart is currently in a column of O at 42% and would currently take a reading of 48% to reverse back up to "bull confirmed." According to Professor Davis' probabilities study, under a bullish phase market/sector condition, this bearish signal reversed pattern is profitable 92% of the time for an average gain of 23.2% in 2.5 months.

  Jonathan Levinson   3/26/03,  10:47:02 AM
I wonder if Al Green and BOJ Chairman Fukui have hired Clarence Beakes to throw his weight around in the futures pits...

  Steven Price   3/26/03,  10:45:39 AM
Beef Jerky Time.... As I watch the endless drift, I'm thinking back to that line from "Trading Places" - It seems it's time to sit back, get a snack and watch until we see a trend develop. Yields are moving sideways and the Dow has been locked in a 50-point range. Economic data is barely moving the markets and it appears we are waiting for more news from Iraq. Bulls will suggest the consolidation after a big gain is bullish, while bears can argue we have run out of steam. I'm really not sure who is right. I'll stick to the long over 440 (438), short under 436 suggestions for now and watch for a more decisive move.

  Steven Price   3/26/03,  10:38:52 AM
Swing Trade Signals
Note the Dow never set a 5 min close above today's pivot of 8266.2. The other indices did so, but never got confirmation here. The top in the COMP at 1397, combined with the top yesterday at 1400 shows resistance at the 1400 level is back in place and traders considering adding to long positions will want to see another decisive break of COMP 1400 first.

  Steven Price   3/26/03,  10:35:08 AM
Barr Labs (BRL) $56.94 +1.02 The broader indices are headed lower, but OI call play BRL has broken into higher ground once again. It reached a new 52-week high of $57.20 this morning and appears on its way to testing its 2001 highs around $60. If the market continues to slide, it will have an uphill battle, but I like the pocket of strength here and if we do get another market bounce we could see another leg up very soon.

  Jonathan Levinson   3/26/03,  10:32:23 AM
With yields falling back toward their worst levels, the TRINQ still at the low end of neutral bullish, and the TICK.NQ -272, it looks like a false break above 1390 COMPX. Despite the less than good data this morning and geopolitical news, gold's gains are very modest, HUI and XAU are barely positive, and equities are looking strong so far. In fact, not much of anything is happening- we're just splitting hairs, as the markets seem to be treading water and waiting to take a direction.

  Linda Piazza   3/26/03,  10:32:05 AM
On the five-minute charts, the OEX currently challenges the lower, supporting line of the wedge. The OEX has bounced from this line three previous times since yesterday morning.

  Linda Piazza   3/26/03,  10:22:01 AM
Early action may not be giving us many clues, as the OEX may be coiling into a big wedge on the five-minute charts, and it will be necessary to see a sustained breakout--if there is any such thing in this market--before we can attempt to gauge direction. Volume patterns don't give many clues, but volume is so thin that it would be difficult to draw many conclusions as yet anyway. Volume is 134 million on the NYSE and 195 million on the Nasdaq. Decliners lead on both the NYSE and the Nasdaq-traded issues, and down volume leads on the NYSE, but up volume is almost twice down volume on the Nasdaq.

  Jonathan Levinson   3/26/03,  10:13:52 AM
Is 40 a "fib" level? :)

  Steven Price   3/26/03,  10:12:13 AM
Over the hill.... Uh Jeff, now that you've turned 40, you might want to think more about today's profits (GRIN).

