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  Jeff Bailey   5/2/2003,  12:20:11 AM
Out of gas I'm out of gas for today. Will come in for a little while tomorrow and complete the "Ask the Analyst" column. Can't decide among the good questions what to try and answer. Will sleep on it and go from there.

 
 
  Jeff Bailey   5/2/2003,  11:02:47 PM
Pivot Analysis Matrix for Monday's DAILY, and new WEEKLY along with May's MONTHLY. Link

Notes:

Pink #1: OEX WEEKLY S2 and MONTHLY Pivot. I discussed the other day about naked put sellers looking to sell a May $455 or $450 put on a pullback near that level for May expiration. Didn't get the pullback, but I still like this trade and have it on my scratchpad.

Pink #2: Will show an SPX chart where this is really good bull target for this week. We've looked at the SPX chart with upward trending regression, and nice line up there. Looks like a bear with cross-hairs on him. Link

Dashed Green: These are all correlative levels, but I'm calling them "tentative" but notable support levels for Monday. "Tentative" because they were traded in today's (Friday) session, but broken as if resistance that should find some type of buying if tested on Monday.

Solid Green: OEX and NDX look to be a "matched pair" at WEEKLY S1 and DAILY S2. I would think a decline on Monday to these levels should be considered "profit taking" and good bullish entry levels for a bounce, or trade higher to a WEEKLY R1 target.

BIX.X : What can a bull say, other than... "how'bout them banks!" After 7 sessions of consolidation near their current bull-run high, there was no holding them back on today's break higher. A lot of correlation at the 299 level, and for those trading this Bank HOLDRS (AMEX:RKH) $106.32 +2.23%, then those following our "reverse head and shoulders" pattern and use of retracement will also note that the 80.9% retracement is at 298.20. OEX and SPX traders may also tie in the BIX.X WEEKLY R1 with OEX/SPX R1s.

 
 
  Jeff Bailey   5/2/2003,  9:20:45 PM
WEEKLY Pivot Matrix Here's the last three WEEKLY pivot matrix, along with next WEEK's matrix. Link

Notes: "Grasping a bit for correlative resistance (this is where MONTHLY has to help) correlations in the WEEKlies and this makes sense with a higher trending market. Some correlations still at/near Dow Industrials 8,664-8,682. 8,664 hasn't been traded, so that "has" to be considered resistance until broken.

Tentative support this week at SPX and NDX Pivots, that would correlate with the week of 04/14-04/17 WEEKLY R2s. The ability for both the SPX and NDX to trade these levels may well see good inventory build on pullback at the WEEKLY pivot, if not WEEKLY S1.

Firm support and multiple correlations among Dow WEEKLY S2 this week (note three 8,200) and I would say this is an IMPORTANT level of support for the Dow Industrials. NDX shows three different 1,064-1,066 levels. Boy... I'd sure have to think that a decline to their would be a good bull entry point for at least a good trade rebound.

I'm picking up on historical pattern that WEEKLY S1's have NOT been traded since the week of 03/31-04/04. I'll make note of this, and any trade/test of WEEKLY S1 may then be viewed as a "signal" that we're starting to see some type of "weakness" as it relates to various levels. If the bullish % really get high and we start seeing a trade at WEEKLY R1s, then we begin to sense some DIVERGENCE to the past.

The 10-year YIELD ($TNX.X) did finish higher on the week, but where stocks found the cash? Lots of short-covering and sideline money is my best guess. This bond's YIELD has had a very tough time trading anything above 4.08% in recent weeks. I'm thinking BEARS hope it doesn't anytime soon.

QQQ bears that took my bearish profile in the QQQ Sept. $27 puts ... my attention was drawn to this WEEK's S1. I profiled this bearish trade yesterday at 12:05:51. Can you guess the entry point? QQQ was trading $27.36. "Perfect entry, right below resistance." Yeah... right.

I'm going to go to work on the DAILY/WEEKLY/MONTHLY levels next. Will be interesting to see if any of the WEEKLY/WEEKLY/WEEKLY levels tie in with anything.

 
 
  Jeff Bailey   5/2/2003,  8:51:45 PM
Symbol Tech (NYSE:SBL) $11.41 +1.87% ... I'm watching "Crazy Louie" and guest analyst mentioned he liked SBL. They flashed a chart of SBL on the screen that looked like a BIG reverse head and shoulder pattern Link

I'll have to do some neckline/head projections but eyeballing it looks like about (neckline at $11, Head at $5, $5.50?). That would be a price objective of $16.50-$17.00.

Better check the p/f chart and see if there's a "match" ....

Oooooeee.... Link I see a nice "low pole warning" ($5.50-10.50) , then a triple-top buy signal at $11 combined with a break of downward trend, followed by a spread-tiple-top buy singal at $11.50, which becomes the bullish vertical count column to $19.50.

Hmmm.... that's a little bit more than the reverse head shoulder objective, but looks bullish. Risking $2 to the sell signal at $8 with a target of $16.50, perhaps $19.50. I like this one for 1/2 bullish position to start out with.

 
 
  Jeff Bailey   5/2/2003,  8:04:17 PM
NASDAQ-100 Bullish % ($BPNDX) "bull confirmed" and adds 3 stocks to new point and figure buy signals. Before ever thinking to add to my partial position in the QQQ Sept. $27 puts, I'm going to wait for some type of internal weakness to present itself.

As I remember I was a few days "too early" in the DIA calls from $77.50. I'll have to go back and look, but I'm wondering if I profiled those calls AFTER the Dow Industrials Bullish % ($BPINDU) reversed up from deeply oversold levels or when the bullish % was still in O. Link The Dow Industrials Bullish % saw a net gain of 2 stocks to new buy signal today. Still "bull alert," but a cycle high of 56.67.

