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  Jim Brown   5/12/200,  5:38:42 PM
Two terrorists attacks in Riad Saudia Arabia against Americans

  Jonathan Levinson   5/12/200,  3:56:17 PM
Well, that 10 cent pullback must have been enough to reset all the oscillators back to "oversold" :)

(just kidding!)

  Jim Brown   5/12/200,  3:50:21 PM
Editors Play
I finally got another fill at 20 cents on the DIA May 85 puts.

  Linda Piazza   5/12/200,  3:49:12 PM
Unless something changes in the last fifteen minutes of trading today, which is always possible, the OEX will close above the rising wedge on its daily chart. This is bullish. The daily Bollinger bands show that the OEX might still climb as high as 482.25 before hitting the upper BB, and that upper BB is still climbing, too, giving some credence to the idea that the OEX might make a push up toward that 487 level, but perhaps fail ahead of that level. However, tomorrow morning sees the release of the trade balance at 8:30 ET, before the market opening, the first item in this week's full economic calendar. News coming out of the Piper Jaffray tech conference tomorrow also might impact the markets. Bullish and bearish traders alike should be asking themselves whether they want to hold over those developments.

  Jonathan Levinson   5/12/200,  3:48:53 PM
I feel like celebrating because QQQ is down 7 cents in the past 60 seconds. Sigh...

  Jim Brown   5/12/200,  3:47:45 PM
Yes, Linda, even a blind squirrel finds an acorn once in a while. I am adding to puts now that we are falling.

  James Brown   5/12/200,  3:44:30 PM
The very late 03:15 PM update: Link

  Linda Piazza   5/12/200,  3:42:29 PM
Ever since the reversal this morning, volume patterns have remained positive. I note that currently there are 269 new highs vs. 4 new lows on the NYSE and 197 new highs vs. 4 new lows on the Nasdaq. This high tide in the markets certainly has floated all boats.

  Linda Piazza   5/12/200,  3:29:08 PM
Congratulations on the great Editor's Play, Jim. That was quick to reach profitability, wasn't it?

  Jim Brown   5/12/200,  3:26:59 PM
Editors Play
Closed the call side for 95 cents
Doubled up on the put side at 20 cents (avg now .30)

The reason I closed was the huge amount of sellers that appeared in the S&P futures between 946-947. This huge overhead supply was preventing the Dow from hitting the 8750 level and I was afraid we would see a sell on close from this extremely overbought position.

  Jonathan Levinson   5/12/200,  3:25:53 PM
Hitting new highs in QQQ, but the 29 level has yet to be challenged. A close at or near the highs of the day would not be bearish to me, and bears who jumped in today expecting a quick decline should be thinking about that 29.00 stop. When a trade doesn't adhere to your initial expectation, that should be taken as a warning, whether the stop gets hit or not. Breadthwise, only the QQV is indicating weakness, with the TRINQ buried at .34 and the TICK.NQ +223.

  Linda Piazza   5/12/200,  3:16:13 PM
We're moving into the time period when traders get information about order flow at the end of the day, and we begin to see the final direction for the day: a drop into the close or a move to the high of the day? We'll know soon. Hourly oscillators are all already in overbought territory but aren't going to give us much information in this trending market anyway.

  Jim Brown   5/12/200,  3:14:10 PM
Editors Play
The lack of a bounce in the Dow late this afternoon I am thinking about selling the call side of the strangle. I was hoping for another short covering bounce before the close and the Dow is holding but the internals are slipping. Getting ready to pull the trigger if 8725 breaks to the downside.

  Jonathan Levinson   5/12/200,  3:11:38 PM
The Matrix Reloaded? It sounds like something that Bernanke put up his sleeve a few months ago.

  Linda Piazza   5/12/200,  3:08:42 PM
If you've experienced slow Internet connections today, it may be due to the "Fizzer" worm reportedly spreading across the Internet today. Reuters News Service said the worm affects computers using Windows operating systems and can be spread via emails with random subject lines, online chat sessions and file-sharing networks. Apparently, it disables firewall and anti-virus software, but doesn't do damage to personal files. It arrives with an .exe, .pif, .com, or .scr attachment. Here's a link to Symantec's information about the virus: Link

  Jonathan Levinson   5/12/200,  3:06:14 PM
FVX fell but has returned to a -2.8 bps loss on the day with t-bonds now closed for the session. TRINQ is down at .33, QQV +1.73, TICK.NQ +132, QQQ at 28.89 and every US equity bear in the world thinking about stops. The downphase was awfully shallow this afternoon. Meanwhile, gold is holding 352/oz, USD Indesx 94.50, CRB 240.40.

  Jim Brown   5/12/200,  2:57:53 PM
Editors Play
The Call is now 90x1.00 and the put 15x25
I would love to see a touch of 8800 to close the call side. That would be about all I could expect before the economic reports on Thr/Fri.

  Linda Piazza   5/12/200,  2:55:53 PM
Traders might have just noticed a new day's high for the OEX, as well as a new year's high, of course. That 1:45-2:00 ET period worked as it used to work, perhaps shaking a few bulls (not too many, though) out of bullish trades before the OEX reversed back up again. If this holds according to pattern, trade should end near the day's high, but the behaviors of the bond market, gold market, and dollar are potential flies in the ointment of that theory. It should be interesting, at least, with the last hour of trading fast approaching.

  Jim Brown   5/12/200,  2:45:02 PM
The Monitor is going to be offline for about two min at 2:45 ET. You may have to reconnect after that time to get fresh updates.

