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  Jeff Bailey   6/3/2003,  6:40:44 PM
SPX June futures (sp03m) 973.70 +0.15%... getting "upside alert" here as it set it to reflect Tuesday's afternoon's relative high. I wanted to do this to perhaps give me an observation toward my late QQQ bullish trade at $29.85.

 
 
  Jeff Bailey   6/3/2003,  5:35:17 PM
Pivot Analysis Matrix for tomorrow at this Link

 
 
  Jonathan Levinson   6/3/2003,  4:48:28 PM
LOL James- look what just crossed the wire: Stewart Woes Come at a Bad Time for Kmart Reuters - Link

 
 
  Jonathan Levinson   6/3/2003,  4:44:31 PM
Watching Stuart recommend it (over and over and over again for nearly 1 year) was a pretty good tell to short KMart bigtime, in retrospect.

 
 
  James Brown   6/3/2003,  4:39:05 PM
Jon, good memory! It was K-mart and Stuart tried to get him to buy 500 shares, instead of just 100. Who knew that K-mart would be in bankruptcy just three years later?

 
 
  Jeff Bailey   6/3/2003,  4:06:14 PM
QQQ $29.85 here. Will take long, stop goes under $29.50 with target of $30.30.

 
 
  Jeff Bailey   6/3/2003,  4:03:17 PM
QQQ $29.84 +0.87% .... lets play a little momentum here, and hold over the close and look for a gap higher in the morning.

Go long the QQQ on trade at $29.85 if traded.

 
 
  Jeff Bailey   6/3/2003,  3:51:02 PM
Economic Data tomorrow has revised Q1 productivit due out at 08:30 AM EST with consensus at 2%.

Then at 10:00 AM, May ISM Services for May is forecasted at 52.0, which would be above April's 50.7 reading.

 
 
  Jonathan Levinson   6/3/2003,  3:44:50 PM
Forget the QQQ h&s - the shoulder has just exceeded its upper limit, heading for the day highs here.

 
 
  Linda Piazza   6/3/2003,  3:39:11 PM
Currently, three levels of resistance converge near OEX 487: the rising neckline of the violated H&S formation (15-minute chart), the 38.2% retracement of yesterday's range, and the midline resistance of the rising regression channel that is perhaps a bear-flag pattern. However, I'm not sure whether I'd consider a close just under or just over that line significant at this point in the day, as I would pin a minor movement on end-of-day positioning only. A major sell-off or buying spree would be different, of course.

Dialing out to the daily chart shows a small spinning top candle, showing indecision, but that candle's appearance can be changed radically by only minor movements in the OEX, as it has been changed all day.

 
 
  Jonathan Levinson   6/3/2003,  3:37:43 PM
3:34pm HMC HONDA MAY U.S. SALES UP 18% TO 130,454

 
 
  Jonathan Levinson   6/3/2003,  3:32:55 PM
Put to call ratio .96.

 
 
  Linda Piazza   6/3/2003,  3:32:39 PM
For the sake of reference, the FTSE 100 ended the day down 13.60 points or 0.33%, at 4115.70, maintaining the recently achieved 4100 level. The CAC 40 closed down 8.91 points or 0.29%, at 3039.41; and the DAX closed down 37.74 points or 1.23%, at 3026.82. Both maintained their recently achieved 3000 levels. Both the FTSE and the CAC traded inside days.

 
 
  Jonathan Levinson   6/3/2003,  3:29:30 PM
While we're reminiscing, add the weirdo in the overcoat with the goatee from the Peoplesoft commercial to the list. Remember him, telling us that our customers would string us up if we didn't wear an overcoat and goatee too? I miss the Aflac commercials, but that's about it.

 
 
  Linda Piazza   6/3/2003,  3:18:58 PM
CSCO has been struggling with the 17.00-17.15 level over the last four trading days and continues to do so today. As it struggles, daily RSI cycles up, but is currently at levels below its high when CSCO traded just below 17 in mid-May. That's not bearish divergence yet, as neither price nor RSI has yet turned down and RSI could still reach a higher high, but it's signaling that potential. Currently, CSCO vacillates between 16.99 and 17.

 
 
  Jonathan Levinson   6/3/2003,  3:15:31 PM
It's a bear flag on the QQQ 3 minute candles, forming the right shoulder. A breakdown from here targets the neckline at 29.45. On a personal note, I would just love to see that neckline violated with authority. Positions aside, I'm getting sick and tired of the mindless bullish chatter polluting the chatboards. Just like in Spring 2000, everyone's a genius, like Stuart the Photocopy Boy in the Ameritrade ads, exhorting his boss to buy a 2nd lot of KMart shares, or whatever it was at the time. Whew! Rant off.