I went back and looked ... I bought a partial bullish in the DIA Sep $80 calls (DAVIB) on March 5th at $4.70 (took some heat to $74.31 in the DIA as it hadn't quite traded its bearish vertical count). Rounded up an additional partial on 3/17 at $6.20.

Here it is... on March 5th, the Dow bullish % was still in O at 13.3%, it turned up to "bull alert" on March 17th.

OK... for any QQQ Sept. $27 put bears, try thinking just the opposite of what we did in the DIA. Right now, the QQQ $27 put is early isn't it?

Now... something I've "learned" over the years. About 70-80% of market participants have a BULLISH view of things. That is... most people would rather buy a stock than sell it short. As weird as it may seem, the same is true for option traders. Many would rather buy a call than buy a put.

For this reason, bullishness tends to last a little longer sometimes, and you can probably see from the bullish % charts, that they will tend to stay "overbought" a little longer (sometimes a month or two) than when they're "oversold." But... when you get the bulk of the bullish % charts at more overbought levels and they reverse lower, then it seems like "gravity" exists in the marketplace.

The ADVANTAGE we had with the DIA calls, is that we had both the DIA and the OEX nearing their bearish vertical counts, when their bullish % charts were at "oversold" levels.

The DISADVANTAGE a QQQ put buyer has right now, is that we don't really have a bullish vertical count that would "make sense" at this point, considering the field position of the bullish %. The bullish vertical count for the QQQ is $45. My bearish target is $25. Here's the QQQ chart, traditional $1 scale. Link

 
 
  Jeff Bailey   5/2/2003,  7:36:17 PM
Are bears about to capitulate? Rydex URSA (RYURX) $11.85 -1.57% ($0.19) Link gives the spread-triple-botton on the 1%-box chart and the $11.93 NAV hadn't been traded since July of last year. $11.82 trade would leave room to $11.47, and that would be an additional 3%.

Resistance looks to build at $12.30 (about 3% higher), which might then equate to a 3% pullback in the SPX.

A 4% decline from current levels in the RYURX might then correlate with a 4% advance in the SPX. SPX closed 930.08 so a 4% gain from current levels would be 967.28. A 3% pullback in the SPX from current SPX levels would be to 902.17.

Here's the SPX chart on 1% box size. Link

 
 
  Jonathan Levinson   5/2/2003,  4:03:52 PM
The INDU "broke out" but GE closed down 2 cents?

 
 
  Linda Piazza   5/2/2003,  3:59:56 PM
Almost . . . here's a look at the weekly OEX (semi-log) chart that I've posted from time to time over the last couple of months. It's difficult to see the rising wedge on this weekly chart, but the OEX is nudged up against the upper trendline or perhaps just over that trendline. It's also nudged up against or just over the long-term descending trendline, and it's over the 200-ema (not shown). The OEX still ends the week at a crucial level, however, without a clear upside break of the rising wedge, at least the way I've drawn the lines. I'm ready to play the bullish side if next week continues the upside, but my last criteria for all-out bullish plays is a move out of that consolidation pattern from 385-487, the top horizontal red line on the linked chart. Link

 
 
  Jonathan Levinson   5/2/2003,  3:53:08 PM
Would you explain how bullish/bearish options levels move the cash market? I am having a hard time figuring this one out.

This is more of a topic for an article than a quick reply, but here goes. Derivatives, by definition, do not move a market- the underlying does. But the writers of derivatives might in the short term try to peg the underlying with buy or sell orders to a strike price that lets them off the hook- we see this during opex week. Regarding the put to call ratio, it doesn't move the market, which is why I think of it as a "soft" indicator. But it *does* indicate prevailing bullish or bearish sentiment at a given time, which does move markets. Just another indicator to follow, but not a holy grail by any means.

 
 
  Linda Piazza   5/2/2003,  3:42:05 PM
We've just seen a slightly lower low on the five-minute OEX charts as the OEX falls away from the upper lavender trendline on the chart from my 10:12 post.

 
 
  Jonathan Levinson   5/2/2003,  3:27:33 PM
I am a new trial subscriber to OptionInvestor.com. I would like you to comment on $NASI and $NYSI from stockcharts.com. These readings are extremely high and they seem to indicate that the market is at the top instead of the bottom. Your comments are appreciated.

The NYSE and COMPX summation ratios are definitely in top territory. I agree. The VIX, VXN, and QQV are in bottoming territory (top territory for the indices). The Bullish Percent indices are there too, at least very close. Note that there are no clear sell signals on the summation ratios yet. I believe that the Maclellan oscillator set a new record yesterday.

Alas, the markets keep going up. Perhaps today was the top. Perhaps it will come at 934 SPX, 970 SPX, or perhaps we've just seen it and Alan nailed it just now. The trouble is that the future is the future, and while I trade off these indicators, they only set up probabilities of a future direction. Beyond that is the Las Vegas Fallacy. I've been meditating on this all day. Perhaps this run will be the one that sets new records.

But I agree. I still smell the top.

 
 
  Mark Phillips   5/2/2003,  3:25:11 PM
LEAPS Update For those of you following along at home (or work), I just wanted to confirm that I will be dropping ADBE from the LEAPS Portfolio this weekend. It has been a great play and actually went further than I initially expected. The stock could continue up towards $40 resistance, but I simply have insufficient faith in a continuation of today's rally. Market is starting to feel a bit toppy, so time to harvest some gains and get ready to play the downside.

