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  Kent Barton   5/8/2003,  4:55:04 PM
OI Reader tolman@xxx.com points out that UnitedHeath Group (UNH) announced a 2-for-1 split today, payable on June 18th to shareholders of record on June 2nd. Might a good old-fashioned split-run be forthcoming?

The bulls could certainly make a fundamental case for UNH. Their most recent earnings announcement on April 16th beat estimates by six cents and also included an increase in full-year growth expectations. However, some analysts pointed out that the company actually missed earnings on an operating basis because the quarterly result included a gain from a previous reporting period.

In any case, the daily chart is looking pretty strong as shares consolidate the big move from $80. There's overhead resistance at $95, with near-term support in the $90 region just above the rising 50-dma. So is it time to jump on a split run? Probably not yet. The daily stochastics (5,3,3) are looking a bit toppy, and shares have just traced a lower high (compared to the April high of $95.11). Traders might instead want to keep an eye out for a pullback to support at $90. A rebound from that area could provide the perfect launching pad for a rally into the split date.

  Jim Brown   5/8/2003,  4:20:08 PM
NVDA earnings 12 vs est of 11 cents

  Linda Piazza   5/8/2003,  3:58:33 PM
The VIX is at 23.61, dropping a little into the close, but continuing its consolidation above 23.

  Linda Piazza   5/8/2003,  3:54:42 PM
Today, the BIX ended its attempt to push above the 296-297 resistance that had been holding back its attempts to move higher, and currently trades at 290.28. On my daily chart, I've been showing the BIX trading within an upward-slanting regression channel since early April. Today, the BIX threatens to fall out of that channel as 5(3)3 and 21(3)3 stochastics and RSI turn down, but that may mean only that the BIX needs to consolidate while it digests recent gains. CCI still shows green, and although daily ADX may show the slightest hint of flattening, its 37.87 number shows that the trend so far remains strong. We may not be able to trust those oscillators just yet. The current level has been both support and resistance in the past, or perhaps the BIX might pull back to 284 support, just above the 200-ema and 200-dma. The P&F chart shows this index to be on a buy signal, but also pinpoints the overhead resistance that has been holding back BIX advances recently. A new sell signal would not be given until a fall through 256, but that would be too far for me if I were holding a stock in the BIX and looking for sector strength. I'd want the 200-ema support to hold.

  Jonathan Levinson   5/8/2003,  3:44:45 PM
The VXN and QQV have sunk a touch lower but are still positive on the day. The TRINQ is up to 2.83, TICK.NQ -194. The descending trendline on QQQ held on that last push. Meanwhile the lower trendline of the ascending wedge on the INDU appears to have been violated, and on the SPX it's just hanging on, with no significant bounce in any case.

  Linda Piazza   5/8/2003,  3:32:25 PM
This OEX ten-minute chart shows that after a quick fall toward the daily S2 this morning, the OEX attempted a climb back to the daily pivot, failed, touched the S2 this time, attempted to push up to the daily S1, and failed in that attempt. It has since been bouncing between the daily S1 and the weekly pivot. Link

  Mark Wnetrzak   5/8/2003,  3:30:38 PM
Covered-Call Update
The majority of positions in the model covered-call portfolio continue to trade within their uptrend channels as they consolidate recent gains. One exception, Tommy Hilfiger (NYSE:TOM) is under pressure today after it warned that it would post a net loss because of a big write-down and said the current year would be difficult. A violation of the April high (and 50-dma) would raise the probability of a test of the March low. In any case, it looks as though the stock will close back below its 150-dma today - time to re-evaluate your long-term outlook? Current issues on the early-exit watch list, Infineon Technologies (NYSE:IFX) and aaiPharma (NASDAQ:AAII), continue to act worrisome and should be monitored closely. Biomarin Pharmaceuticals (NASDAQ:BMRN) is also looking a bit overextended and today's apparent violation of the 50-dma doesn't bode well in the near-term.

  Jonathan Levinson   5/8/2003,  3:15:53 PM
The Qubes are pushing up against the descending trendline that has capped each advance since yesterday's noontime highs. A print at QQQ 28 would violate this resistance. Treasuries have closed with the FVX +5.8 bps, TNX -2.2 and TYX -1.9 bps. It appears that the strange action in treasuries today was the result of dumping in the wake of the note auction.

  Linda Piazza   5/8/2003,  3:03:47 PM
The SOX is dropping to the LOD, currently at 337.09, but having just touched 336.88. It's edging ever closer to that 200-ema at 334.13, setting up for a fall through that level or a bounce. With 60-minute oscillators so oversold and with this level being so key, I'd guess that bulls will try to send it back up again, but I'm not convinced that any bounce would be strong.

  Linda Piazza   5/8/2003,  2:48:09 PM
The volume patterns are remaining fairly steady through this last hour.

  Jonathan Levinson   5/8/2003,  2:46:33 PM
We now have 2 straight hours of .95 put to call readings, and the QQV has sunk a little lower, now up .23 on the day at 27.86, with the VXN +1.39 at 33.39. June gold is still up 7 at 349.20, HUI +3.27 and XAU +1.72. QQQ is trading in the mid 27.80's.