 
 
  Jeff Bailey   6/3/2003,  3:11:46 PM
Sell Program Premium Alert ... first one of the day. DOW 8,883, SPX 967, OEX 486, NDX 1,192, QQQ $29.62

 
 
  Jonathan Levinson   6/3/2003,  3:09:03 PM
Another 1.01 put to call reading. The rapidity with which the pc ratio climbs is a thing of beauty for bulls, and a disaster for bears. The market can't go down if everyone begins hedging at the slightest suggestion of a pullback. This is the exact thing that didn't happen last year, when most traders were bullish all the way down, and bears were relatively rare. For this reason, I fear that we'll see a sideways drift for the next few months, just as the Nikkei did during the summer of 1993. If so, Mike Parnos' articles should get some more eyeballs, because premium selling will be the better way to run the clock.

 
 
  Linda Piazza   6/3/2003,  2:57:01 PM
Since breaking through the H&S formation shown in my 14:39 post, on the 15-minute chart, the OEX fell. It has since has been rising in a potential bear-flag formation to retest the neckline. So far, there's been no penetration of the neckline, but no fall out of the potential bear-flag formation, either.

As I mentioned earlier today in connection with another formation, bullish sentiment has continued to be stronger than expected, so if the OEX should fall out of that potential bear-flag formation, as would currently happen with a fall through 485.50 (but rising through the afternoon), I would want further confirmation of bearishness. I would want to see a fall through Monday's gap up, for example. I'm not watching for short-term daytrade type movements, anyway, but for signs of early weakness that might start weakness that would last a day or two at least.

 
 
  Jeff Bailey   6/3/2003,  2:44:59 PM
Auto Sales various reports from news services are perplexing to say the least. Some percentage increase/declines include foreign sales, others just U.S.. Some include "lease sales" while others do not, as if "lease sales" may not be counted in total?

Perhpas as difficult as reading an old Enron balance sheet and income statement.

 
 
  Jonathan Levinson   6/3/2003,  2:44:16 PM
The QQQ head and shoulders pattern is still in play, with price just failing at the level of the left shoulder peak. Neckline 29.45.

 
 
  Linda Piazza   6/3/2003,  2:43:30 PM
This afternoon, volume patterns slow a slight shift toward the bearish end of the continuum, but the shift is slight. Adv/dec ratios are .87 for the NYSE-traded issues and .79 for the Nasdaq-traded ones. Down volume is now 1.8 times up volume on the NYSE, and up volume no longer leads as strongly on the Nasdaq. Up volume is now 1.6 times down volume on the Nasdaq, a lower proportion than had been seen in mid-morning. Total volume is 994 billion on the NYSE and 1.5 billion on the Nasdaq. I see only eight new lows listed on both, but the number of new highs appears to be down significantly from yesterday's number, although still at 413.

 
 
  Linda Piazza   6/3/2003,  2:39:59 PM
Here's an interesting formation on the 15-minute OEX chart. Link As Jane Fox reminded us some time ago in an OIN article, not all H&S formations are created equal, and this one's neckline slants at quite a steep angle. It still might be important to watch, particularly if the current OEX rise gets turned back at the neckline test.

 
 
  Jonathan Levinson   6/3/2003,  2:36:42 PM
Put to call ratio 1.01 for the past 1/2 hour.

 
 
  Jonathan Levinson   6/3/2003,  2:32:15 PM
Flash of red across my quote screen.

 
 
  Jonathan Levinson   6/3/2003,  2:26:44 PM
FVX is well off its lows but still down 11.8 bps, a big drop. TRINQ is at .51, at the low end of neutral., TICK.NQ -35 and QQV down .31. QQQ is still painting that right shoulder on the 3 minute candles, neckline now around 29.45.

 
 
  Jeff Bailey   6/3/2003,  2:25:25 PM
02:00 Internals....

NYSE = Vol: 884m A/D 14:17 NH/NL 261:1

NASDAQ = Vol: 1.32b A/D 13:17 NH/NL 118:7

 
 
  Linda Piazza   6/3/2003,  2:24:27 PM
Here's an interesting formation on the 15-minute OEX chart. Link As Jane Fox reminded us some time ago in an OIN article, not all H&S formations are created equal, and this one's neckline slants at quite a steep angle. It still might be important to watch, particularly if the current OEX rise gets turned back at the neckline test.