 
 
  Linda Piazza   5/2/2003,  3:17:47 PM
Volume may not be validating the upside by expanding over the volume of recent days, but it's certainly slanted strongly toward the buy side, with up volume on the NYSE 5.6 times down volume and on the Nasdaq 6.5 times down volume. Adv/dec ratios are 3.1 on NYSE-traded issues and 2.4 on Nasdaq-traded issues. New highs vastly outnumber new lows. Total volume is 1.2 billion on the NYSE and 1.45 billion on the Nasdaq. These volume patterns aren't quite strong enough to be give validity to a bearish contrarian slant as yet.

 
 
  Jonathan Levinson   5/2/2003,  3:11:44 PM
It feels like an op ex Friday.

 
 
  Jonathan Levinson   5/2/2003,  3:08:05 PM
The volume on the NYSE looks a little too light to confirm today's move as a genuine ascending triangle breakout. Unless I'm mistaken, volume should balloon on a breakout of a multiweek bullish triangle, and today's NYSE volume at 1.51B so far is aiming to come in roughly the same as yesterday's.

 
 
  Linda Piazza   5/2/2003,  2:55:18 PM
As the OEX 5(3)3 five-minute stochastics hit oversold levels three candles ago, the OEX was hitting midline BB support. The reversal up in the OEX occurred from that level. The five-minute 5(3)3's zoomed right back up toward overbought levels again, making a quick cycle up, but the move back toward the day's high hinged the five-minute 21(3)3's up, too, and they've still got room to go up.

 
 
  Jonathan Levinson   5/2/2003,  2:39:43 PM
The five year yield continues to pullback slowly, now up 7.3 bps, QQQ currently 28.15 and back to testign the longer moving averages on the 3 minute candles. QQV is down .65, off its lows but still plenty oversold. HUI is actually positive as June gold continues to try to hold the 341 level. The US Dollar Index is finding support at that lower ascending trendline, still too early to rule on the flag vs. wedge question.

 
 
  Linda Piazza   5/2/2003,  2:22:08 PM
As the OEX bumps up against that top trendline of the rising wedge, there are bearish kisses from overbought levels on 5(3)3 and 21(3)3 stochastics on almost all intraday OEX charts: five-minute, fifteen-minute, and 60-minute. This is warning for bullish players, but not necessarily a valid short/put signal, as oscillators don't give valid counter-trend signals in a strongly trending market. I'd just be alert to any possibility here, especially as the VIX has popped back into positive territory, again near the HOD.

 
 
  Jonathan Levinson   5/2/2003,  2:19:57 PM
FVX has pulled back to a 7.3 bp gain, and the US Dollar Index has pulled back to 96.80. If it keeps falling, it was a bear wedge and projects to 96.40 for the pattern. If it bounces here, then it looks like a bear flag, and could project below 96.20 after a bounce to the 97.10 level.

 
 
  Jeff Bailey   5/2/2003,  2:11:43 PM
NASDAQ Composite (COMPX) 1,500 +1.91% ... just 22-points away from a technical "bull market" as a series of higher lows, now has the potential for a higher relative high.

 
 
  Jeff Bailey   5/2/2003,  2:10:19 PM
Juniper (JNPR) $11.12 +9% ... starting to see some action after last week's "bullish triangle" pattern. Remaining shorts could get squeeezed. Link

 
 
  Jonathan Levinson   5/2/2003,  2:08:08 PM
The put to call ratio has flatlined in the current area at .66, which is at the low end of neutral. The QQV is near its lows of the day and the FVX is near its highs. Thinking it through, it's difficult to key off of bond yields due to the massive repo drain taking place today. Judging from the action in equities, I'd guess that the fed's dealers had invested in bonds instead of stocks. For this reason, the selling we're seeing in bonds is not entirely a reallocation of assets- at least part of it is the reimbursement of several billion dollars of the fed's intervention money.

 
 
  Jeff Bailey   5/2/2003,  2:02:08 PM
I may have really missed something in last night's Index Trader wrap regarding the 5-year YIELD chart. Here's a look at the bar chart of the 5-year YIELD. Today's "observations" of QQQ trend trading had me doing this. Link

 
 
  Linda Piazza   5/2/2003,  2:01:55 PM
On the OEX 60-minute chart, the recent sideways action has flattened the RSI and curved the fast lines of the 5(3)3 and 21(3)3 stochastics down to the point of bearish kisses from fully overbought levels. However, as we've often seen with trending markets, those stochastics are quick to redraw themselves if a sustained upward movement begins, as might happen with the breakout of the bull-flag pattern on the five-minute chart. My best guess for today has been a move up to the top of the rising wedge on the daily chart and then a stall there for a period of time, which we've been getting. I just haven't been able to concoct a strong thesis for what I expect to happen late this afternoon--a quick, late-day short-covering pop over that rising wedge or a precipitous fall? I expect bulls to try to hold the DOW over recent relative highs, so perhaps I wouldn't expect too hard of a fall.

 
 
  Linda Piazza   5/2/2003,  1:50:53 PM
If this newest regression channel is another bull-flag pattern, it's either undergoing the expected retest after a breakout or prices are moving back into the channel. The breakout was a small one, which would led credence to the second scenario, but the 21-pma is right underneath current prices, perhaps lending support. Link

 
 
  Jonathan Levinson   5/2/2003,  1:46:04 PM
I'm watching the price walk the longer moving averages on the 3 minute QQQ candles, and there's definitely a weakening of the trend taking place. Of course, a consolidation pullback is to be expected, and today still looks stunningly bullish to me, with the USD up, FVX way up, TRINQ down, QQV down. The TICK.NQ is currently up 250. The only chink in the armor is gold holding above 341 and HUI hanging on by its teeth.