  Linda Piazza   5/8/2003,  2:42:04 PM
That 465.80 daily S1 level for the OEX has acted like a magnet all day.

  Linda Piazza   5/8/2003,  2:29:25 PM
Volume is currently 914 million shares on the NYSE and 1.2 billion on the Nasdaq. Adv/dec ratios are .77 for NYSE-traded issues and a much more bearish .60 for Nasdaq-traded issues. Down volume is about 2.8 times up volume on the NYSE and 3.5 times up volume on the Nasdaq. New highs continue to vastly outnumber new lows.

  Jonathan Levinson   5/8/2003,  2:14:33 PM
If the descending resistance line from yesterday's morning high holds, we should not see north of QQQ 28 again. The TRINQ is up at 2.02, showing moderate selling pressure, while the QQV and VXN are up slightly, TICK.NQ +80. This is so far an aimless down day, quite out of the ordinary because for the past month we've seen few aimless days that didn't have an upward bias.

  Linda Piazza   5/8/2003,  2:12:49 PM
The OEX again tests the daily S2 level at 465.60 while the 60-minute ADX shows selling pressure increasing and buying pressure decreasing. Hourly stochastics and RSI remain deeply oversold, indicating the risk of another bounce attempt as this level is again tested. Daily oscillators begin to show more bearishness, perhaps portending that any OEX bounce might fail at the broken lower trendline of the rising wedge.

  Jonathan Levinson   5/8/2003,  2:02:02 PM
The Commodities Index continues to rise, at 235.03 just below its high of the day, led by oil, natural gas, gold and silver.

  Linda Piazza   5/8/2003,  1:52:34 PM
The SPX, OEX, and DJI currently all trade under their weekly pivots, while the NDX at 1121.68 trades just above its 1119.60 weekly pivot. This brings the possibility of weekly S1 levels into play on the SPX, OEX, and DJI. For those who haven't printed up Jeff's weekly pivot levels, those S1 levels are 8394.10 for the DJI, 909.10 for the SPX, 461.30 for the OEX, and 1101.70 for the NDX, if the NDX should join the other indices in falling beneath their weekly pivots.

  Kent Barton   5/8/2003,  1:49:32 PM
Here's another possible short play that we've been keeping an eye on: Syntel (SYNT) is an IT stock that's broken down to fresh relative lows, following a rollover from resitsance at $16.00. The stock has no clear horizontal support until the $12.00 region. The average volume is too light for us to add to PI, but traders who don't mind the reduced liquidity could think about shorting SYNT on a failed rally from the $14.80-$15.00 region, using a stop slightly above $16.00. Bearish entries at current levels would demand a tighter stop-loss.

  Jonathan Levinson   5/8/2003,  1:48:53 PM
The Qubes are showing no strength on the most recent bounce, currently trading 27.88 with the QQV up .37 to 28.15. VXN is up 1.17 at 33.17. There have been very few days during the past weeks when either the QQV or the VXN closed positive, but then, there are still over 2 hours left of this session. The put to call ratio is down to .95 currently, its second such reading in a row.

  James Brown   5/8/2003,  1:37:45 PM
FYI...odds are really good that we might add AIG as a put play in tonight's newsletter. We still have a little bit more digging to do. Check out both the daily and the weekly charts.

  James Brown   5/8/2003,  1:32:01 PM
If you're a believer in the airlines and that the worst may be behind them then keep an eye on shares of Continental Airlines (CAL). The stock rocketed higher on May 2nd from under very heavy resistance at $10.00 to almost $12.25 with the big Merrill Lynch sector upgrade fueling the advance last week. The last four days have been a consolidation of those gains and CAL is approaching the $10 mark, which should now act as support.

  Linda Piazza   5/8/2003,  1:21:50 PM
The FTSE 100 closed down 64 points or 1.60%, at 3928.90, and the CAC 40 closed down 84.79 points or 2.80%, at 2939.17. Currently, the DAX trades down 100.66 points or a whopping 3.35%, at 2904.98, having already dipped below 2900 once today.

  James Brown   5/8/2003,  1:20:42 PM
Just an observation that shows how fragile this market is...look at today's moves in WFMI and CHS. When a simple brokerage downgrade can cause these kinds of reactions... traders seem way too scared. The initial reaction appears to be "sell now" and take any profits they had off the table.

  Kent Barton   5/8/2003,  1:20:11 PM
Interpublic (IPG) $11.29 -0.36: Seeing some profit-taking in IPG ahead of tonight's quarterly report. The stock had a nice pre-earnings run but had recently been struggling to crack the $12.00 level. Our bullish play on PI was stopped out today at $11.49. Traders who are still long ought to strongly consider closing a portion (or all) of their remaining positions before the closing bell. Holding over earnings is a crap shoot that more often than not is a losing proposition for bulls.