 
 
  Linda Piazza   6/3/2003,  2:17:27 PM
Jeff mentioned Ford in his intraday update. Here in Dallas, Ford has been in the news of late, as the city refuses to buy more Ford Crown Victoria police cruisers after a number of officers were killed or injured in gas tank explosions after rear-end collisions. This gas tank problem is not new news, but what is new is the city's refusal to buy more for their fleet and their delivery of a letter to Ford that requests certain changes be made. On yesterday's news, the city reported receiving a letter from Ford that declared the city's requests unreasonable. An Arizona county already is suing Ford, and that county's attorney and the city of Dallas are taking lead roles in forming a Crown Victoria policy, according to local news.

 
 
  Jeff Bailey   6/3/2003,  2:17:23 PM
DaimlerChrysler (DCX) $31.45 -0.97% ... reported a 3% decrease in May year-over-year sales with 216,563 total sales.

Was much better than Morgan Stanley's estimates of down 6-7%

Link to breakdown of May data and year-to-date.

 
 
  Jeff Bailey   6/3/2003,  2:15:35 PM
General Motors (GM) $35.69 -1.73% ... reported a 4% increase in sales versus year-ago.

Was "inline" with Morgan Stanley's estimates of up 4-5%

Link to table.

 
 
  Jonathan Levinson   6/3/2003,  2:05:25 PM
The 3 minute QQQ chart shows me the right shoulder of a head and shoulders formation with the neckline at approx. 29.45.

 
 
  Linda Piazza   6/3/2003,  2:05:00 PM
A glance at the daily VIX candle shows the VIX gapping up this morning above the 21-dma, falling back to test that dma and springing up from it. That's bullish action (for the VIX, bearish for equities). This action also moves the VIX out of the congestion zone that has capped its value of late. However, it's got resistance at the current 23.24 level, at 24, and at 25, so bearish traders should still exercise care.

 
 
  Linda Piazza   6/3/2003,  1:56:48 PM
I mentioned in an earlier post that this was the time of the trading day I liked the least. To be specific 1:45 ET is the time of day I like the least. When I first began trading, I found myself stopped out of trade after trade at just that time until I wised up and figured out that markets were being tested to see if support or resistance would hold. A stock or market might pop above next resistance, for example, then immediately fall, many times predicting a greater fall during the afternoon. Meanwhile, I'd just been stopped out of my trade. The problem then becomes how much you "fudge" during this time of day and widen stops to accommodate for the expected test.

I'm not fudging right now because the OEX isn't anywhere near my stop yet, but generally, I found honoring stops is still the best idea. When markets are being run up or down during this period, market participants are testing how firm that support or resistance might be. No one knows the eventual outcome at that moment. If I'm close to my stop but all oscillators are already rolling and volume patterns favor my side of the trade, I usually wait for a five-minute close over the stop rather than a brief penetration of the stop. If all oscillators show the move still going against me and volume patterns do, too, I want out. I can get back in if the market turns again.

 
 
  Linda Piazza   6/3/2003,  1:46:55 PM
So far, the OEX decline stopped right on that line I'd drawn on the chart linked to my 13:28 post, with that line demarking further weakness. It's currently testing that line again. From Friday afternoon's close to Monday's open, the OEX gapped from 483.41 to 484.33, and I'd expect to encounter some support at that gap area. This is also near the level that provided resistance all Friday, and so should be expected to provide support now. If the OEX should drop below that support, I would next watch 482.50.

 
 
  Jonathan Levinson   6/3/2003,  1:45:54 PM
I'm watching the CRB and June gold trading at their lows of the day, with treasury yields near their lows of the day, and the USD Index failing again with a lower low before 94.00 and headed back down. So gold and commods are falling alongside the USD index, equities are strong alongside a treasuries rally. Very strange day today.

 
 
  Jonathan Levinson   6/3/2003,  1:40:08 PM
The put to call ratio is down to 1.03, with an index pcr of 1.91 and equity pcr of .86. QQV is now down .03 while VXN is still up .37. There is surprising resilience in INTC (+1.86%) and MSFT (+.21%), both outperforming the NDX (QQQ -.3%). If these let go, the downside for the broader index will get significantly worse.

 
 
  Linda Piazza   6/3/2003,  1:28:14 PM
Here's what I'm watching on the OEX five-minute chart. Link Disclosure: I still hold a 1/4 put position, bought late last week with the intention of holding through a test of 488-490, if necessary, as it turned out to be. Although I occasionally daytrade, my usual practice is to position trade, and I tend to set wide stops and hold positions for days or weeks. I also tend to base exits on closing values rather than intraday values, if possible. That kept me in the play yesterday, rather than stopping out at an intraday high above 490. That may be a good thing and it may be a bad thing. Time will tell.