  Linda Piazza   5/12/200,  2:39:35 PM
Volume patterns continue to be strong, with 911 million shares now traded on the NYSE and 1.3 billion on the Nasdaq. Up volume is now more than five times down volume on the NYSE and more than four times down volume on the Nasdaq. There are now 251 new highs versus 3 new lows on the NYSE, and 180 new highs versus 4 new lows on the Nasdaq. A lot of effort is going into the attempt to break out, and bulls and bears both should be on alert. At 21.77, the VIX has dropped back toward its low of the day. Bond yields sit nearer the middle of their day's ranges, though, rather than toward the day's highs as I would expect, and appear to be moving down further through the last few moments.

  Jonathan Levinson   5/12/200,  2:25:22 PM
The US Dollar Index is hanging just above 95.50 as gold holds above 351.60 and the CRB above 241. QQQ took another run at the day highs but pulled back slightly. FVX is lower, -2.3 bps now, QQV up 1.74, TRINQ .38 and TICK.NQ +50.

  Linda Piazza   5/12/200,  2:21:52 PM
The DAX closed at 2937.26, down 19.33 points or 0.65%.

  Linda Piazza   5/12/200,  2:14:54 PM
That OEX five-minute 21-pma is getting tested from the underside again, with the MA now at 477.41 and the OEX currently at 477.28.

  Linda Piazza   5/12/200,  1:57:05 PM
The DJI currently tests 8700, with a simple line chart of the day's activity showing a rounding-top type formation for intraday trading. A sustained fall beneath this level could impact sentiment, but we're just getting into that 1:45-2:00 ET time period when back in the momentum days when I was daytrading, I always used to despair that my long intraday trades were falling beneath support, just before they turned around and headed back up again. I learned then that bullish resolve was often being tested during that period, and I haven't forgotten the lesson now, either, by jumping to conclusions too soon.

  Jonathan Levinson   5/12/200,  1:51:35 PM
The utter lack of downside movement looks awfully bullish to me. Whoever's buying at current levels is displaying what strikes me as either awesome courage or awesome recklessness, given how close underneath last week's rally high the Qubes are currently trading. FVX is down 1.6 bps on the day, QQV up 2.15, TICK.NQ -73. What concerns me most for bears is the shallowness of the pullback. It continues to appear that resistance has been abolished as the s/r levels become one-way turnstiles, all support and no resistance.

  Linda Piazza   5/12/200,  1:46:03 PM
The OEX failed in its first attempt to regain the five-minute 21-pma and hourly stochastics now have made definitive bearish kisses, but those hourly stochastics have not rolled down out of overbought territory, and across the markets those volume patterns still remain positive. There's no real evidence either direction as yet.

  Linda Piazza   5/12/200,  1:35:30 PM
The hourly OEX stochastics are in territory indicating overbought conditions and are in the process of making bearish kisses or trying to roll while the RSI also hinges down. However, if this is still a trending market, this kind of oscillator evidence can signal a brief pullback, a consolidation, or even only a slowing in the upward movement while oscillators relieve some of the overbought pressure. Hourly ADX measures 19.96 and has turned back up. A measure over 20 indicates a trending market. Is this close enough we can consider the OEX to be a trending market on an hourly basis? The line showing buying pressure zoomed up today but has currently flattened. Selling pressure is in the basement, so those two lines would indicate that the trend continues, but the ADX measure itself is just too close to call. As Jonathan said earlier, we'll just have to let the tape show us. If volume patterns remain as strong as they are now, I'd have to go with the still-trending-market theory, so I'll be watching the volume patterns.

  Jonathan Levinson   5/12/200,  1:30:22 PM
The put to call ratio is up to .86, on an equity pcr of .65 and index pcr of 1.53.

  Linda Piazza   5/12/200,  1:27:30 PM
The OEX has just fallen beneath the five-minute 21-pma for the first time since climbing above it on the second five-minute candle of the day. I wouldn't take this as the signal that it's now time to jump in short, especially as the OEX could be expected to retest that MA, perhaps successfully, but I'll be watching this and other action.

  Jonathan Levinson   5/12/200,  1:22:18 PM
Gold is now up 3.70 to 352.60.

  James Brown   5/12/200,  1:21:18 PM
The 1:00 PM ET update: Link

  Linda Piazza   5/12/200,  1:15:29 PM
Volume has topped a billion now on the Nasdaq, with 711 million shares traded on the NYSE. Adv/dec ratios and up/down volume ratios grow stronger, with up volume 5.6 times down volume on the NYSE and 4.4 times down volume on the Nasdaq. There are now 234 new highs on the NYSE and only 3 new lows. On the Nasdaq, 168 new highs are (im?)balanced by 4 new lows.

  Mark Wnetrzak   5/12/200,  1:12:23 PM
Covered-Call Updates
One covered-call position (long stock, short MAY-$22.50 call, CB ~ $21.85) not enjoying the current bullish momentum is Cyberonics (NASDAQ:CYBX), which was downgraded this morning based on valuation. The stock is currently testing its 30-dma and the APR high, with the next level of support at the 50-dma near $21. Definitely one to monitor closely if you "don't" want to own the stock. Traders may consider buying back the sold calls (0.25 x 0.45) in the current weakness to free-up the stock for an adjustment (roll forward and/or down) or an early exit. Of course the stock may just finish above $22.50 by Friday.

  Jonathan Levinson   5/12/200,  1:08:24 PM
The CRB has taken 240 now, and June gold is up 3.10 to 352. HUI is up 2.52, and XAU +1.01. It looks the rampant printing of dollars has something for everyone, except, I support, dollar bulls.