  Jonathan Levinson   5/8/2003,  1:08:29 PM
The 10 day stochastics are on a sell signal from deep in overbought, and the 10 week is impending but not yet there. Gold is pulling back from its highs in time for the 1:15 COMEX Crush. TNX has come way up off its lows, down just .5 bps now, and the persistent discrepancy between the FVX (now up 8.7 bps) is beginning to confuse me. It looks like some wacky goings on in the bond market today.

  Jonathan Levinson   5/8/2003,  1:00:30 PM
Thanks, Keith! That seems to coincide what I've been hearing too.

  Linda Piazza   5/8/2003,  12:54:01 PM
Reader Question: Can you comment on AGN it looks like it has broken down from uptrend line from december thru present.Any response would be appreciated as I value your opinion and knowledge.

Response: Thanks on behalf of all the writers for the compliment. Although I'm not a P&F expert, I do always look first at the P&F chart, and note that Allergan remains on a buy signal and above its bullish support line, but has recently begun consolidating in a wedge shape. A bullish trader has risk down to 69, at which point AGN would give a new P&F sell signal, but until that should happen, the P&F chart gives a cautious signal that buying on support would be the best idea. I have not checked this stock's sector, however, and also do not know of fundamentals that might change the outlook.

The bar chart looks a bit more troubling. Daily oscillators all look bearish, with RSI and 21(3)3 stochastics having recently broken through a pattern of higher lows. This occurred as AGN gapped down on April 28, and those oscillators have since unsuccessfully tested that violated line while AGN made the recent 73.02 high on May 5. I give evidence like this strong credence in my own trading, so I would feel forewarned to watch for further weakness if I were in a bullish trade with Allergan. Although the shape is malformed and the neckline sloping, the topping formation just now has a bit of a H&S look to it, with a neckline just below near 70. The 50-dma is just below that, at 69.20, and that December through present line you mentioned cuts across about there, too, so that those two factors might provide support, but a move below that level would create that new P&F sell signal. Daily ADX shows that the strength of the rally has been abating, and that selling pressure is beginning to rise while buying pressure begins to abate. Below 69, next strong support appears to be at about 67.50, 65, and then the 200-ema at 63.77. H&S necklines can be rejected, but I see some warning signs here.

  Jim Brown   5/8/2003,  12:43:50 PM
Market Monitor Problems - We are having intermittent problems with the monitor this week. There are four separate monitors, the browser version, the current monitor version, a Proxy server version and the initial desktop version. The initial desktop version and the browser versions run off a Windows-2000 server and the current version runs on a Linux server. We are trying to move everything to the Linux based version due to speed and reliability. The Windows based system simply cannot handle the load even on a twin Xeon-2.6GHZ server. It is no longer a speed issue but Windows keeps dropping the connections when the server is the busiest.

Despite our best efforts at getting everybody to convert to the current desktop version we still have a couple hundred readers using the older desktop version. Because the servers interact and share data the Windows server sometimes crashes the entire monitor when it dies.

I know this is far too much info than anybody wants to hear but the bottom line is we are going to kill the windows version on Monday. If you do not download the current desktop version before Monday you will be without the monitor. We cannot continue to allow the Windows version to take down the entire Monitor.

You can download the current version of the monitor here: Link

This is the link for the Proxy server version of the desktop monitor: Link
Use it if you are behind a firewall, using a cable modem or are having connectivity problems in general.

This is the link for the browser version of the Market Monitor: Link

This is the link for the browser version of the Futures Monitor: Link

As of Monday these are the only versions of the monitor that will work.

  Jonathan Levinson   5/8/2003,  12:42:14 PM
The duct tape must be starting to strain as ES futures dip below 920 again, QQQ below 27.90 again, but NQ holding above 1120. June gold is now up 7.20 to 349.70, with HUI up 3.44, XAU up 1.68. A dowside break on the indices with a dash of acceleration would complete the picture, but don't rule out the bounces just yet.

  Jonathan Levinson   5/8/2003,  12:39:31 PM
Nasdaq Stock Market President Rick Ketchum Resigns to Take Position at Citigroup


  Linda Piazza   5/8/2003,  12:38:33 PM
OEX S1 is 465.60, with the OEX currently just below that level. Daily oscillators all look bearish now, although hourly ones again approach oversold levels. We all know they can stay oversold for days and that the daily and weekly oscillators trump the hourly ones, but this bears watching for bounce potential. The minimum downside target for the now-confirmed H&S pattern is 462.80, an area of some support in late May, so that would be the next area to watch for a bounce with a fall through the current levels.

  Jonathan Levinson   5/8/2003,  12:32:19 PM
The Commodities Index (CRB) has added to its gains, now +.87 to 234.20, led by natural gas, crude and heating oil, gold and silver- none of these commodities leaders are saying anything good about the US equity markets at the moment.