  Linda Piazza   3/26/03,  10:11:55 AM
Thanks, Jonathan, for the input on my 9:45 post. I'm so attuned to watching the VIX, that I said VIX instead of VXN. This brings up a subject I've been meaning to mention in the Monitor. A week or two ago, Jeff wrote an article on "the best book on trading stocks and options" and he mentioned the exorbitant $3000 cost of one of them. That "book" was a $3,000 account set up with the specific purpose of testing a specific trading strategy. That's an excellent suggestion. I often do that in my own trading. Through much of my trading career, I've put on directional trades, but I decided a while ago that I wanted to try more hedged trades. Because I knew there would be adjustments to be made and expected a learning curve, I set up a specific account with risk capital only for learning the new techniques. I expected to lose in that account as I learned the new strategies and figured out which ones worked for me and which didn't. What have I learned so far? Bear call spreads and bull put spreads tend to work well for me. I'm a patient trader, so collecting that initial credit and just letting the position sit suits my trading style. Conservative covered calls are suitable for one portion of my portfolio, too, although I'm not trading those in this account because I've done them in the past. Then here's the odd thing: straddles just don't work at all for me. A patient trader even in directional trades (sometimes too patient for my account's good), I can't leave a straddle alone to do its work. I'm always trying to buy in and out, reducing the basis, and defeating the whole purpose. It's odd, it doesn't make sense, but that's what I've discovered. I'm a self-taught trader, and now I'm teaching myself that straddles don't work for me. I don't seem to have the same problem with strangles. It's important that you learn your own trading style, too. Here's a link to Jeff's article: Link

  Steven Price   3/26/03,  10:08:54 AM
Swing Trade Signals
That last spike took us within 3 Dow points of unchanged before failing. Similar action in the othere averages. However, we did not get a 5-min close above the daily pivot. We did get 5 min closes above the pivots in the SPX and OEX. I would think if we get above the opening range and the pivots on a 5 min closing basis, the earlier bearish signals will be in question.

  Jonathan Levinson   3/26/03,  10:08:30 AM
New home sales fell 8.1% in Feb, worse than expected. Link

  Jonathan Levinson   3/26/03,  10:05:57 AM
Happy birthday, Jeff! Wish I could be there to toss some confetti around :)

  Jonathan Levinson   3/26/03,  10:04:39 AM
Yesterday's high for the COMPX was 1400, which is now 4 points away, just below 1401 fib resistance.

  Jeff Bailey   3/26/03,  10:04:12 AM
Over the hill .... Thanks to all of my "office mates" that decorated by desk with "over the hill" posters and black balloons! Gold/silver/black "sprinkles" all over the place with 40 and over the hill.

Great... just great!

I'm looking for a "birthday trade" like last year. Do you remember? Some of us were short/put Adelphia Communications (ADLAC) from $24 level. Then... they reported earnings on March 27th. That was the "beginning of the end" for ADLAC.

I'm still holding short/put CSCO Link , AEP Link , MCK Link , SBC Link , UNM Link and long FRX Link , FLR Link , GERN (speculative)Link , INTC Link and F (Jan. 05 LEAPS) Link . I can't wait until tomorrow!

  Jonathan Levinson   3/26/03,  10:02:39 AM
Jan new home sales revised to -12.6% at 929,000.

  Jonathan Levinson   3/26/03,  10:01:06 AM
The fed has added 4.75B via overnight repo, for a 3.25B net addition.

  Jonathan Levinson   3/26/03,  9:55:30 AM
Linda, the drop in the value of your position is most likely due to the collapse in the QQV, currently 39.16, down .26 today, after big losses during yesterday's trading.

The COMPX is at 1393, with the FVX up to a .6 bp loss. There's still economic data due at 10AM. We'll see if the COMPX can hold above yesterday afternoon's range.

  Jeff Bailey   3/26/03,  9:54:09 AM
10-year YIELD Chart and comments were posted at 09:39:51. Might "fit" with Steve's 09:48:04 post and provide guidance as session progresses. Here's the chart again. Link

First "alert" to weakness for equities would be some type of YIELD move BELOW the WEEKLY pivot of 39.43, or 3.943%.

  Linda Piazza   3/26/03,  9:52:45 AM
The 60-minute OEX 21-pma is located at 445.83. That average and/or the daily simple 100-dma, currently at 446.48, were capping upward movements yesterday afternoon, and so they might bear watching today, too.

  Steven Price   3/26/03,  9:48:04 AM
Yields still moving sideways and not giving much directional indication from here.