  Linda Piazza   5/12/200,  1:02:00 PM
As our markets began climbing today, European markets began climbing off their lows, too, with the FTSE 100 climbing all the way into positive territory. The FTSE 100 closed at 3987.40, up 18 points on the day. The FTSE came within nine points of the magic 4000 level and closed near the high of the day, but could not manage even a blip over that level. The CAC did manage a brief blip above its magic 3000 level, trading as high as 3003.62, before it retraced, closing down 5.26 points or .18%, at 2962.63. The DAX currently trades down 11.23 points or .38%, at 2945.36. The DAX has not approached anywhere near the 3000 level today. These markets all tested their respective next-1000-level resistances last week. Unlike our markets, then, these markets did not retest last week's highs today.

  Jonathan Levinson   5/12/200,  1:00:24 PM
The TRINQ is up to .37, so it's no longer very deep in redline territory, but now just sort-of in redline territory. It reminds of gasping for breath that follows a baby's opening shriek- is it just gathering steam for another, stronger wail, or is that it? I won't even venture a guess. FVX has inched up again, now -1.8 bps. QQV still staying up there. TICK.NQ down to +29. The longer that bulls can hold QQQ above 28.80, the less excessive these levels will look as volume begins to accumulate. Consolidation or distribution? The tape will have to tell us.

  Jonathan Levinson   5/12/200,  12:44:51 PM
The US Dollar Index has bounced to the 94.50 level and is holding it so far, with the 2 hour MA now providing support. The CRB is holding the 239.65 level. The FVX has crept up to a 2.2 bp loss on the day, well off its lows for the day. QQV is still up nearly 2 points. Despite some cold sweats, this continues to look like the top of the rally, but a move above QQQ 29 will change that.

  Linda Piazza   5/12/200,  12:35:43 PM
When I was young, we used to say that people or things "faked us out." Do people still say that? This morning, the various intermarket relationships faked me out, as they predicted a down day. I did not buy puts today as I saw that the OEX 475 level was likely to be challenged and I had thought that the tentative turnover in the OEX hourly oscillators on Friday might mean that we'd see a renewed push up early this week. I wanted to see the outcome. I didn't buy calls, either. On the OEX, we've seen a more than $7.00 move off the day's low, a big enough move to profit during opex week when options are cheap and spreads a little less than usual. I missed an opportunity, but didn't lose any money at least. If I'm going to trade during opex week, when crazy things happen anyway, I do want everything to fit.

  Jonathan Levinson   5/12/200,  12:32:10 PM
So much for the pullback as QQQ scopes for new highs at 28.90. FVX is holding at a 2.4 bp loss, QQV up 1.75 at 28.53, TRINQ .26 and TICK.NQ +117.

  Mark Wnetrzak   5/12/200,  12:27:04 PM
Covered-Call Updates
The Bulls are running and all is good, at least for now. The market-wide rally has lifted Tommy Hilfiger (NYSE:TOM) too, offering a second chance to exit or adjust the position (long stock - short MAY-$7.50 call), depending on your outlook. Marvell Technology (NASDAQ:MRVL), a covered-call candidate for this week (long stock - short JUN-$25 call), was up a $1.50 quickly after the open - maybe we should just recommend buying calls?

  Ray Cummins   5/12/200,  12:25:17 PM
Spreads/Combos & Premium-Selling -- Market Movers

Stocks are in "rally mode" today and a number of our portfolio positions are participating in the upside activity. One of the best performing issues in early trading is SafeNet (NASDAQ:SFNT), which is up over 10% after being awarded a DoD development contract for the research and development of a High Assurance Internet Protocol Interoperability Specification Network. Other strong stocks include Biosite (NASDAQ:BSTE), Best Buy (NYSE:BBY), Bed, Bath & Beyond (NASDAQ:BBBY), Vimpel Communications (NYSE:VIP), Medtronic (NYSE:MDT), and Capital One Finance (NYSE:COF). Thankfully, most of the bearish plays have seen little buying pressure and issues such as Igen International (NASDAQ:IGEN), Engineered Support Systems (NASDAQ:EASI), Intuit (NASDAQ:INTU), CDW Computers (NASDAQ:CDWC), Pharmaceutical Product Development (NASDAQ:PPDI), Proctor & Gamble (NYSE:PG), Devon Energy (NYSE:DVN), Forest Labs (NYSE:FRX), and Universal Health (NYSE:UHS) are all underperforming the broader market.

  Linda Piazza   5/12/200,  12:24:30 PM
Reader Question: How do those resistance numbers on the OEX translate to the SPX? 480, 487?

Response: The SPX levels prove slightly more difficult to ascertain, because it didn't make the nicely even tops seen in the OEX. I'm having trouble with Q-charts currently, but I've included an SPX chart that shows two levels to watch, including the current SPX level and another line near 965-965.80. Unfortunately, the Stockcharts.com chart isn't allowing me to pinpoint the descending trendline I'd like to show, with that line crossing at about 960. However, these three levels--the current level, 960, and 965-966--would be levels to watch, with breakouts above these levels bullish. Link

  Jim Brown   5/12/200,  12:10:43 PM
Editors Play
That DIA 87 call I bought this morning at 40 cents is now 75x80. I would love to get a bounce to 8800 today. I would gladly sell the call and double up on the put at the much cheaper price.

  Linda Piazza   5/12/200,  12:09:48 PM
The VIX just dropped to 21.70.