 
 
  Jeff Bailey   5/2/2003,  1:41:59 PM
01:00 Update post at this Link

 
 
  Linda Piazza   5/2/2003,  1:18:54 PM
Total volume stands at 847 million shares on the NYSE and 1.1 billion shares on the Nasdaq. Adv/dec ratios are a strong 2.95 for NYSE-traded issues and 2.47 for Nasdaq-traded issues. Up volume is 3.7 times down volume on the NYSE and 6.48 times down volume on the Nasdaq. These numbers and strong and likely are sustainable throughout the rest of the day, but that doesn't guarantee that they will be sustained, of course. I wouldn't want to step in front of these volume patterns just yet with a short play, however.

 
 
  Jonathan Levinson   5/2/2003,  1:14:20 PM
Hi Jonathan, I continue to be bearish, but am keeping an eye on the copper and palladium futures. Can't tell yet if they're basing, or just pausing on the way down (an upturn might indicate increased industrial activity, inflation, or both). Any thoughts? Thanks, -Matt

Matt, there are too many factors currently up in the air. Is the USD Index putting in a real bounce off the low, or is it merely corrective? That will determine the price of those commodities in US Dollars. The inflation / deflation question has become a hydra- we have consumer price inflation, paper asset price deflation, commodity inflation (but then it reversed), home price inflation, etc. The trouble here is that most of the markets are currently trading at or near critical pivot areas, testing major trendlines. The market will have to tell us.

 
 
  Linda Piazza   5/2/2003,  1:06:53 PM
The VIX remains near the HOD, at 24.38, with that HOD at 24.56.

 
 
  Jonathan Levinson   5/2/2003,  1:04:20 PM
The put to call ratio dipped to .65, now back up to .67. The US Dollar Index is pushing higher, but it's doing so in the Chart Pattern of the Month, the bearish ascending wedge (15 min candles). Resistance is so far at 97. QQQ broke below 28.10, but found support at 28.00, currently 28.06.

 
 
  Linda Piazza   5/2/2003,  12:49:31 PM
Reviewing old technical analysis texts often turns up information that might not have seemed as useful the first time I read the texts. I'm reviewing some old sources today that relate certain trading patterns to certain times of the trading day or certain periods during the month. For example, it's curious that the recent stall a few minutes ago came at the end of the 11:15-11:30 time period during which some note that it's common for the preceding movement to be stalled. According to some, highs (or lows) put in during this period tend to last for several hours. Studying the portion of Pring's book that deals with various cycles today and remembering the relative outperformance of the Russell 2000 one day this week, I also note that small-capitalized stocks usually outperform at month-end.

 
 
  Jonathan Levinson   5/2/2003,  12:37:01 PM
Sure has, Jeff.

 
 
  Jeff Bailey   5/2/2003,  12:32:59 PM
QQQ $28.10 +1.48% ... has broken above WEEKLY R2 and steady here. Here's an intra-day chart of what I think has been going on. Link

When I say ... "this is the VERY short-term trend I was playing into the close," what I'm saying here is that was the ONLY downward trend that ANY bearish trader would have been playing. It's been "bad news" for QQQ bear when these short-term trends have been broken hasn't it? It's also been "good news" for bullish traders. It looks like even if a bull misses an intra-day break above trend, he/she is getting good "pullback entries" at these broken trends.

 
 
  Jonathan Levinson   5/2/2003,  12:23:14 PM
Gold is edging back up, last at 341.10, but so is the FVX, now +6.1 bps. I doubt that they're selling bonds to buy gold- could project another blast higher in equities. Watching 28.10 support. Resistance? The highs of the day.

 
 
  Linda Piazza   5/2/2003,  12:18:19 PM
Although the markets don't always behave as I expect them to do, I continue to be relieved this week to see standard technical analysis tools working much as they're predicted to work. For example, this morning, the five-minute OEX charts showed the OEX making an upside break of a bull-flag pattern, and the OEX then moved up after a brief and expected retest of the pattern. A couple of weeks ago, a similar upside break might or might not have led to higher prices. It might just as likely have led to a fall back into the pattern and then a downside violation, which itself might or might not have had any validity. While it's always uncomfortable to take losses, at least now we know when to do that and when a trade is working in our favor!

If technical analysis tools are working, what's next? I don't know, and that's what standard TA tells me the correct response would be. When the OEX bounced from the lower line of the rising wedge this morning, I predicted a test of the upper trendline on that narrowing wedge and we've been getting that. Again, standard technical analysis could have predicted that kind of action. Now, I'm still watching for a definitive upside or downside break of the rising wedge on the OEX. Hourly, daily, and weekly stochastics say that the upside movement is getting a little extended, but standard technical analysis teaches us to distrust "sell" signals given by oscillators in a strong uptrend and we haven't even gotten those signals yet. While I'm watching stochastics and other oscillators and letting them forewarn me of possible movements, I'm keeping the word "possible" foremost in my mind and watching price.

 
 
  Jonathan Levinson   5/2/2003,  12:17:39 PM
He's right. A break below 28.10 will be a violation of the neckline of a head and shoulders pattern on the QQQ 3 minute candles.

 
 
  Jonathan Levinson   5/2/2003,  12:14:29 PM
Agreed, Alan. The FVX is creeping higher, now up 5.6 bps. They don't dump bonds when they're getting reading to dump equities.

 
 
  Mark Phillips   5/2/2003,  12:03:21 PM
KSS $55.19 (-0.30) Now that's what I call relative weakness. All the major indices are breaking out to new multi-month highs today, the Retail index (RLX.X) is inching over the $300 level and poor KSS is languishing down at its critical $55 support level. It looks like the only thing holding it up is the 50-dma ($55.04), but the chart definitely looks weak. KSS still needs to break below the $55 level to confirm this weakness, but when that breakdown comes, it ought to have better downside follow-through than we saw on Monday.