  Linda Piazza   5/8/2003,  12:29:10 PM
Reader Question Concerning PGR: I am looking at the 15/30/60 min charts..looks like a h/s formation....if so, would you please give your opinion of neckline and possible target

Response: Good eye. Link Studying the 15-minute chart, I, too, notice a H&S formation on PGR, but if I'm seeing the same one you're seeing, the minimum downside target has already been exceeded. Will PGR fall further? Before I comment on other chart characteristics, I want to reiterate what I said about MMM earlier. I'm mainly an index trader, and don't often know about fundamentals that might affect a stock such as PGR. Daily oscillators look bearish and the ADX is beginning to slope down, showing a lessening in the intensity of the rally. Selling pressure is beginning to pick up, but the ADX level itself is still high, so that it's possible that we cannot yet trust the evidence of those oscillators and that they indicate only a need to consolidate recent gains or pull back into a less-steep ascending line while maintaining an overall bullish outlook. PGR currently falls just beneath the 67 support and just barely beneath the 21-pma at 66.96. The P&F chart shows a strong stock on a buy signal above the bearish resistance and bullish support lines, so buying support still seems the best policy, although I admit that that chart looks toppy to me. When I see a stock with a column of that many X's without a single pullback, I start worrying about that pullback and about the possibility for a high pole warning, too, but that hasn't happened. Until it does, P&F pundits would advise you to look for next support. A break through the current 67 support might find next support in the 60.50 range, or even at the 61.35 level that's the level of the 50-dma. By that time, the rising 200-dma's may have sloped up to meet the price near that level.

Since weekly oscillators look bearish, though, I would watch for a change in the daily ADX values to indicate that the rally was failing and would also watch for a retracement of more than 50% of that high column of "X's" on the P&F chart. So far, this stock appears strong, but these are signs you should watch.

  Ray Cummins   5/8/2003,  12:16:04 PM
Spreads/Combos & Premium Selling -- Portfolio Activity

Today's broad retreat provided a brief respite for some of the more critical "bearish" positions in the portfolio. Technology stocks endured the worst losses in early trading and much-needed declines occurred in CDW Computers (NASDAQ:CDWC), Novellus (NASDAQ:NVLS), Cabot Micro (NASDAQ:CCMP), Symantec (NASDAQ:SYMC) and Maxim Integrated Products (NASDAQ:MXIM). Among the industrial issues, Dreyer's (NASDAQ:DRYR), Wal-Mart (NYSE:WMT), and Quest Diagnostics (NYSE:DGX) also moved lower, offering favorable exit or adjustment opportunities for traders in those positions. Our broad-market index spread in the S&P 100 index (OEX) is in a much better position as well, with the recent rally having failed exactly at the sold (call) strike of $475. One of the surprisingly strong groups is the Oil Service sector and the price of the Oil Service Holders (OIH) is approaching the sold (call) strike in the bearish portion of our credit-spread strangle. While the overall position remains profitable, conservative traders should monitor the near-term activity of the OIH and initiate any necessary actions to "lock-in" gains in the neutral-outlook play.

  Jonathan Levinson   5/8/2003,  12:15:16 PM
No sign of a bounce as QQQ sinks to the low 27.90s, TNX near its low of the day -7.3 bps, and the TRINQ up to 2.01 with TICK.NQ -323. Despite the high pc ratio (1.0), complacency reigns on the Qubes, with the QQV up just .70, while the broader COMPX volatility index, the VXN, is up 1.7 to 33.70.

  Linda Piazza   5/8/2003,  12:14:50 PM
Currently at 467.07, the OEX dips below the 468.80 level that has provided support throughout May. This morning's first hourly candle dipped below that support level, but closed above it. As the OEX dips again to this level, the 60-minute stochastics cycle up, but RSI hasn't been convinced yet, if I can be allowed to anthropomorphize the indicator, and still slopes down. The five-minute chart shows the OEX breaking down out of a neutral wedge that had formed over the last hour or so. The OEX is now below S1.

  Linda Piazza   5/8/2003,  11:47:01 AM
Here's one reason I like to leave old trendlines on my charts: Link Long ago, I drew a steeply sloping neckline for a potential rough H&S formation on the Dow Jones Transportation Index. Although the H&S was so rough and malformed that I wasn't sure it had much validity, I did notice that declines in the TRAN escalated quickly once that trendline was violated in mid-January. That seemed to give some validity to the trendline and to the H&S formation, so I retained the trendline on my chart. Today I noticed that recent advances in the TRAN have been turned back at that extended trendline.

  Jonathan Levinson   5/8/2003,  11:41:07 AM
That last put to call reading from the CBOE must have been bad data. The pcr is back to .99, equity pcr .91 and index pcr 1.30.

  Jonathan Levinson   5/8/2003,  11:37:04 AM
Please elaborate on the CEF.A fund.

It's a warehouse of gold and silver. I'm not recommending it either way, but have mentioned my position here over the past months. Link

  James Brown   5/8/2003,  11:34:34 AM
Oops.. sorry, forgot to post the 11:00 AM ET Intraday update link: Link

  Jonathan Levinson   5/8/2003,  11:25:32 AM
I understand the put/call ratio numbers and follow your commentary closely and most time agree with you. I wish there were too many bears... bulls still have the upper hand because price keeps rebounding. I would think if there were too many bears it would drive down price and keep it down. That has not happened. I'm wondering how much more money is out there because they keep buying an aweful lot of stock.