  Jonathan Levinson   5/12/200,  12:08:00 PM
Any QQQ bears with patience superior to mine could consider shorting QQQ at current levels with a hard stop just above the rally highs. Above QQQ 29, the market will look different to me that it does now.

  Linda Piazza   5/12/200,  12:07:10 PM
Trading CSCO long this morning on the upgrade would have been like a late '99-style momentum play, playing the upside on the day's story stock. NVDA would have been the same on Friday. Should the reminders of late '99 and early 2000 cheer us or scare us? I'm honestly not sure. It scares me, but the charts don't look scary. Today, CSCO's move up popped it above a possible reverse H&S neckline I've had on the chart since early 2003, a reverse H&S that ended up developing two right shoulders, as sometimes happens. If CSCO manages a couple of days of closes above that neckline, I would consider that one more arrow to add to its bullish quiver.

  Linda Piazza   5/12/200,  11:59:43 AM
Volume patterns now all support the buying we're seeing, with volume picking up a bit, too. Total volume is now 491 million shares traded on the NYSE and 738 million on the Nasdaq. Adv/dec ratios are 1.8 on NYSE-traded issues and 1.6 on Nasdaq-traded issues. Up volume is 3 times down volume on the NYSE and 3.7 times down volume on the Nasdaq. These volume patterns are strong, but by no means excessive as of yet, and can be sustained during the day. The new highs/new lows figures show 191 new highs on the NYSE and 2 new lows, and 134 new highs on the Nasdaq and 3 new lows.

  Mark Phillips   5/12/200,  11:54:02 AM
KSS $54.29 (+1.68) With the Retail index (RLX.X) blasting off through resistance this morning, it is looking more and more like our KSS play has run its course. After coming within a few pennies of our initial target at $51.06 on Friday, the subsequent rebound is finding some solid follow through this morning, with the stock now up 3% on the day. Volume is already over half the ADV and the bulls seem intent on seeing whether they can break out of the pattern of lower lows and lower highs. The $55 level is the line in the sand, and KSS really shouldn't be able to vault back through that level unless the trend has changed. A failure of the current rebound below that level can still be used for new entries, but only if the RLX index shows signs of appreciable weakness. Recall our stop is set at $55.25.

  Ray Cummins   5/12/200,  11:52:28 AM
Spreads/Combos & Premium Selling -- Portfolio Activity

Today's early retreat provided some excellent opportunities for bullish traders to enter new positions. Vertical spreads included Adtran (NASDAQ:ADTN), KLA-Tencor (NASDAQ:KLAC), Linear Technology (NASDAQ:LLTC), Ross Stores (NASDAQ:ROST), Boston Scientific (NYSE:BSX), and Mercury Interactive (NASDAQ:MERQ), Goldman Sachs (NYSE:GS), and 3M Company (NYSE:MMM). Calendar spreads in Check Point Software Technologies (NASDAQ:CHKP), Guidant Corporation (NYSE:GDT), and National Semiconductor (NYSE:NSM) also traded at acceptable prices and the synthetic position in Marvell Technology (NASDAQ:MRVL) was available to adept market players.

  Jonathan Levinson   5/12/200,  11:51:08 AM
TICK.NQ currently reading +476, very broad buying here. QQV +1.37, slipping slowly, TRINQ .27 very unbalanced to the buy side.

  Linda Piazza   5/12/200,  11:47:54 AM
As I expressed this weekend, I now expect an OEX push toward 487 now that the OEX has cleared 475. At this time, I don't expect the OEX to be able to push over that 487 level, at least not without some regrouping first, but the uncertainly lies in how close it will approach 487. Although personal considerations as well as the crazy trading during the worst of the Iraq conflict kept me from employing my planned strategy, my long-ago plan was to go long the OEX on a move over 450, but then to get out ahead of that 487 level. If I'd been able to employ that strategy, I'd be watching very closely now, ready to bail sometime soon and collect my profits. Sigh. Those already in bullish plays should be watching closely and deciding how they'll deal with the situation as the OEX approaches first the round-number resistance near 480 and then that 487 massive resistance. Stay in and just monitor trades closely? Get out and watch? Take partial profits and let the others run? Now is the time to make a plan, if you haven't already.

  Jonathan Levinson   5/12/200,  11:46:04 AM
QQQ is now less than a dime away from the rally high. QQV is still up 2.07 and FVX is down 2.3 bps, still edging slowly back from deep in the red. June gold is holding at 350/oz.

  Linda Piazza   5/12/200,  11:37:07 AM
Reader Question: Too early to enter a short trade on NVDA?

Response: As most every market participant knows, NVDA beat earnings last Thursday, and had a remarkable day Friday, bumping up above the 200-ema and closing up more than $5.00 above its Thursday's closing level of 16.06 and the 200-ema at 16.31. NVDA climbed on high volume, too, spiking up the buying pressure line of the daily ADX indicator and sending the selling pressure line plummeting. Those who watch stochastics might note that the daily 5(3)3 stochastics have turned back up from just below overbought levels, but that a descending line could still be drawn from the mid-April stochastics levels to current stochastics levels, and the stochastics would not yet have broken up through that line. MACD appears bullish. RSI moved up and did make a higher high, but may also be in the process of turning over as prices retreat somewhat today. NVDA's big climb on Friday brought it right up to a resistance level between 20-22.70.