 
 
  Jonathan Levinson   6/3/2003,  1:25:34 PM
So far there's been little force to the bounce. TRINQ is up to .48, still a low reading, TICK.NQ -102, QQV well off its lows, down .23 at 29.31.

 
 
  Jonathan Levinson   6/3/2003,  1:12:14 PM
Most recent put to call ratio just out 1.04.

 
 
  Linda Piazza   6/3/2003,  1:07:42 PM
Since just before noon, the OEX one-minute chart shows a pattern of a fall followed by a bear-flag pattern, then another fall, and another bear-flag pattern, and so on. However, we're coming to the time when that pattern will probably be broken, as market participants return from lunch and test the next support or resistance. Stops get run during this period, and bulls and bears alike can get trapped. This is probably the time of day I like the least.

 
 
  Jonathan Levinson   6/3/2003,  1:03:04 PM
My guess is that the strength in equities is coming from short covering, compounded by momentum trading and dip buying. The rally in treasuries combined with a fed drain of over 5B should be choking off the equity markets.

 
 
  Jonathan Levinson   6/3/2003,  12:55:00 PM
FVX is getting down there too, -14.6 bps at 2.196%. The strength in equities given the large fed drain of 5.25B, combined with strong buying in treasuries, is inexplicable for the moment.

 
 
  Linda Piazza   6/3/2003,  12:40:05 PM
The person just commenting on market behavior on CNBC commented on the jest going around among traders--that there's a 50% chance of the markets going up or a 50% chance of them going down. Not really. They're forgetting a third possibility: markets consolidating and not moving at all. With volume patterns somewhat mixed and with bullish and bearish sentiment apparently equally matched throughout the morning, that may be what we get today. I hope not, but markets are going to have to be driven below significant support or above significant resistance if that's not to be our fate.

 
 
  Jonathan Levinson   6/3/2003,  12:34:58 PM
Regarding the porsche sales #, I was just doing my part to help the economy (grin)...

I was waiting for these to start landing! It must have been the OIN readership that frontlined the boost in Porsche May sales.

 
 
  Linda Piazza   6/3/2003,  12:32:37 PM
Of course, as I've been mentioning the 50% retracement of yesterday's OEX range being just under 488, I've neglected to mention that important 487.94 number that marked the December 2 high. That's probably just a bit more significant than the 50% retracement of yesterday's range! I've got it marked on my charts and marked in my memory for months, but had a bit of brain fog this morning.

 
 
  Jonathan Levinson   6/3/2003,  12:28:19 PM
This was apparently the best month ever for Porsche in North America.

 
 
  Jonathan Levinson   6/3/2003,  12:27:44 PM
12:25pm PORSCHE CARS N. AMERICA MAY U.S. SALES UP 34%

 
 
  Linda Piazza   6/3/2003,  12:25:52 PM
I've been watching retracement levels today, and turned to a Dow Jones Transportation Index weekly chart that I've displayed through the last weeks. This week's trading has bumped the TRAN just above the 50% retracement of the March-to-March decline. As this week progresses, it might be important to see whether the TRAN can maintain that 50% retracement of the decline or whether it falls back below that level. Link

 
 
  Jonathan Levinson   6/3/2003,  12:24:08 PM
Millhouse on CNBC is apparently saying that the top is not in and that the bulls are in control. I don't know about the former statement, but I agree with the latter- until we see the lower ascending trendlines taken out on the indices, "buy the dips" (with tight stops) will remain the better strategy.

 
 
  Jeff Bailey   6/3/2003,  12:22:49 PM
5-year YIELD ($FVX.X) falling 1.1 basis point to 2.232% and new multi-decade lows.

 
 
  Jonathan Levinson   6/3/2003,  12:22:09 PM
June gold has just printed its low of the day at 363.70. HUI is flat at 141.16 and XAU is up .21 at 74.18. The stochastic downphase discussed in the futures wrap is in effect, but with price staying above the 358 support level, this continues to look like a very shallow pullback, good news for goldbugs. Often, the last part of a cycle downphase will be a burst downwards to finish off the cycle, and until we see that, confirmed with a stochastic reversal back up from oversold, gold remains a dangerous buy.

 
 
  Jeff Bailey   6/3/2003,  12:20:08 PM
Qualcomm (QCOM) $34.61 +3.8% .... wanted to monitor this name as NASDAQ-100 component as it showed up in this weekend's "Ask the Analyst" column bearish stock scan. However, today's trade finds QCOM trying to get back above its 200-day SMA for first times since falling below on April 8th. Stock has been moving AGAINST the market in recent week on SARS concern in China.