I agree, Billi. The problem I'm trying to highlight is that it's primarily bears who buy on declines, not bulls. I believe that too many saw the "top" and sold there, whether short (bearish) or locking in gains (bullish). The bears are covering on the dips and the bulls, presumably, are buying. If it was mostly bulls buying the dips, I'd expect to see a very low p/c ratio, but instead, the thing is sky high, telling me that it's mostly put volume.

Here's the problem with the put to call ratio, and why we can't trust it much: Is the put volume bearish speculation or bullish speculation? Are those contracts selling at the bid or the offer?

Note that the Qcharts PUTCALL indicator is the equity put to call ratio only, omitting the index pcr and total pcr data released every half hour by the CBOE.

  Linda Piazza   5/8/2003,  11:20:25 AM
The FTSE 100 and DAX have been attempting their own bounces this morning, with both currently off their day's low, but still far from the breakeven points and looking to be turning back a little at current levels. The FTSE 100 trades now 62.60 points or 1.57%, to 3930.30; and the DAX trades down 76.36 points or 2.54%, to 2929.28. The CAC 40's intraday chart doesn't appear to be correct, so I can't study its behavior, but the index currently trades down 80.66 points or 2.67%, to 2943.30.

  Ray Cummins   5/8/2003,  11:16:48 AM
Premium Selling - No "New Plays" For Wednesday?

Due to a technical snafu, there were no new plays published for the Premium-Selling portfolio in Wednesday night's newsletter. (Such is life in the age of the Internet!) For those who are interested, the bullish (naked put) candidates included American Pharmaceutical Partners (NASDAQ:APPX), Avid Technology (NASDAQ:AVID), Best Buy Company (NYSE:BBY), Capital One Financial (NYSE:COF), ImClone Systems (NASDAQ:IMCLE), Marvell (NASDAQ:MRVL, SafeNet (NASDAQ:SFNT), and OmniVision Technologies (NASDAQ:OVTI). "Bull-put" spreads were offered in BJ Services Company (NYSE:BJS) and Lehman Brothers Holdings (NYSE:LEH). The bearish positions (naked-calls) included Dupont Photomasks (NASDAQ:DPMI), IGEN International (NASDAQ:IGEN), and Pharmaceutical Product Development (NASDAQ:PPDI) and "bear-call" spreads were suggested in Devon Energy Corporation (NYSE:DVN), Forest Laboratories (NYSE:FRX), and Krispy Kreme Doughnuts (NYSE:KKD).

  Jonathan Levinson   5/8/2003,  11:16:40 AM
I added a few lots to my CEF.A position (on the TSX) today. June gold is now up 5.20 to 347.40, HUI +1.79, XAU +.88. TRINQ .92, TICK.NQ +225. The FVX is still up 3.8 bps according to quote.com, TNX -5 bps. I will watch the TNX today so we can stop stressing over this abberrant datum.

  Jonathan Levinson   5/8/2003,  11:10:50 AM
Way too many bears, with the put to call ratio up to 1.43 now. I'm hoping that it's bad data, because the equity pcr has spiked up to 1.44, index pcr 1.41. It's easy to see how that awful 1990-2003 Nikkei chart occurred- once the market wises up to the fact that things aren't healthy, bears and bulls sell on every rise and buy at every dip, producing an awful rangebound mess that can go on for years.

  Linda Piazza   5/8/2003,  11:00:34 AM
Total volume as of a few moments ago was 350 million for the NYSE and 538 million for the Nasdaq. Volume patterns show adv/dec ratios of .87 for NYSE-traded issues and .66 for Nasdaq-traded issues. The Nasdaq number is bearish, but the NYSE ratio is only slightly so. Down volume is 1.7 times up volume on the NYSE, however, and 1.8 on the Nasdaq. It's particularly interesting that there are no new lows on the NYSE this morning, but 72 new highs. Is this bearish from a contrarian standpoint?

  Jonathan Levinson   5/8/2003,  10:45:35 AM
Which charting service do you use? Qcharts is driving us crazy. Or any other sugestions?

Unfortunately, no. I love Qcharts, because I've made most of my trading money with it and am most comfortable with that format. Lately I've been using the 2 day live charts with Quotetracker, using my IB realtime feed. Very good charting, fib grids and fans, trendlines, etc. I tried using Prophet charting for longer views, and still do, but don't like it that much, although its infinite trendlines in different timeframes are very, very useful. To tell you the truth, I've been doing a Jesse L. lately, just "watching the tape". For daily and weekly views, Stockcharts.com free service.

  Jonathan Levinson   5/8/2003,  10:39:27 AM
The Commodities Index (CRB) is up .29 to 233.38, led by gold, silver, frozen concentrated OJ, wheat and copper.

  Jonathan Levinson   5/8/2003,  10:37:33 AM
Too many bears. The put to call ratio has risen to .90, with the equity pcr .77 and the index pcr 1.39. QQQ is falling back to 28.03, with the TRINQ 1.20, QQV +.86 at 28.49, and TICK.NQ +77.