That Friday climb also punched NVDA through the top of its weekly and daily Bollinger bands, with the upper daily Bollinger band below at 19.80 and the weekly below near 19.50. It seems probable then that NVDA needs to retrace a bit, touch support, and try moving up again. That process may be beginning now. Different traders employ different strategies, but it's not usually my strategy to trade against trend. Currently, trading NVDA on the short side would be trading against trend. It's given a P&F buy signal and has moved above the bearish resistance line, so it's strong from a P&F basis. It's moved above both 200-dma's, so it's strong from that standpoint. Daily ADX is moving up, showing that the trend is gaining strength. So, while I think it very likely that NVDA will pull back, perhaps to its 200-ema or to the midline support of the BB, I'm not sure when or how deeply. Perhaps dips will continue to be bought while those MA's move up and support NVDA from underneath, so that it never falls as deeply as it appears that it should right now.

That doesn't mean that a short play wouldn't be wildly successful. In fact, I rather suspect that NVDA will retrace, perhaps doing so later this week. It does mean, however, that currently traders going short/put NVDA are trading against trend and must feel comfortable employing that tactic in their arsenals of options plays. With strong overhead resistance near 22.70, that might make the best place for a stop on a short/put play, so traders would have to consider whether a $2.70 loss would fit the risk/reward parameters they usually employ.

  Linda Piazza   5/12/200,  11:36:09 AM
The OEX has just bumped above last week's high.

  Jonathan Levinson   5/12/200,  11:23:21 AM
The US Dollar Index has gained 94.40 and is now up to 94.50. June gold is trading 350.00, up 1.10. The CRB is up 1.65 to 239.70, led by natural gas, platinum, sugar and heating oil.

  James Brown   5/12/200,  11:22:34 AM
The 11:00 AM ET Update: Link

  Jim Brown   5/12/200,  11:19:04 AM
Editors Play
Jim...re the put going up while market going up...I think you may be looking at the strike 86. The 85's are ask 35. Samir

I have the right symbol. I checked again on Preferred when I got your email and the ask was 40 cents. I am wondering if Preferred Trade was running behind a little earlier.

I checked Time and Sales on Qcharts (notoriously unreliable) and the last time 55 cents was ask was 9:58 this morning with 40 cents being ask at 10:24. It does appear the 55 cent ask I reported at 11:02 was likely a bad quote.

  Jonathan Levinson   5/12/200,  11:18:03 AM
The QQQ:$QQV ratio is down to 1.009. To contextualize that reading, here's a chart of the relationship I will be discussing in greater detail tonight: Link

  Jonathan Levinson   5/12/200,  11:15:31 AM
The put to call ratio is up to .80, comprised of equity pcr .70 and index pcr 1.13.

  Ray Cummins   5/12/200,  11:13:36 AM
Spreads/Combos & Premium Selling -- E-mail Replies

Hello Ray, I have 4 credit spreads on this month and am doing just fine on 3 of them. Unfortunately, I did not exit [the bearish spread in] International Game Technology (NYSE:IGT) in a timely manner. It appears this stock refuses to go down... as strange as that may seem it has pretty much gone straight up for the last 2 weeks within the ascending regression channel defined by the EMA on the downside and above by the upper bollinger band. Here is my question... will this stock ever sell off? I know you don't have a crystal ball, but relative to the PNF chart, what is my upside risk. I have not been good at reading PNF charts. Can you also please tell me what the stochastics are doing for this tock... I would think it's getting overextended, but it does behave as such. This will help me determine what I will do next week (1) exit and take loss (2) roll forward to S $85 call, L $90 call (3) roll forward S $90 call L $95 call. Please advise on technicals...Thank you

Regarding International Game Technology (NASDAQ:IGT), I decided to bring in some real expertise in that area. I have asked OI staff members Mark Wnetrzak and James Brown to offer their opinions on the issue. Here is Mark's reply:

First, we all know the stock will "eventually" sell off (and in my case, it would occur right after I closed the play!) Looking at IGT on a 2-year chart shows the stock nearing the top of its uptrend channel, so a pullback seems in order - possibly to the 30 or 40 week MA, however the long-term stochastics aren't really indicating an "overbought" condition as the most recent lateral consolidation (NOV02 to MAR03) helped work off the bullish momentum. It is a concern that volume is drying up on this latest climb, which reinforces the possibility of a pull-back (probably in conjunction with a market-wide correction). In addition, short-term stochastics suggest the issue is overbought, however a "sell" signal won't be triggered until the indicator crosses back down through the 80 line. Traders in the bullish camp would point out that the stock has rarely violated it 50-dma since July, and using that average as a support level provides a downside target of about $83, which also correlates to a 50% pull-back from the latest rally from $78.

Most technicians would say it's a rather ambiguous chart in general, and it's hard to be negative on a stock in one of the strongest sectors for the last several months. Looking at the stock's history, it has made sustained upside moves from JUL02 - DEC02 and SEP01 - JAN02, with lateral consolidations along the way, so another rally to $110 is quite possible. At the same time, there appears to be some slight negative divergences on this latest ascent and a consolidation seems probable -- the question remains whether it will be down (towards $80 to $85) or lateral ($90 to $85). If the market continues to power higher, despite the overbought conditions, IGT will likely follow suit. In the case of a break above the March high, the bullish trend would resume, suggesting further upside potential. Trade Wisely!

  Jonathan Levinson   5/12/200,  11:09:10 AM
QQQ is less than 20 cents from the rally high, so this an easy moment to read- I'm viewing QQQ 29 as the ceiling here. The persistence in the QQV and t-note yields, gains in gold and losses in the USD index tell me that the rally is gasping for strength here. It will take a big punch to knock out that QQQ 29 barrier. If yields can go green and the QQV red, I'll be feeling a lot more bullish than I am now.