 
 
  Jonathan Levinson   5/2/2003,  12:01:12 PM
My stock list has gone dead, very little movement, could almost hear a pin drop. 28.12 has held as support on this pullback, now getting a slight bounce higher. FVX is still well off its day highs, and with treasuries not selling off on a second consecutive day of massive fed drains from Al Green, we're seeing a lack of confirmation of the move in equities. This is of little short term importance, because price is the only arbiter. The US Dollar Index is holding its gains with a brief spike above 97, currently 96.90.

 
 
  Mark Phillips   5/2/2003,  11:58:40 AM
FITB $50.40 (+1.66) Time to pull the plug. Despite the fact that this put play did not go in our favor, I have to chalk it up as a success, because of the strategy we used. Since we listed a trigger of $47 (that was never hit), there was no valid entry point into the play. That's certainly a relief, as we see the stock moving through our $50.25 stop and the BKX index is finally taking out the $800 resistance that has held it back since last August. To be fair though, the BKX at $804.58 is still a bit below the intraday highs set last August and we'l need a close over $806.90 for a clean and decisive breakout. Regardless of the outcome on the BKX, we'll be dropping FITB this weekend.

 
 
  Linda Piazza   5/2/2003,  11:53:35 AM
Although the OEX hasn't yet hit the top BB on the daily chart, it has done so on the hourly chart, with the OEX currently at 470.77. Although I don't know how much credence I'd give stochastics in a strongly trending market anyway, hourly stochastics show the 5(3)3's flattening just above the 80 level while 21(3)3's still push up, also near that same level. RSI still appears to have room to go up. With a high of 471.62, the OEX has reached within a point of the upper lavender trendline (see my 10:12 post) of the rising wedge.

 
 
  Mark Phillips   5/2/2003,  11:53:33 AM
SLM $114.38 (+2.20) Were you quick on the trigger? You had to be to catch this new OI Call play, as the stock opened right at yesterday's closing level and surged through the $113 level. One brief pullback to test that level as support and it was off to the races again. SLM now testing its 20-dma as resistance and once through there, we'll be looking at the $115-116 resistance as the next obstacle ahead of an expected retest of the mid-April highs.

 
 
  Mark Phillips   5/2/2003,  11:45:36 AM
AZO $82.24 (+1.28) What's YOUR exit plan? AZO has been a stellar performer for us, now up $7 from where we initiate coverage. Could it continue to run higher? Certainly! But how much risk are YOU willing to take for the possibility of more upside? Our initial target for harvesting gains is the $82-83 area and we are right there now. Traders looking for a bit more upside will be watching for a continued rally into the $84-85 area, which will likely be very strong resistance. In either case, our coverage stop now moves up to $80.

 
 
  Jonathan Levinson   5/2/2003,  11:41:19 AM
Regarding Jeff's "holding their nose" comment, I don't think that robots have noses to hold. And shorts covering are too busy holding their heads :)

 
 
  Mark Phillips   5/2/2003,  11:39:51 AM
ERTS $61.18 (+2.28) Now that's more like it. After languishing for the first four days this week, ERTS is charging higher this morning. If this surge in the broad market is for real, then ERTS could continue this surge early next week, leading up to earnings on Tuesday after the closing bell. If the stock can clear the $62 level this afternoon, then I'd say it has good odds to continue that move next week. Just to be clear though, I would not advocate new positions at this time due to the proximity of earnings.

 
 
  Linda Piazza   5/2/2003,  11:37:18 AM
The FTSE 100 closed up 66.30 points or 1.71%, at 3946.40; and the CAC 40 closed up 9.45 points or .32%, at 2963.12. Each closed at or near the day's high. The DAX currently trades up 19.10 points to 2961.14.

 
 
  Jonathan Levinson   5/2/2003,  11:36:53 AM
The put to call ratio actually edged up there to .69. Bad news for bears. As Jim's charts depict, the ES is poking above the long term ascending trendline here. On my futures wrap charts, we have also exceeded the top trendlines. A retest and a failure to penetrate back below the trendlines would be a technical signal to go long. I would only add that given the extreme readings on the indicators, any long will need a tight stop.

 
 
  Jeff Bailey   5/2/2003,  11:35:37 AM
S&P 500 Index (SPX.X) 925.95 +1.05% ... Today's trade at 920 gives SPX a 3-box reversal up, but trade at 925 generates a 5th consecutive "buy signal." Sector bulls can snug a stop up under yesterday's low of 902, or just under 900. I prefer a stop just under the MONTHLY pivot of 896 for those comfortable. Link

Per this past weekend's "Ask the Analyst" column Link , if today's 1% gain in the SPX holds, then we might well expect the 1% chart of the Rydex URSA (RYURX) Bear Fund to generate a major breakdown sell signal on its chart. Here's the chart we looked at using the p/f charting technique of measuring price based on percentage moves of 1%. Link

Are the nex round of "fund redemptions" we've been hearing about the last couple of years about to hit the "bear funds?"

To be "fair" to the bears, the first sign of any real trouble for the RYURX would be a closing NAV (net asset value) of $11.50, which would be a double-bottom sell signal on its conventional $0.50-box chart. Link

 
 
  Mark Phillips   5/2/2003,  11:34:41 AM
ADBE $37.76 (+1.07) Time to start thinking about an exit here! While we aren't in a panic to get out, (and why should we be?) I think traders in this LEAPS play should start thinking about a profitable exit. Since we initiated this position on 2/28 at $27.50, the stock has managed to put together better than a $10 gain. The listed LEAP option strikes are currently up 115% ('04) and 72% ('05) in just over 2 months. ADBE is already well into its push into strong resistance, which will only get stiffer in the $38-40 area. Rather than wait for a trailing stop to be hit, I'm leaning towards an exit on strength. While I can see the stock working higher from here, I'm not willing to take the risk and will most likely drop the play this weekend. Traders that would rather hold in the hopes of seeing higher prices ahead should get more aggressive with their stops, raising them to $36.00, just below this morning's intraday low.