  Linda Piazza   5/8/2003,  10:37:07 AM
The OEX broke above that flag pattern, escalating its gains as it did and turning up the 60-minute oscillators, at least temporarily. The five-minute 50-pma appears to be giving the OEX trouble now, with that MA at 469.71, and the OEX just below that level.

  Linda Piazza   5/8/2003,  10:21:36 AM
The OEX attempt at a reversal came right on schedule. The five-minute chart shows a steep fall, a steadying, and then a move up in a pattern of higher highs and higher lows. You know the routine by now: this looks as if it might be a bear-flag pattern, but if it is, it should break down by 468.80, at which point it will have retraced about half the descent. If you've been paying attention lately, you also know that the underlying sentiment has meant that many of these potentially bearish patterns actually break out to the upside. Has that changed today? We'll soon see. The OEX is currently at 468.06.

  Mark Phillips   5/8/2003,  10:14:57 AM
KSS $55.31 (-1.19) Here we go again...Shares of KSS got pummelled at the open this morning following the company's report of a 4.1% decline in same-store sales. But just like the pattern that has prevailed over the past couple weeks, the stock is surging back from its $53.50 low. That's right, KSS is already nearly $2.00 above it's early low. It looks like the stock is beinging to weaken again, and this rollover may be suitable for new entries. the one clear pattern is of lower highs and lower lows over the past few weeks, and that certainly is in keeping with our view of lower prices ahead.

  Linda Piazza   5/8/2003,  10:13:22 AM
Reader Question: Where do you see MMM going- approaching 120 support?

Response: A caveat first: I looked at the charts in order to point out charting characteristics that relate to this reader's question, but I have not been following MMM and do not have a knowledge of fundamentals that might impact the play. One reason that I do not follow MMM is that this stock always surprises me, particularly when I consider a bearish play. One of my first-ever losing plays was an attempt to capitalize on a potential H&S pattern setting up on MMM.

I looked first to the P&F charts, noting that MMM just gave a P&F sell signal and also popped below the bullish support line. MMM has not yet reversed into a column of "X's," so a downside target has not yet been set, but that target would be below 120. This P&F sell signal predicts that the best outcome will be selling strength in MMM rather than buying support.

The bar chart shows the importance of the 120 level, however, as well as this morning's bounce from just above that level, at 120.50. A long-term uptrending line I've placed on my weekly chart shows that MMM could descend to the 119.50 area or so and still maintain that uptrend, so I think bulls will likely try to defend this area. Daily 5(3)3 and 21(3)3 stochastics and RSI all show the smallest hints of upward hinges from oversold or near-oversold levels, so it's clear that MMM is trying to steady at this level. However, weekly oscillators indicate that the selling may not yet be over, and daily ADX shows a bearish crossing of selling pressure vs. buying pressure, and a strengthening of the recent downtrend. In addition, both RSI and MACD broke through an ascending line of higher lows about April 22, portending the recent weakness.

MA evidence shows that the 21-dma is in the process of making a bearish cross of the 50-dma and that the 200-dma's have flattened during April and May after having risen into that period. MMM has broken below all those MA's.

Will 120 fall? Given my own experience with MMM, I'm not sure. The weight of evidence together--the action of the MA's, the P&F sell signal, the break below the rising trendlines on the daily oscillators, the increase in selling seen on the daily ADX, and the still-bearish weekly oscillators lead me to believe that MMM might likely at least see further tests of the 120 level, and I would not be surprised to see it fall. However, I also would not be surprised to see MMM first attempt a reversal up to the violated 200-dma's while those daily oscillators reset themselves to overbought again and then cycle back down.

  Jonathan Levinson   5/8/2003,  10:06:56 AM
Despite countless court cases and years of software evolution, java still cannot run reliably in a windows environment. I trust Sun over Microsoft any day, but it's tough to pinpoint the culprit.

  Jonathan Levinson   5/8/2003,  10:03:45 AM
Opening put to call ratio .79 as the dip buyers appear.

  Jonathan Levinson   5/8/2003,  10:03:05 AM
Al Green has added 2.75B net by replacing the expiring 2.25B overnight repo with a fresh 5B overnight repo.

  Jonathan Levinson   5/8/2003,  9:50:39 AM
The fed has added its usual 5B 28 day repo. We await the announcement regarding the remaining shorter term repos.

  Jonathan Levinson   5/8/2003,  9:48:04 AM
The spike low on the COMPX was close enough to fulfill the target of the 15 minute candle head and shoulders I discussed yesterday. A retest of 1500-04 COMPX would the next move in the playbook, and in my idea world, a failure there will open the door to lower lows.

  Linda Piazza   5/8/2003,  9:46:43 AM
In the next few moments, the markets reaches one of those periods of the day when the initial selling or buying is out of the way, and the markets attempt a reversal. This phenomenon is one of the reasons that I look askance at early volume patterns, as they can be so distorted and unlike the patterns that will be seen later in the day. Be alert, though, to the likely upcoming attempt to reverse early losses. A failure to break back above key levels in indices and stocks during those reversal attempts might precipitate further selling.