  Linda Piazza   3/26/03,  9:47:59 AM
Sometimes you can't win for losing. After studying charts Thursday night, I decided to enter a QQQ strangle Friday morning if I saw the VIX drop to recent support levels. I chose the strangle because I thought a big move was due soon, but I wasn't sure of direction, and because it would be $2.00 in the money at all times. The most I could lose was the $1.65 time premium if it didn't move at all before opex. I chose April options because I wanted the expected move in the Q's to inflate the price of one of the options enough to pay for the entire cost of the strangle. I chose the QQQ's because the bid/ask spread is small. It's too early to tell what will happen by the end of the expiration cycle, of course, but yesterday's drop in the VIX, the time decay over the weekend, and the probability that April options were inflated on Friday have so far led to a $.40 loss, despite a $.70 move in the QQQ's since my purchase.

  Steven Price   3/26/03,  9:45:35 AM
Swing Trade Signals
We are now below the pivots in the OEX/SPX/Dow, as well as the NDX. The move below the opening range would indicate further bearishness as well. Today's OEX S1 lies at OEX 439.75, and support at 440 would still look bullish overall to me. It should coincide with the Dow Dow S1 at 8194.

  Jonathan Levinson   3/26/03,  9:44:44 AM
Let's see how the COMPX does at the 1380 s/r level. It found support there yesterday afternoon, and has been rangebound between 1380 and 1390 ever since.

  Linda Piazza   3/26/03,  9:41:19 AM
We now have a first five-minute candle for the OEX. The 50% retracement of that first five-minute move is 443.96. You know the routine by now: bulls want a sustained move over that level. Bears want a failure if that level is tested again. Levels to watch today are the 337-338 level for support and the 443.96 and 446-447 levels for resistance. Bulls might find it somewhat troubling that the OEX could not sustain a move above 446-447 yesterday, the location of the simple 100-dma and a 50% retracement of the previous day's big red candle.

  Jeff Bailey   3/26/03,  9:39:51 AM
10-year YIELD ($TNX.X) seeing some buying in this bond as its YIELD slips to 3.952%. This is below "my" 4.0% YIELD level for bullishness in equities, so a little defensive here. I'm tying this in with Dow Industrials (INDU) comments of 09:36:50.

Here is a chart of 10-year YIELD with conventional and WEEKLY pivot retracement. Link

  Jeff Bailey   3/26/03,  9:36:50 AM
Dow Industrials Chart with both conventional and WEEKLY pivot retracement overlaid. Link

I'm going to advise some cautioun near-term on Dow and perhaps major indexes. Dow Indu (INDU) 8,248 -0.38% slipping below the WEEKLY pivot of 8,275, and with resistance from 38.2% retracement, I'm now looking for higher probability of pullback to 8,050 area.

As such, if positioned with MORE than 1/2 position, would look to get down to 1/2 bullish position. Short-term traders can be looking short/put, but most likely follow with rather tight stop of 8,345.

  Linda Piazza   3/26/03,  9:36:32 AM
Valero Energy (VLO) is pulling back in pre-market this morning to light support at 40.40, on news that the company will sell 6.3 mln shares. Since early March, volume has been dropping as prices continued to rise, with OBV also creating a series of lower highs. Daily OBV still remains above an ascending line, however. This stock's behavior has been difficult to predict, as it's had several promising developments on the bullish side, but also of course reacts strongly to geopolitical developments. In this climate, this one may be too risky to gauge.

  Jonathan Levinson   3/26/03,  9:33:58 AM
Here's ABC coverage of that rumor about North Korea: Link

  Jonathan Levinson   3/26/03,  9:31:53 AM
Flat open with the COMPX trading 13900, TRINQ .78, TICK.NQ +39.

  Steven Price   3/26/03,  9:22:02 AM
Swing Trade Signals
After yesterday's bounce, we're not seeing much decisive action anywhere. The futures are down slightly in the SPX and Dow, while the Nas futures are up slightly. Yields headed lower to start the session, bounced and have gone sideways. Not much to take from this moring's action, so far. I'd like to see another test of OEX 438 to get a feel for the reaction to the ambush and the durable goods data, but I'm not sure if we will. I'm going to wait to make any recommendations until I see some type of trend emerge here. Right now the only live recommendation I have on is the long entry at OEX 440, with a stop at or below 436 (434 for more aggressive traders).