  Linda Piazza   5/12/200,  11:07:56 AM
With the exception of light, sweet crude, which remains at or near its day's high, and the dollar, which hasn't moved much, the other indicators move in the direction of the day's trading, with volume patterns now positive, VIX at the low of the day and barely positive now, with gold dropping although still positive. Still, gold is still up on the day, the dollar is still down, the VIX and VXN are still positive (with the VIX moving back up as I type), and bonds are still up on the day. It's still not quite the kind of trading day I like, although I thought just this kind of trading was possible early this week.

  Jim Brown   5/12/200,  11:02:46 AM
Editors Play
Interesting point on the DIA May 85 put. I was filled at 40 cents this morning when the Dow was trading at a lower level. It is now ask at 55 cents. Not bad for the premium to rise on a put when the market is moving up. Must be a lot of traders thinking this rally is not going to stick. This is one case where waiting to buy the put cheaper would have been the wrong decision.

  Linda Piazza   5/12/200,  10:55:07 AM
Last week's OEX high was 475.66, and the SPX high was 939.61. The DJI high was 8641.20, and the COMPX high was 1531.82. The indices currently approach or have exceeded these levels, with the DJI just now moving over last week's high.

  Mark Phillips   5/12/200,  10:54:04 AM
ADTN $46.10 (+1.05) Still going...After a solid bounce from the $43 level last week, shares of ADTN are pushing through resistance this morning and hitting a new 2-year high. Now that the stock is clear of that $44-45 ressitance area, the next viable target is the $48 level. Volume is brisk this morning, with 390K shares trading hands already, which is almot 50% of the ADV. The breakout move over the $45.25 level was a solid momentum entry and traders looking to enter on a pullback will now be watching the $45 level for newfound support. Stops should now rise to $43, which is below the 10-dma ($43.23), as well as last Thursday's $43.01 intraday low.

  Jonathan Levinson   5/12/200,  10:50:48 AM
The US Dollar Index is back at 94.40, FVX up to -4.3 bps on the day at 2.566%. QQV is sliding slowly, now up 2.09, TRINQ .46 as QQQ hits its highs of the day at 28.62. Gold is still up 2 at 350.90. So far, this is either the start of a trending/flagpole rally, or we're near the top of today's trading range.

  Linda Piazza   5/12/200,  10:44:14 AM
Volume patterns now shift to show more buying than selling, but volume remains light on the NYSE, with 222 million shares traded as of a few minutes ago. On the Nasdaq, 396 million shares have been traded. On the NYSE 130 new highs have been reached with only 1 new low. While still positive, the VIX moved down from its high of the day. The ten-year and thirty-year bonds trade off their highs. Now the patterns are all shifting toward directions that support the move up in the markets, but they're not there yet, and they still feel out of synchronization with the rise in the markets. Gold and light, sweet crude remain near their day's highs.

  Jonathan Levinson   5/12/200,  10:35:10 AM
Sugar is now up 2.33%, bringing the CRB up to 238.38.

  Jonathan Levinson   5/12/200,  10:29:59 AM
On that CDWC release: government buying more computer equipment while corporate demand remains soft doesn't point to economic recovery.

  Jonathan Levinson   5/12/200,  10:28:36 AM
FVX is off its lows with the five year t-bond pulling back from its highs, now down 5.3 bps with the Qubes up 10 cents to 28.51. The bounce in the Qubes had that feel to it, reminiscent of flagpole rallies. So far, though, it's been pretty mellow, as there are actually sellers out there for a change. The TRINQ didn't get down to subterranean readings, currently .45. A few weeks ago, I would have expected .25... QQV is holding its gains, up 2.34 at 29.12. The day is young, but the market feels heavy.

  Jonathan Levinson   5/12/200,  10:25:56 AM
From CBS Marketwatch: CDW Computer Centers (CDWC: news, chart, profile) said April sales were $348.1 million, down from $351.4 million. The Vernon Hills, Ill. technology seller said it continues to see "strong double-digit growth in the public sector," but that the market remains soft in the corporate sector. The company will report May 2003 sales results on June 11. Shares rose 97 cents to $43.73 on Friday.

  Jonathan Levinson   5/12/200,  10:20:16 AM
The fed has added 1.5B net with 4B in 3 day repos against the expiring 2.5B in weekend repos.

  Linda Piazza   5/12/200,  10:16:56 AM
VIX and VXN up, bond prices down, dollar down, gold up, crude oil up, and more decliners than advancers: normally all these indicators would predict a down day. OEX hourly RSI pushing up through RSI resistance or not, I don't know that I trust what's happening currently. This isn't my "all my ducks in a row" kind of trading day. If only one of these indicators was out of synchronization, I'd discount it, but I find it difficult to discount them all.

  Jim Brown   5/12/200,  10:13:53 AM
Editors Play
I did not get the order cancelled fast enough on the bounce and I was filled at 40 cents on the put.

I now have a strangle on the DIA as follows:

MAY DIA 87 Call DAV-EI at 40 cents
MAY DIA 85 Put DAV-QG at 40 cents

Let the move begin. I do not care which direction just go +200 points in either direction. Link

  Linda Piazza   5/12/200,  10:12:24 AM
The earliest volume patterns showed slightly more decliners than advancers and slightly higher down volume than up volume, but the differences were slight and early volume patterns can be distorted. New highs remain ridiculously out of proportion to new lows.

  Jonathan Levinson   5/12/200,  10:11:29 AM
Opening put to call ratio .69, with equity pcr .73 and index pcr .60.

  James Brown   5/12/200,  10:09:56 AM
Speaking of oil, an article published over the weekend by Time says that Iraq has the potential to surpass Saudi Arabia as the #1 oil producer in the world.