 
 
  Linda Piazza   6/3/2003,  12:16:45 PM
Lots of alerts sound off as markets test key levels as the lunchtime lull begins. The OEX is back to testing that 488 level that signifies the 50% retracement of yesterday's range, after failing to maintain the 61.8% retracement.

 
 
  Jonathan Levinson   6/3/2003,  12:15:28 PM
12:14pm MERCEDES-BENZ MAY U.S. NEW VEHICLES SALES UP 6%

 
 
  Jeff Bailey   6/3/2003,  12:09:42 PM
Ford Motor (F) $10.89 -1.62% ... just released saying May total sales fell 0.7%.

Link to table.

 
 
  Jonathan Levinson   6/3/2003,  12:08:59 PM
The put to call ratio dropped to 1.07 and just printed 1.08 for the past half hour. These are levels that indicate increased risk for bears because of an excess of bearish speculation. In my experience, the best short plays are those entered when everyone's bullish. A put to call ratio above 1.0 indicates a high degree of bearishness in the market. On the other hand, the FVX is now down 8.3 bps, TRINQ down to .33 and the TICK.NQ is only +13. The TRINQ at this level shows market breadth skewed to the bullish side. Conflicting indicators here.

 
 
  Jeff Bailey   6/3/2003,  12:07:09 PM
12:00 Internals ...

NYSE = Vol: 577m A/D 15:15 NH/NL 190:0

NASDAQ = Vol: 898 A/D 14:14 NH/NL 89:5

 
 
  Linda Piazza   6/3/2003,  11:52:15 AM
Now the OEX tests the 61.8% retracement of yesterday's range, at about 488.90. Today there seems to be a strong correlation between those retracement levels and the points at which the OEX finds support or resistance. Other days, retracement levels might not be quite so helpful. Common wisdom would say that a sustained retracement of more than 61.8% would likely see a retest of the high.

 
 
  Jeff Bailey   6/3/2003,  11:52:01 AM
QQQ $29.81 +0.74% .... morning shorts look defensive here. Break above $29.85 has day trader bull targeting $30.40. Link

 
 
  Linda Piazza   6/3/2003,  11:47:53 AM
Adv/dec ratios strengthen, now in neutral territory for both the NYSE and the Nasdaq, although decliners lead slightly on both. Up volume draws further ahead of down volume on the Nasdaq, too, with up volume now 2.8 times down volume. Down volume still leads on the NYSE, but not by a large percentage. Total volume is 530 million on the NYSE and 834 million on the Nasdaq. New highs vastly outnumber new lows, as we've become accustomed to seeing.

 
 
  Jonathan Levinson   6/3/2003,  11:46:32 AM
Agreed, Alan. In particular, derivatives now move markets. On a philosophical note, if they move markets, can they truly be considered to be "derivatives" of the underlying securities that now follow them around? Witness the tape painting that goes on during opex week.

 
 
  Linda Piazza   6/3/2003,  11:32:57 AM
The OEX finally pushed above the 38.2% retracement of yesterday's range, just above 487 and now tests the 50% retracement, near 488. (As I type, it's moving above that level.) On the one-minute OEX charts, the formation takes on a saucer or rounding-bottom appearance. On the five-minute chart, there's a bullish right triangle. Sixty-minute oscillators predict more upside, too, although ADX (and +D1) have not yet risen. I'm still guarded about eventual direction for the day.

 
 
  Jeff Bailey   6/3/2003,  11:31:45 AM
11:00 Update posted at this Link

 
 
  Jonathan Levinson   6/3/2003,  11:29:59 AM
FVX is down 8.1 bps here. TRINQ down to .38, getting closer to extreme/hysterical territory. TICK.NQ is +334, QQV down .30 to 29.24. Combined with the high p/c ratio, it's looking ugly for bears here.

 
 
  Jonathan Levinson   6/3/2003,  11:27:14 AM
Where can I get the numbers for the ADX you and Jane are talking about?

The ADX is a "bottom pane" indicator on most charting packages. The ADX is a trend-strength indicator- green line/red line reflect buying and selling strength, while the ADX line itself (usually black) shows the trend strength within that leg or wave. It's useful, but I don't trade on it, because the trend strength will generally lag. A pullback within an upwave will lower the ADX, telling us the obvious, which is that the move is corrective or countertrend. As the move progresses, the ADX will eventually pull up, telling us (late) that it now sees the move as impulsive. It's more useful to compare short term vs. long term moves, but I find the stochastics and MacD a simpler way to accomplish the same analysis. That's just me- others are more comfortable with the ADX. Whatever works, and it all makes a market.

 
 
  Linda Piazza   6/3/2003,  11:20:59 AM
It's an OEX stand-off. Bulls can't seem to move the OEX above that 38.2% retracement of yesterday's range just above 487 and bears can't seem to drive it past next support near 486.40.