 
 
  Jonathan Levinson   5/2/2003,  11:29:01 AM
Waiting for the put to call reading due in 3 or 4 minutes to find out how much impact this move had on sentiment. Hopefully we'll see a reading in the .50s, but that's pretty optimistic.

 
 
  Jeff Bailey   5/2/2003,  11:27:57 AM
Dow Industrials (INDU) 8,541 +1.04% ... session high has been 8,554.88, but today's trade at 8,500 was enough for a 3-box reversal on the p/f chart. Per last night's Index Trader's Wrap, Dow bulls can either keep stops at 8,250, or remove further risk by raising stops to 8,300. Link

 
 
  Jeff Bailey   5/2/2003,  11:22:32 AM
11:00 Update posted at this Link

 
 
  Jonathan Levinson   5/2/2003,  11:20:28 AM
QQV has now collapsed to a new low of 26.51, down 1.35 today. The QQQ options market thinks that this is a new bull market. FVX is down from its highs, up 4.1 bps now. June gold is down to 399.90, down 2.90 on the day. The US Dollar Index is trying to retake the 26.80 level.

 
 
  Linda Piazza   5/2/2003,  11:18:20 AM
The OEX now pushes above the green upper trendline shown in the chart linked to my 10:12 post and now moves toward the upper lavender trendline, near 472.50-473, and upper daily BB, now at 474.62. Remember that the whole point of formations such as these rising wedges is that you don't know which way they'll break until they do break. Most rising wedges are bearish, but upside breaks are sometimes seen, too.

 
 
  Mark Phillips   5/2/2003,  11:12:56 AM
ADTN $42.22 (+0.82) Now past the opening volatility and our ADTN play is charging to new highs again. Traders that entered either on the breakout yesterday or today's push through the $41.75 level are looking good here, as the stock has already traded half its ADV in the process of rising 2.25%.

 
 
  Jonathan Levinson   5/2/2003,  11:08:11 AM
The put to call ratio is down to .68, but I fear that it's simply too small a decline. The fact is that many technicians expect current resistance to hold, and this is reflected in the bullish to neutral p/c readings we're seeing. The market won't be dropping meaningfully until there are fewer bears. The FVX is up to a 6.3 bp gain now, TRINQ down to an extreme .31 reading, TICK.NQ +561.

 
 
  Mark Phillips   5/2/2003,  11:06:26 AM
Now that the opening volatility has settled out, it certainly looks like the bulls are set to have some fun as we head into the weekend. All the indices are either testing or above their recent highs and the ADVDECV indicators are solidly rising from their opening lows. We're seeing the VIX relax a bit, but it's interesting to see it still holding over 24 at 24.04 as I type. Bond yields are moving up to test their opening highs, and gold is dropping back just a bit in response to a slight firming of the dollar's recent slide. Taken together, this is not a hospitable environment for the bears. Despite my bearish longer-term view for equities, today does not look like the time to be backing that bias with trades.

 
 
  Jonathan Levinson   5/2/2003,  11:03:48 AM
NDX volatility as measured by the QQV has collapsed to a new bear market low, currently 26.93.

 
 
  Linda Piazza   5/2/2003,  10:49:13 AM
With regard to my 10:43 post, I continue to be puzzled by the divergence in the $TRAN's behavior and that of its sister index, the industrials. The transports first closed above the 200-ema on April 15, for example, and the index has stayed above that ema ever since, while the DJI has not been able to maintain closes above that ema. The longer this divergence exists, the more troubling it becomes, as Dow theory says the two indices should confirm each other. Conversely, though, the DJI first gave a new buy signal and moved above the bearish resistance line in March, so the transports lagged far behind the industrials by this measure.

 
 
  Jeff Bailey   5/2/2003,  10:44:13 AM
QQQ $27.95 +0.93% ... session high of $28.04 has come VERY close to Tuesday's $28.06 and WEEKLY R2 of $28.08. Break above there most likely brings in some further short-covering and has upper "zone of resistance" in play of $28.65-$28.79.

 
 
  Linda Piazza   5/2/2003,  10:43:02 AM
Perhaps the $TRAN is benefiting today from Merrill Lynch's upgrade of several airlines. Delta (DAL), Northwest Airlines (NWAC), Continental (CAL), Alaska Air (ALK), and Frontier (FRNT) were among the airlines upgraded to buy. Today, the TRAN surpassed November and January's highs (2425.75 in January), and pushed toward the August high of 2469.91, but has not yet been able to move past that level. Currently, the $TRAN trades at 2449.89. Daily and weekly charts show stochastics in the overbought region, but they have not yet begun to roll. Today's move has given a triple-top-breakout buy signal on the $TRAN, but by only one box.

 
 
  Jonathan Levinson   5/2/2003,  10:36:35 AM
The put to call ratio (total) has risen to .76. The five year t-yield has risen to a 3.3 bp gain on the day, while QQV is scoping for day lows in the low 27s. June gold is now down 1.40, HUI -.47 to 129.37 and XAU -.31 to 67.35.

 
 
  Linda Piazza   5/2/2003,  10:28:00 AM
So far, advancers far outnumber decliners today, and up volume is far ahead of down volume. New highs vastly outnumber new lows, with only one new low on the NYSE and only 6 on the Nasdaq. At the time of this report, volume was light, at 180 million shares for the NYSE and 313 million for the Nasdaq. I'm not sure I trust these figures just yet as there still might be some settling-out of plays from yesterday's Globex closing and any hedging that might have been done in the cash markets. With the dollar down, gold up, bonds down, crude oil up, and the VIX down, I'm still getting a mixed picture from the various indicators. This is not my favorite kind of day to trade.