  Linda Piazza   5/12/200,  10:09:33 AM
The OEX 60-minute RSI is currently attempting a push up through the RSI resistance line I'd noted in my 9:52 post this morning. In my weekend article, I'd speculated that although the hourly oscillators were either showing overbought conditions or nearing that point, they could be turned back up this morning for a day-or-two run at higher levels. That may be happening, perhaps provided via CSCO's upgrade or via a bounce when bond yields approached so near recent lows. There's strong resistance for the OEX between 475-476, but above that I would expect a push toward the 487 level. I'm not sure I expect the OEX to get there, however, or push out of that 385-487 trading range that has held it for so long.

  Jim Brown   5/12/200,  10:08:37 AM
Editors Play
Canceling order to buy put. Looks like the bounce is taking hold.

  Jonathan Levinson   5/12/200,  10:05:18 AM
The Commodies Index, the CRB, is holding Friday's gains, currently at 238.08, led by cotton (+1.91%), Platinum (+1.64%), lean hogs, natural gas, live cattle, oil and gold.

  James Brown   5/12/200,  10:01:13 AM
Looks like the June contracts for light, sweet crude (CL03M) are headed for their fourth up day in a row. Oil is now up over its simple 200-dma and trading at $28.03 a barrel.

  Jim Brown   5/12/200,  10:00:43 AM
Editors Play
We are not moving up here and I am going to put in a limit order at 40 cents for the put side. (current ask 55 cents)

  Jonathan Levinson   5/12/200,  10:00:11 AM
Bonds are holding their gains, with FVX -7.3 bps. The US Dollar Index is languishing in the 94.30 area.

  Jonathan Levinson   5/12/200,  9:59:20 AM
June gold is losing a little of its morning lustre, still up 2.80 above 351. The HUI is up 2.82 at 136.82, XAU +1.21 at 71.90.

  James Brown   5/12/200,  9:57:56 AM
A few minutes ago I heard a blurb on the tube about ERTS and MSFT but just missed it. That reminded me that E3, the Electronic Entertainment Expo, is going on this week. Check out some of these numbers (CNN.money):

U.S. (video) Game industry 2002 income: $10.3 billion
U.S. (movie) box office totals for 2002: $9.5 billion

Total number of video games released in 1995: 550
Total number of video games released in 2002: 850

  Jim Brown   5/12/200,  9:53:23 AM
Editors Play
I entered the call side with a fill at 40 cents.

For those unfamiliar with this play it was discussed in the Sunday Editors play section. Link

The initial play was for a strangle on the DIA with the 85 put 87 call. The prices on Friday were 50 cents each. I bought the call this morning at 40 cents and the put is currently 45 cents. I chose the DIA instead of the DJX because of the extra day of trading in an expiration week.

I have only entered the call side on the hopes we do get a Mon/Tue bounce making the PUT cheaper. We are going to need some buyers to show soon for that to happen.

  Linda Piazza   5/12/200,  9:52:44 AM
On the OEX 60-minute chart, I'm watching the RSI for clues as to direction. That RSI has been forming a pattern of lower highs that it has not yet been able to break. An upside break of that resistance line in conjunction with an OEX move back above 475 might convince me that there's going to be an attempt at the 487 level before hourly, daily, and weekly oscillators turn down in concert, but I'm still thinking about those bullish percent levels approaching overbought levels now and am hesitant to jump in long here even if there were an upside break. Link

  Jim Brown   5/12/200,  9:46:19 AM
Editors Play
I entered the call side with a fill at 40 cents.

  James Brown   5/12/200,  9:46:01 AM
The XBD Securities and broker-dealer index is showing some weakness and current OI put play GS has pulled back from potential resistance at $75.00. More conservative traders may still want to wait for a move under $74.00, which was support late last week.

  James Brown   5/12/200,  9:43:19 AM
Potentially affecting markets in Europe is word that labor unions in France plan to strike on Tuesday protesting the French government's plan to extend the retirement age and change the retirement benefits. Air France expects to cancel 65% of its short and medium length flights while British Airways is also expecting delays and canceled flights.

  Jonathan Levinson   5/12/200,  9:43:14 AM
Just spoke with my man Mark B. at Interactive Brokers- they're aware that option quotes are offline and are working on it.

  Jim Brown   5/12/200,  9:43:13 AM
Editors Play
I have not entered the editors play of the week yet. The DIQ $87 call has dropped to 35 cents and the Put is falt with Friday's close at 50 cents. I am leaning to buying just the call on any bottom (dip bounce) this morning and riding it up until Wednesday. We are not dropping at present so this could happen any minute.

  Jonathan Levinson   5/12/200,  9:38:32 AM
That's more like it, QQQ now 28.19, -.22.

  Jonathan Levinson   5/12/200,  9:37:09 AM
The US Dollar Index has just dumped back to 94.20, June gold up 3.20, FVX -7.6 bps. How QQQ is down a mere 9 cents here is a thing of wonder.

  Linda Piazza   5/12/200,  9:36:44 AM
That first OEX bounce was provided by the five-minute 21-pma, with the OEX headed back down to test it again. The average is a 471.25, with the OEX dropping .10 below that level as I type.

  James Brown   5/12/200,  9:36:00 AM
An upgrade from Lehman Brothers has shares of CSCO gapping higher this morning, shares are up 2.45% currently. LEH moved CSCO to an "overweight". The stock had been fighting with resistance at $16.00, now at $16.40. New price target is $18.00.