 
 
  Jonathan Levinson   6/3/2003,  11:16:01 AM
Jane, I've heard of traders using the ADX and 20 period ema to generate "holy grail" buy and sells. Basically boils down to fading any move countertrend to the ADX when it reaches the 20 period ema. Is that the technique you employ?

 
 
  Jonathan Levinson   6/3/2003,  11:12:13 AM
One more word about the fed. Their inflationary antics are creating one major casualty, which is society's class of savers. Their overt mission of keeping rates historically low means that our retirees and other savers, those responsible and displined enough to actually save some of their money, are receiving insufficient interest on their savings to even keep up with inflation. This story of seniors will, I'm expecting, become a major story within the coming months, and I wouldn't be surprised to see it impact the President's reelection campaign.

 
 
  Jonathan Levinson   6/3/2003,  11:09:34 AM
The put to call ratio has now risen to 1.22, with the equity pcr way high at .99 and the index pcr 2.70. As long as these levels continue, I will continue to expect to see short squeezes keeping the market aloft at or above current levels.

 
 
  Jonathan Levinson   6/3/2003,  11:07:46 AM
It seems like all Fed counter parts in other countries are trying to use the same strategy as the Fed which is to lower its currency. I would think that this is not healthy on a global basis since someone's currency has to to stronger to make buying goods cheaper. Is this strategy fitting into a dis-inflationary or deflationary end result?

This is my prime reason for being a commodity-bug. As the fed devalues the US Dollar by running its printing presses in its effort to fight "dis-inflation", other countries which make their money selling to the US (the world's #1 importer) must devalue to their currency to avoid impeding US purchases of their goods. This creates a race to devalue their currencies, and as the fed devalues ours, what you have is a tidal wave of freshly minted paper hitting the global financial markets. This tidal wave has been buoying the nominal price of paper assets across the board, in all asset classes. However, as we see with the steady climb in PE ratios, the intrinsic value is not keeping pace. This is an example of monetary inflation, and the fed is using it to fight debt deflation, oops, I mean debt "dis-inflation". If debt deflates, rates will rise, which will kill US debtors who are barely keeping up with interest payments. This is why I own gold and commodities long- as the world's central banks continue to make a mockery of their respective currencies, it requires more and more of that paper to buy the same quantity of gold, silver, soybeans, cotton, whatever, and so their prices continue to rise. Meanwhile, they are of finite quantity and cannot be created out of thin air like paper assets, and if the fed's ponzi scheme collapses, they remain "nobody else's paper", not contingent upon any counterparty's full faith or credit.

 
 
  Linda Piazza   6/3/2003,  11:06:57 AM
The OEX still tests that 38.2% retracement of yesterday's range at about 487.08. Just as a failure to drive the OEX back below the day's low predicted a retest of resistance, a failure to maintain or push above this retracement level may predict a retest of lower levels.

 
 
  Linda Piazza   6/3/2003,  11:02:29 AM
Reader Question: NDX printed a bearish engulfing candle yesterday. A commentator on CNBC early this morning said this usually means a correction of up to 8% in the following 2 weeks. Not that I put that much faith in CNBC.

What's your take on this? Also, do you happen to know if there is a relationship between points on the NDX and points on the QQQ. Say, if the NDX moves 10 points, how much would that mean for the QQQ?

Response: Great questions. First, there is a correlation between NDX prices and QQQ prices. As explained on the CBOE site, the QQQ's "initial market value approximates 1/40 the value of the underlying Nasdaq-100 Index." A ten-point move on the NDX should then be good for a .25 move on the QQQ's (10 x 1/40 = .25). I recall some recent Market Monitor discussion about some variance from that 1/40 value, due to the NDX's close being different than the broader market's close. Jonathan is the NDX expert here, so perhaps he'll weigh in with this information. You'll also find information at this CBOE site: Link

I have not previously seen information correlating a bearish engulfing candle with a downside of 8%. That prediction may be reliable or not, but yesterday's NDX bearish engulfing candle is there for anyone to see. The fact that it also occurred near important resistance should give it extra significance, but any downside at all first requires that the NDX falls, and it's so far refusing to do so today! Still, I do believe this is signaling incipient weakness that will show up soon, if not today. I, like many other technicians, look for the normal-and-expected pullback to occur soon. The depth of that pullback will tell us much, but even in a strongly performing market, as this has been in recent months, a pullback of 38.2% is usually expected.