 
 
  Jonathan Levinson   5/2/2003,  10:25:02 AM
Would you please explain, "Put to call ratio .71, equity pcr .48, index 2.21"

The total put to call ratio is released by the CBOE every half hour, summarizing put and call volumes for that time period. The total ratio is based on a combination of equity and index put and call volumes. I calculate these by hand based on the CBOE's data and determine the equity and index p/c ratios. Generally, I use the equity pcr in a contrarian manner and the index pcr directly, though I think of them as "soft" or secondary indicators only. So, low equity pcr= bearish, high index pcr= bearish. High equity pcr= bullish, low index pcr= bullish.

 
 
  Jonathan Levinson   5/2/2003,  10:19:55 AM
Federal reserve permanent market operations can be tracked at this Link

 
 
  Jonathan Levinson   5/2/2003,  10:15:10 AM
To those who are astounded at the action in the COMPX/QQQ today and this week, yes, I feel your pain. My only comment is that the chart pattern discussed in my wraps this week is a bearish ascending wedge. Try to remember how this feels- the pattern pushes stubbornly higher in a narrowing range, and most of the time (but not always) breaks to the south.

 
 
  Linda Piazza   5/2/2003,  10:12:11 AM
So far, the OEX has been stopped at the green upper trendline on the linked chart, rather than the lavender one that has stopped other advances this week. Link

 
 
  Jonathan Levinson   5/2/2003,  10:09:17 AM
Beautiful short entry, Alan.

 
 
  Linda Piazza   5/2/2003,  10:08:55 AM
After closing pennies below its 200-ema for two days in a row, the SOX attempts another push above that MA this morning, with the 200-ema currently at 333.61 and the SOX currently at 337.42.

 
 
  Jeff Bailey   5/2/2003,  10:08:37 AM
Airline Index (XAL.X) 43.33 +9.6% Link ... sector winner this morning after Merrill Lynch says they feel that risk to their 2003 earnings forecasts for airlines could be to the upside (lower losses) as it appears the worst may be over for the group (war, SARS, recession). While Merrill believes industry capacity is likely to be constrained over the next 1-3 years, an industry restructuring is now well underway.

Merrill upgraded ALK Link , CAL Link , DAL Link , FRNT Link , NWAC Link

 
 
  Jonathan Levinson   5/2/2003,  10:06:01 AM
Put to call ratio .71, equity pcr .48, index 2.21.

 
 
  Linda Piazza   5/2/2003,  10:05:25 AM
Yesterday's OEX high of 467.13 has now been exceeded. This week's high has been 469.89, but I would look for strongest resistance near 472.50, the top of one version of the rising wedge, or near 474, the current level of the top BB on the daily chart. Sixty-minute stochastics extend toward overbought levels, but haven't yet turned down, showing that momentum hasn't yet slowed. I do expect a test of that upper trendline on the rising wedge now that there's been a bounce from the bottom line.

 
 
  Jonathan Levinson   5/2/2003,  10:02:51 AM
Still no Michigan Sentiment data. Meanwhile, FVX is back near its highs of the day. Gold is down .20 on the factory orders data. TRINQ .41, QQV -.61 to 27.25, TICK.NQ +587., QQQ 27.96.

 
 
  Jim Brown   5/2/2003,  10:00:01 AM
Factory Orders +2.2% VS est of +1.2% and drop of -1.5% last months report

 
 
  Jonathan Levinson   5/2/2003,  9:59:00 AM
The fed has added 2B in weekend repos for net drain of 7B, the second large drain in as many days.

 
 
  Jeff Bailey   5/2/2003,  9:57:57 AM
Cigna (CI) $49.35 -8% ... stock sharply lower after reporting Q1 earnings of $1.46 per share, which was 4-cents better than consensus. However, on call, company said membership losses exceeded losses. Link

 
 
  Jim Brown   5/2/2003,  9:53:13 AM
The link to the 9:00 update. Link

 
 
  Jonathan Levinson   5/2/2003,  9:50:34 AM
While I search for the 9:45 data, commentary on CNNfn: The drooping greenback is starting to get investors jittery.

Well done, Sherlock- the USD Index is down nearly 25% since January, 2002, and it's "starting" to make investors jittery?

 
 
  Linda Piazza   5/2/2003,  9:46:32 AM
The OEX five-minute chart shows a potential bull-flag pattern, and it appears that the OEX is attempting an upside break of that pattern now. Again, I'd be reluctant to bet too much of my trading account on any action occurring this early on this morning.

 
 
  Jonathan Levinson   5/2/2003,  9:46:23 AM
The QQV has keeled over on this 13 cent QQQ rise, now down .29 to 27.57. VXN is up .25 to 32.74. The FVX is still up 1 basis point as we await the 9:45 data.

 
 
  Jeff Bailey   5/2/2003,  9:45:52 AM
09:00 Update was "uploaded" to the site this morning, but something is broken in the code and it doesn't show on the home page. The 09:00 update should be in subscriber's e-mail. I would give the "link" to the 09:00 update, but don't know what it is. (random generated).

For those that also subscriber to PI, it is on the front page.

 
 
  Linda Piazza   5/2/2003,  9:40:17 AM
Once again, the OEX sits near the bottom supporting line of the rising wedge, with that line now crossing somewhere near 462-462.50. Once again, I caution that this support zone could provide either a bounce point for the OEX or be the point from which the OEX begins a violation of that rising wedge. I'm reluctant to draw many conclusions ahead of the 9:45 release of numbers and the volatility that might accompany that release, but one conclusion I can safely draw is that the wedge is narrowing sharply toward its apex and a break one way or the other should occur within a matter of days.