  Jonathan Levinson   5/12/200,  9:34:29 AM
TRINQ .64, QQV +2.59 at 29.37, TICK.NQ +47. Not quite the gap up that many were anticipating on Friday's close.

  James Brown   5/12/200,  9:32:46 AM
The boys over at Merrill Lynch are feeling pretty bullish these days. Last week they were telling investors to buy telecom stocks. This morning MER's equity analyst is saying use any market pull back in May to buy stocks. This might encourage the current attitude to buy the dips.

  Linda Piazza   5/12/200,  9:30:56 AM
I've been watching bond yields this morning, noting how close they're coming to recent lows. I turned to Jeff's monthly pivot analysis levels for the $TNX.X and noted that this yield, at 36.04 as I type, is below the 36.06 monthly S2 level. October and March lows for the $TNX were 35.59 and 35.49 respective, although the closing lows were 35.80 and 35.74, respectively. That means that we're approaching either triple-bottom territory or a point where a deeper break can mean trouble for equities.

  James Brown   5/12/200,  9:29:03 AM
Hmmm... it will be interesting to see how investors interpret Wal-Mart's news over the weekend. According to company comments sales for May last week were "in line" with their estimates for 1 to 3% growth BUT Mother's Day sales were "below plan".

This could have WMT's shares lagging, which were trying to break back over the $56 level. Keep in mind we're due to see WMT's earnings on Tuesday.

  James Brown   5/12/200,  9:11:45 AM
The 09:00 AM ET Update: Link

  Linda Piazza   5/12/200,  9:09:23 AM
European markets currently trade at or just off their day's lows, with the FTSE 100 now down 28.30 points or .71%, to 3941.10; the CAC 40 now down 43.74 points or 1.47%, to 2924.15; and the DAX down 81.86 points or 2.77%, to 2874.73.

  Jonathan Levinson   5/12/200,  9:07:59 AM
June gold is up 3.60 now to 352.50. Shock and awe. QQQ is down 7 cents at 28.34, and bonds are rallying, FVX -6.9 bps, TNX -7.8 and TYX -4 bps.

  Jonathan Levinson   5/12/200,  8:53:36 AM
Lehman has upgraded CSCO, giving a lift to the sagging futures, with NQ now +3.50 and ES -.50, YM -8.00. QQQ is trading 28.47. The US Dollar Index got slammed, now trying to regain 94.40, while June gold trades up 2.00 to 350.90. Thanks to Dan with whom I was emailing this weekend, and who suggested that we might view the high p/c ratios as bearish instead of bullish. Doing so, we see the US Dollar tanking, bonds rallying, stocks rallying, gold and commodities rallying, and the put to call ratio higher than normal. That looks like US currency inflation to me, too much paper chasing too few assets. It also explains the unhealthy feel to this equities rally, but doesn't spell out an end to it at any particular time. Nonetheless, I won't be buying it, having committed myself to precious metals, commodities, index puts, and canadian bonds as discussed last week. As for the equities rally, here's an interesting daily and weekly view of a chart I'll be examining in tonight's index wrap:



  Linda Piazza   5/12/200,  6:46:53 AM
Good morning. The Nikkei opened flat overnight, up only .22 points, but the index added to its gains and closed up 68.96 points or 0.85%, at 8221.12. Those gains occurred despite the dollar weakening against the yen, hurting Japanese exporters. Banks gained, as did many tech stocks. As happened last week, much of these gains were built on expectations of developments later in the week that could boost the markets. Many market participants believe key Japanese economic numbers to be released later this week will show improvement, and government representatives now prepare to discuss emergency economic measures that might boost stock performances. Also, Chief Cabinet Secretary Yasuo Fukuda stated today that the government would act decisively to counter any extreme currency moves, but his statement was perhaps contradicted by that of Zembei Mizoguchi, head of the Finance Ministry's International Bureau, who did not feel that bucking up the yen was necessary to Japanese economic fundamentals.

One class of exporters performing well in early trading in both Japan and other Asian markets was the semiconductor-related group, with these stocks rising based on Intel's expectations of a slight recovery and Nvidia's bullish statements. Tokyo Electron and Samsung Electronics in Japan, Taiwan Semiconductor in Taiwan, and Chartered Semiconductor Manufacturing in Singapore were among the gainers. Nikon proved to be an exception. In what appears to be a contradiction to the improved outlooks, Nikon reported a net loss for the year and claimed that semiconductor-makers are cutting spending. With Nikon supplying the machines that print circuitry onto silicon wafers, those spending cuts by the semis resulted in a "severe" outlook for the company, a Bloomberg report stated, but another report added that the company expects to return to profitability this current business year. Nikon, the world's largest company manufacturing the machines that print that circuitry, dropped 7.4% on the day.

Currently, the major European markets all trade down or flat. European exporters fell as the dollar hit fresh four-year lows against the euro. That drop in the dollar could precipitate a decline in economic growth in the Eurozone as investor shift away from the exporters and multinational companies to companies that operate domestically only. Currently, the FTSE 100 is down 9.30 points or 0.23%, to 3960.10; the CAC 40 is down 17.69 points or 0.60%, to 2950.29; and the DAX is down 57.11 points or 1.93%, to 2899.48.

  Leigh Stevens   5/11/200,  10:34:12 PM
The Index Trader Wrap has been posted: Link

  Jim Brown   5/11/200,  10:33:58 PM
The Futures Trader Wrap has been posted: Link

  James Brown   5/11/200,  10:33:29 PM
Yesterday's Market Monitor has been archived. You may view it and any previous days here: Link

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