  Jonathan Levinson   5/8/2003,  9:42:18 AM
What causes the differences in the 5 yr vs 10 yr and 30 yr treasure notes at this morning's opening? Is it significant?

It's significant in that it's immensely irritating- I'm quite sure that it's bad data. If not, then it looks like a huge seller of five year notes in favor of longer dated securities, which would be very bearish to my mind. But I think it's bad data. Does anyone show the five year yield (FVX) in the red this morning?

  Linda Piazza   5/8/2003,  9:41:51 AM
The SOX was one of the first of the indices to turn down. Currently at 337.86, the index sits less than four points above its 200-ema at 334.09. This ema could be a likely bounce point for the index, but a sustained fall through this important MA would be quite bearish. Daily 5(3)3 stochastics show bearish divergence, with lower stochastics tops and higher price peaks.

  Linda Piazza   5/8/2003,  9:38:13 AM
Bellwether GE dropped below the 28.80 level that had been supporting prices since mid-April. It now moves to the 21-dma at 28.62, and may find at least temporary support at this level. Daily oscillators indicate the likelihood of further weakness, so if that 21-dma does not support prices, horizontal support at 28 and the 200-ema at 27.45 are the next places to watch for support.

  Linda Piazza   5/8/2003,  9:33:18 AM
The OEX ended the day yesterday with 60-minute oscillators already at levels indicating short-term oversold conditions. The anticipated lower opening is driving the oscillators even further into oversold conditions, while breaking the OEX below the neckline of the H&S formation shown on 30-minute charts as well as below the lower line of the rising wedge. I wouldn't be surprised to see an attempt at a reversal and retest of the broken support, perhaps in that 9:50 to 10:10 time period, while intraday oscillators reset. Daily and weekly oscillators predict that the reversal will fail, but we'll have to watch to be sure.

  Jonathan Levinson   5/8/2003,  9:31:21 AM
TRINQ 3.76, QQV +1.05 at 28.68, TICK.NQ -68.

  James Brown   5/8/2003,  9:29:57 AM
OI is playing Kohl's (KSS) as a put play and their same-stores sales numbers just came out. Total sales for the four-week period ending May 3rd were actually up 5.8% but it looks like the company is reporting a 4.1% drop in comparable sales numbers. Worse yet, the company is lowering its earnings guidance for the current quarter to 32 cents a share. Concensus estimates had been for 36 cents. The stock is trading lower in pre-market near its short-term support level of $54.

  James Brown   5/8/2003,  9:25:35 AM
Gap Inc (GPS) is another stock that's been on my personal watch list. The stock has been fighting with the $17.00 level of overhead resistance for several months. It looks like it may have finally broken above it. The company came out with April same-store sales numbers that jumped 20 percent and for the last four-weeks, ending May 3rd, the numbers rose to 22 percent. This is great news for the beaten and weary retailer. Shares closed at $16.60 on Wednesday but their trading above $17.00 in pre-market trading.

  Jonathan Levinson   5/8/2003,  9:23:41 AM
The US Dollar Index actually dipped below 95, and is now treading water at the 95.00 level. June gold is up 4.40 to 346.60. QQQ 27.91, FVX +4.1 bps, TNX -4.5 bps and TYX -3.1.

  James Brown   5/8/2003,  9:20:46 AM
All right, I hate to say it folks, but if you think you're missing the most recent updates on the desktop version of the Monitor, I suggest you close it and reopen it. The refresh button isn't working for me. It looks like it's going to be one of those days.

  James Brown   5/8/2003,  9:17:50 AM
We've had WFMI on the OI watch list lately due to its relative strength but never played it as we wanted to see its earnings report. Earnings were out last night and the numbers appear positive on the surface. Looks like WFMI hit the estimates of 41 cents with a 26% jump in net profits. Unfortunately, WFMI's growth was on new stores as their conference call suggested that same-store sales open for over a year would see sales numbers at the low end of the estimate range. Morgan Stanley has already cut their rating on WFMI to an "equal-weight" and shares have fallen from over $60 at yesterday's close to nearly $52 in pre-market trading.

  James Brown   5/8/2003,  9:10:22 AM
Shares of NXTL are getting hit again with a new downgrade. This time Goldman Sachs is dropping their rating to "under-perform". NXTL is trading near $13.00, down 80 cents in pre-market trading.

  Linda Piazza   5/8/2003,  9:06:55 AM
The World Health Organization revised its SARS death rate today, announcing a disturbing 14-15% death rate, revised upward from its previous 6-10% estimate. Those over 65 suffered even higher death rates, with more than 50% of seniors infected by SARS succumbing to the illness. WHO extended the SARS-related travel warning to Taiwan and two more regions in China. Taiwan has recently seen a tripling in diagnosed or presumed SARS cases.