 
 
  Jonathan Levinson   5/2/2003,  9:38:57 AM
The USD index has just ramped hysterically up to the 97 level, yet gold is up 80 cents to 343.60. The discrepancy could be that either my supposedly live INO chart is actually delayed, or, more likely in mind, that the Matrix has simply lost control for a few moments :) I'll keep an eye on this. The June gold quote is definitely live, and I'll trust that over my free dx00y feed.

 
 
  Linda Piazza   5/2/2003,  9:35:17 AM
As Jonathan warned in his 8:31 post, we have other economic numbers due out shortly. Traders might consider expected volatility near the release of those numbers, coupled with the volatility that might be due to Globex's extended closing yesterday, when thinking about setting stops on existing positions or initiating new ones.

 
 
  Jonathan Levinson   5/2/2003,  9:31:56 AM
China makes submarines too? Can I pick one up at WMT?

QQQ down a whopping 6 cents at 27.63, FVX now up 1 bp off its highs, TRINQ .86, QQV +.25 to 28.11, TICK.NQ +183.

 
 
  John Beyer   5/2/2003,  9:15:21 AM
Ha! Jonathan, Fame, I just got it. Thanks for starting my day with a laugh, since the jobs report didn't do it.

 
 
  Linda Piazza   5/2/2003,  8:50:03 AM
In the at-least-the-numbers-weren't-worse mode, European markets liked the U.S. economic news, too. Currently, the FTSE 100 is up 16.10 points, to 3896.20; and the CAC 40 and DAX have trimmed their losses. The CAC 40 is down 34.60 points, to 2919.07; and the DAX is down 31.60 points, to 2910.44.

 
 
  Jonathan Levinson   5/2/2003,  8:34:14 AM
Just out: U.S. jobless rate up to 6%; 48,000 jobs lost. March payrolls revised to -124,000 jobs from -108,000 reported. Workweek down to 34 hours.

Futures like the news, QQQ up to 27.82. FVX +2.5 bps, TNX +2 and TYX +.8 bps.

 
 
  Jonathan Levinson   5/2/2003,  8:31:34 AM
8:30 am: Average Workweek for April, prior 34.3, consensus 34.2

8:30 am: Hourly Earnings for April, prior 0.1%, consensus 0.2%

8:30 am: Unemployment Rate for April, prior 5.8%, consensus 5.9%

8:30 am: Nonfarm Payrolls for April, prior -108K, consensus -58K

9:45 am: Mich Sentiment-Rev for April, prior 83.2, consensus ? 10:00 am: Factory Orders for March, prior -1.5%, consensus -1.2%

 
 
  Jonathan Levinson   5/2/2003,  8:09:41 AM
Was it just me, or did anyone else expect all the personnel on the deck of the USS Abraham Lincoln to break into an impromptu Fame-esque dance-a-thon?

QQQ is trading up 8 cents to 27.77, and it appears that the bear correction that many, including myself, were expecting has been purged by simply pulling the plug on the Globex. The story didn't even make it onto Paul Kangas' menu last night. ES is currently up .25 to 915.25, NQ 1117.50 +4, and the US Dollar Index 96.60 after a brief visit to 96.20. Gold is worth ten cents less at 342.70/oz.

 
 
  Linda Piazza   5/2/2003,  7:06:52 AM
Good morning. The Nikkei opened down 37.58 points at 7825.71 and hit an intraday low of 7792.20. It rebounded from that low, and closed on the day's high, up 43.90 points or 0.56%, to 7907.19. Ahead of a three-day weekend for Japanese markets, trading was lighter than usual. Although banks had gained in recent days due to coalition plans to ask the BOJ to buy bank shares, a news source quoted BOJ Governor Fukui as saying he would oppose the plan. Bank shares plunged. Sony continued its recent fall, although it slowed its descent, falling only 0.2%. Some other exporters suffered due to the stronger yen against the dollar, but many tech stocks participated in the rebound. Other Asian markets were mixed, with Hong Kong's Hang Seng adding 1% and South Korea's Kospi falling 0.3%.

Most European bourses are down to flat this morning, impacted by the falling dollar, yesterday's U.S. economic numbers, and Eurozone economic numbers. Recent economic numbers have shown Germany's retail sales falling 4%. In a lower-than-expected number, Eurozone PMI for April fell to 47.8 from March's 48.4, Reuters reported today. Unilever, the world's biggest maker of household products, plunged as much as 8.1% at one point today after announcing sales growth that disappointed analysts. Royal Dutch/Shell gained in early trading after announcing Q1 income that more than doubled, although analysts question the sustainability of that income growth. As of this writing, the FTSE 100 was up 8.70 points or 0.22%, to 3888.80; the CAC 40 was down 40.56 points or 1.37%, to 2913.11; and the DAX was down 46.65 points or 1.59%, to 2895.39. The CAC 40 and DAX were closed yesterday due to May Day holidays.

 
 
  OI Technical Staff   5/2/2003,  7:02:06 AM
The Market Monitor Server will be rebooted in 5 minutes. To continue to receive updates you will need to reconnect your desktop program

 
 
  Jeff Bailey   5/1/2003,  11:21:18 PM
The Index Trader Wrap has been posted: Link

 
 
  Jonathan Levinson   5/1/2003,  11:21:11 PM
The Futures Trader Wrap has been posted: Link

 
 
  James Brown   5/1/2003,  11:20:44 PM
Yesterday's Market Monitor has been archived. You may view it and any previous days here: Link

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