 
 
  Jeff Bailey   6/3/2003,  10:52:35 AM
Drug Index (DRG.X) 317.28 +1.3% .... only sector I see up greater than 1%. Glaxo (NYSE:GSK) $41.00 +2.4% driver Link

 
 
  Jonathan Levinson   6/3/2003,  10:52:26 AM
The largest of all markets, currencies, has the US Dollar Index struggling with 23.70 resistance. June gold last traded 364.10, whith HUI up .15 to 142.31 and XAU up .27 to 74.24, both off their highs.

 
 
  Linda Piazza   6/3/2003,  10:50:43 AM
Bears couldn't drive the OEX down past the current day's low, so the OEX now rises to test that 38.2% retracement of yesterday's range, near 487.

 
 
  Jonathan Levinson   6/3/2003,  10:45:58 AM
Alan K., my money's on the much-larger treasury market to lead equities.

 
 
  Jonathan Levinson   6/3/2003,  10:43:09 AM
The put to call ratio is now up to 1.07, just too high, led by the index pcr at 2.93 and equity pcr .81.

 
 
  Linda Piazza   6/3/2003,  10:41:43 AM
As of a few moments ago, decliners led advancers on both the NYSE and the Nasdaq, and down volume led up volume on the NYSE. On the Nasdaq, however, up volume was 1.75 times down volume. Also, although decliners led advancers on the Nasdaq, the adv/dec ratio was a neutral-to-slightly-bearish .88. On the NYSE, the adv/ratio was a slightly more bearish .78. Total volume was 266 million shares on the NYSE and 491 million on the Nasdaq. Although these volume patterns are not yet squarely in the bears' camp, they show a divergence from recent early-morning volume patterns.

 
 
  Jonathan Levinson   6/3/2003,  10:41:37 AM
The commodity futures index (CRB) is up .12, led by platinum (+1.69%), cocoa (+.97%), silver and lean hogs.

 
 
  Jonathan Levinson   6/3/2003,  10:34:16 AM
TRINQ sticking at .40 and TICK.NQ -125 shows that there's some very focused buying support the COMPX. Note that NQ is trading in a relatively narrow range, less than 5 points off its lows. The negative TICK.NQ reading combined with the very low TRINQ shows unhealthy market breadth behind the current resilience. If the broader market starts to get bought, we will get a strong pop. If the hysteria buying slows, the market will hit fresh lows.

 
 
  Linda Piazza   6/3/2003,  10:31:00 AM
A scan of 60-minute OEX oscillators gives a mixed view. The most important task is to first look at ADX, which shows the ADX level declining beginning yesterday, but still in the area that defines a trending market. That means we may not yet be able to trust sell signals given by oscillators. Those oscillators show the 5(3)3 stochastics cycling down and nearly at levels indicating oversold conditions, but still in full bearish mode, while the 21(3)3's have been tugged down out of overbought levels, but perhaps are hooking back up again. CCI is still in the green, but yesterday afternoon cycled below the line demarking overbought conditions. RSI, however, hooks up after touching a May 20-to-present trendline of higher lows on the hourly RSI. So far, that line is intact, but I'm watching the RSI to see if it turns and pierces it.

 
 
  Jeff Bailey   6/3/2003,  10:24:24 AM
10:00 Internals ....

NYSE = Vol: 42m A/D: 8:13 NH/NL 48:0

NASDAQ = Vol: 170m A/D 8:13 NH/NL 34:6

 
 
  Linda Piazza   6/3/2003,  10:23:54 AM
The VIX's bump above 23 this morning takes it above its six-day consolidation range. The day is far from over and the performance of this volatility index has been known to be quite volatile itself, but this is one development to keep on your radar screen today along with those mentioned by other writers.

 
 
  Jonathan Levinson   6/3/2003,  10:22:41 AM
FVX is down 6.3 bps, yet the TRINQ at .43 shows aggressive bullish breadth on the COMPX. QQV is up .48 to 30.02.

 
 
  Jeff Bailey   6/3/2003,  10:22:11 AM
S&P Banks Index (BIX.X) 305.22 +0.5% .... strength in BIX.X as well as KBW Banks (BKX.X) 845 +0.48% most likely provides partial bid for SPX 967.81 +0.07% and OEX 486 +0.15% in early going.

OEX session high of 487.90 comes just under yesterday's stopping point of 488-489 and I would think today provides a good "observation" day for bear perhaps thinking of trade opportunity into tomorrow. Try and get at least some consolidation with market internals still strong.

 
 
  Linda Piazza   6/3/2003,  10:18:42 AM
The OEX 50% retracement of yesterday's range held as resistance and after a few minutes of tepid support at the 38.2% retracement level at 487.08, that, too, has fallen again.