  James Brown   5/8/2003,  8:56:08 AM
The 09:00 AM ET Update has been posted. Link

  Jonathan Levinson   5/8/2003,  8:54:36 AM
The USD Index spiked to 95.05,but is back to 95.20. I can almost hear Al Green shouting for Andrea to bring him the Batphone, stat, speeddialing Toshihiko Fukui at the Bank of Japan...

QQQ 27.93. FVX must be on a bad print, showing +3.1 bps, TNX -5.6 bps and TYX -3.9 bps.

  Linda Piazza   5/8/2003,  8:45:44 AM
European markets disliked those continuing claims and four-week claims numbers, too. After the BOE and ECB announcements this morning, they dropped further, and eased further still immediately after the U.S. jobs claims numbers, but now attempt to climb off their lows. Currently, the FTSE 100 is down 52.40 points or 1.31%, to 3940.50; the CAC 40 is down 68.73 points or 2.27%, to 2955.23; and the DAX is down 72.12 points or 2.40%, to 2933.52.

  Jonathan Levinson   5/8/2003,  8:34:44 AM

Looks like the moving average is scaring the market (for a change).

  Jonathan Levinson   5/8/2003,  8:32:01 AM
QQQ is so far weak despite the positive suprise- was a drop to 425K too little too late, despite expecations of 440K initial claims?

  Jonathan Levinson   5/8/2003,  8:30:52 AM

  Jonathan Levinson   5/8/2003,  8:27:29 AM
Gold is up 2.30 to 244.50, and huge red candle has brought the USD Index to 95.20. QQQ 27.96 as we wait for initial claims.

  Jonathan Levinson   5/8/2003,  8:13:50 AM
95.60 has fallen on the USD Index, and QQQ is now trading 27.92.

  Jonathan Levinson   5/8/2003,  7:59:35 AM
NQ futures are down 10.50 to 1028.50, ES futures down 5.25 to 924.25, with QQQ at 28.03 on Island ECN. These are support levels, and so the stage is set for either a nice bounce or a nice tank on the 8:30 initial claims data. I seriously doubt that we'll see no reaction to the news. The US Dollar Index is sitting at 98.60, but I expect it to move on the ECB/BOE rate decisions mentioned by Linda, and I don't expect the move to be higher. A coordinated rate cut from those two central banks could have helped the dollar, but no such luck.

  Linda Piazza   5/8/2003,  7:47:35 AM
The ECB leaves rates unchanged.

  Linda Piazza   5/8/2003,  7:16:21 AM
The Bank of England leaves rates unchanged.

  Linda Piazza   5/8/2003,  6:50:53 AM
Good morning. Propped up by optimism over a coalition-formed emergency economic plan, the Nikkei struggled for two days this week to move over 8110-8125 resistance. The index gapped over that number in Wednesday's opening trade, but soon fell. Today, that optimism finally succumbed to fears that some of the coalition's suggestions would not be adopted after their anticipated presentation to the BOJ today. One Bank of Japan governor reportedly said last week that he would not favor extraordinary measures. Tumbling exporters also led the Nikkei down due to the further weakening of the dollar against the yen. The Nikkei opened down 37.10 points and stayed down all day, ending down 78.22 points or 0.96%, at 8031.55. Taiwan's Weighted Average fell 2%, but in Taiwan's case, the tumble may have been due to a combination of SARS-related fears and reactions to the Nasdaq's recent pullback. In the last two weeks, Taiwan has seen a tripling of diagnosed and probable cases of SARS.

As European and U.S. markets await decisions from their central banks on interest rates, most trade down. The FTSE 100, CAC 40, and DAX have all slipped beneath important psychological levels, with the FTSE below 4000, and the other two below 3000. Since the ECB usually telegraphs its intentions to change interest rates and has not done so, most market pundits agree that it's unlikely to change rates. The Bank of England's likely decision is more difficult to predict, some feel, but most expect the Bank to hold rates steady. As the dollar has slipped against other currencies, pressure has grown across Europe and the U.K. to ease rates. Insurers dropped as some continued reducing equity holdings and as Goldman, Sachs reduced Dutch insurer Aegon to "in-line" from "outperform." As of this writing, the FTSE 100 was down 34.90 points or 0.87%, to 3958; the CAC 40 was down 47.29 points or 1.56%, to 2976.67; and the DAX was down 42.12 points or 1.40%, to 2963.52.

In company-specific news, Royal Ahold, the world's third-largest retailer and owner of the U.S. chain Stop and Shop, fired two managers and a food distributor, and announced that it would take a $700 million writedown in the accounting scandal involving its U.S. Foodservice unit. While some expressed skepticism that two middle managers and a food distributor alone could be responsible for $880 million in overstated earnings for the past three years, Ahold nevertheless was rising in early trading.

  Linda Piazza   5/7/2003,  1:27:31 AM
The Index Trader Wrap has been posted: Link

  Jim Brown   5/7/2003,  1:27:19 AM
The Futures Trader Wrap has been posted: Link

  James Brown   5/7/2003,  1:27:09 AM
Yesterday's Market Monitor has been archived. You may view it and any previous days here: Link

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