  Jonathan Levinson   3/26/03,  9:20:42 AM
Spot gold is back above 330/oz. I'm hearing trader talk, from a trader who is generally quite sharp with his news, about North Korea threatening to attack Japan and cutting off its military liason to the UN, but this is unsubstantiated. If not for the source, I wouldn't bother repeating it.

  Jeff Bailey   3/26/03,  9:20:15 AM
09:00 Update posted at this Link

I've also made a note in last paragraph that Index Traders might want to review.

  Jonathan Levinson   3/26/03,  9:15:56 AM
Al Green is owed 1.5B from yesterday's overnight repo expiring today. The announcement is due around 10AM.

  Jonathan Levinson   3/26/03,  9:12:42 AM
Some light buying in bonds, with FVX -1.1 bps, TNX -.6 bps and TYX -.4.

  Linda Piazza   3/26/03,  9:12:13 AM
Ahead of the opening of the U.S. markets, the FTSE 100 is up 24.80 points, the CAC 40 is up 13.63, and the DAX is up 6.50, with the CAC and the DAX having pulled back slightly from earlier levels.

  Jonathan Levinson   3/26/03,  9:06:52 AM
CNN is reporting that a convoy has been ambushed, possibly by Fedayin.

  Jonathan Levinson   3/26/03,  8:36:35 AM
Historical notes:

U.S. Feb Durables ex-transportation decline largest since June '02

U.S. Feb Durables ex-defense decline largest since Sept '02

  Jonathan Levinson   3/26/03,  8:35:24 AM
Feb durable goods orders -1.2%. Link

  Jonathan Levinson   3/26/03,  8:27:37 AM
Due this morning:

8:30 am EST: Durable Orders for February, prior 3.3%, consensus -1.0%

10:00 am EST: New Home Sales for February, prior 914K, consensus 927K

  Jonathan Levinson   3/26/03,  7:55:57 AM
The US Dollar Index made one unsuccessful attempt to regain the 101.00 level, and is currently trading in the 100.80 area. Futures are in the green, with SPX futures +0.70 and NDX +5.50, with QQQ currently bidding at 26.57. Spot gold is quoted at 329.40 at Kitco.

  OI Technical Staff   3/26/03,  7:34:48 AM
The Market Monitor will be rebooted in 2 minutes. You will need to reconnect your desktop monitor to continue to receive updates.

  Linda Piazza   3/26/03,  7:21:55 AM
Good morning. Japanese fund managers appear to be studying war news as studiously as the rest of us. I encountered two reports in different new sources of Japanese fund managers attempting to obtain the latest war news and ascertain their market's likely reaction ahead of a wider dissemination of the news. The Japanese market seems to swing upriver and downriver with the current tide of information, too, with the Nikkei down yesterday and then swinging back up in Wednesday's trading, as coalition forces approach Baghdad. The Nikkei gained 113.16 points or 1.4%, closing at 8351.92. Individual stocks swing up and down, too. For example, Toyota was dropping in Tuesday's trading as financials sold the stock under a government policy requiring banks to divest themselves of non-financial stocks. Today, Toyota gained.

In these morning updates, you've often read of the problems Japanese and European financials face due to the decline of the stock markets. This morning, I read of a disingenuous solution undertaken by one Japanese bank. UFJ Bank is in the process of transferring a portion of its shareholdings to a new company to be created for that purpose, so that fluctuating stock prices will not impact the parent company so strongly. Apparently investors didn't think the solution as disingenuous as I did, however, as the bank rose 3.45% in today's trading.

The headline news in Europe concerns the release of the Ifo economic institute's monthly German March business confidence number. That number showed an unexpected decline to 88.1 from February's 88.9. Italian business confidence and French consumer spending, both released yesterday, also dropped. British Airways will cut flights and accelerate job reductions. Duetsche Lufthansa announced a reduction in its fleet, and Metro Group, a retailer, said its earnings may slow to the lowest levels since 1999. Crude oil rose in London. However, European markets were able to absorb these blows and currently trade up, with the FTSE 100 up 25.50 points, the CAC 40 up 29.37 points, and the DAX up 24.72 points.

  Steven Price   3/25/03,  9:41:57 PM
Yesterday's Market Monitor has been archived. You may view it and any previous days here: Link

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