 
 
  Jonathan Levinson   6/3/2003,  10:12:50 AM
Alan's correct- as discussed last night, the selloff yesterday did almost no technical damage whatsoever on the daily chart, and very little on even the 30 minute chart- it only bought the bears more breathing space. Until downside support within the uptrend is violated, it just looks like a routine pullback, and the resilience so far today is lending credence to that bullish interpretation.

 
 
  Linda Piazza   6/3/2003,  10:11:57 AM
The OEX is currently at that 50% retracement level (of yesterday afternoon's range) at 487.98. I mentioned this level in an earlier post as one bulls want to see violated to the upside and bears want to see holding as resistance. So far, the level holds, but it's too soon to be sure.

 
 
  Jeff Bailey   6/3/2003,  10:09:22 AM
Gold/Silver Index (XAU.X) 74.71 +1% .... sector winner in morning trade. The time has come for the test of "right shoulder" in head/shoulder top formation. Sector bulls look for a bold break above 76 to bring in short-covering and get some momentum going. Link

AMEX Gold Bugs (HUI.X) 142.55 +0.27%, which is equal weighted index Link has similar "head/shoulder top" with the right shoulder starting to grow into the ear.

 
 
  Jonathan Levinson   6/3/2003,  10:03:44 AM
The put to call ratio was .98 for the opening half hour- far too high for a bear's liking.

 
 
  Linda Piazza   6/3/2003,  10:03:26 AM
The 50% retracement of the fall from yesterday's high to the afternoon low lies at about (because I snapped the Fibonacci tool rather than calculating exact amounts) 487.98. The 38.2% retracement lies at current levels, at 487.08. Bulls want to see a climb above those retracement levels. Bears prefer to see the OEX stopped at the 50% level, if not at the current level.

 
 
  Jonathan Levinson   6/3/2003,  10:01:31 AM
A 2.5B overnight repo has just been announced, effectively draining 5.25B from those expiring today. Good for the dollar, bad for bonds and equities. We'll see.

 
 
  Jonathan Levinson   6/3/2003,  9:58:30 AM
Al Green has apparently told an enraptured audience of central bankers in Berlin that he sees evidence of a "marked turnaround" in the US economy. Tell that to the 14,000 Fedex employees who got axed yesterday.

 
 
  Linda Piazza   6/3/2003,  9:58:09 AM
The OEX early action today diverges from the pattern seen in the last week--a zoom up in early trading, perhaps after a brief dip. Noting that divergence, I'm alerted that the OEX pattern might be signaling more weakness today, but bullish sentiment doesn't preclude another attempt at recent highs first.

 
 
  Jonathan Levinson   6/3/2003,  9:56:15 AM
The attempted bounce seems to have flunked out at a lower high. FVX now down 6.2 bps, buyers returning to treasuries. TRINQ .74, neutral bullish, TICK.NQ -112, QQV flat while VXN is up 1.16 to 34.79. Yesterday's bullish engulfings on the QQV and VXN should have awoken some bears.

 
 
  Jeff Bailey   6/3/2003,  9:55:18 AM
Sector Bell Curve saw no sector status changes yesterday. Wall Street (BPWALL) was biggest winner, with its bullish % rising 7.7% to 58%.

 
 
  Linda Piazza   6/3/2003,  9:51:22 AM
The current OEX action was one reason I suggested waiting for a confirming close below yesterday's low before considering the potential bear-flag pattern violated. Technically, the bear-flag was violated, complete with a five-minute close beneath the pattern, but as has been typical lately, that didn't prevent market participants from sending the OEX up again. I don't feel that we can yet determine ultimate OEX direction today.

I note that the VIX is above 23.

 
 
  Jonathan Levinson   6/3/2003,  9:48:54 AM
The dip below ES 965 was a stoprunner, currently 966.75. NQ 1180 was never tested.

 
 
  Jonathan Levinson   6/3/2003,  9:41:58 AM
FVX is down 6.1 bps, approaching session lows as buying picks up again in treasuries.

 
 
  Jonathan Levinson   6/3/2003,  9:41:22 AM
Evidently the bulls are expecting IBM's allegedly cooked books to be revised UPWARDS once a proper audit can be accomplished. Wonders never cease.

 
 
  Jonathan Levinson   6/3/2003,  9:39:57 AM
ES 965 has just been violated, 1180 NQ is next on deck.

 
 
  Linda Piazza   6/3/2003,  9:38:49 AM
On the OEX, today's first five-minute candle spanned a small range and so won't provide good targets for bearish and bullish traders to watch. However, since yesterday's plummet, the five-minute chart shows the OEX settling into a tight upward-slanting regression channel that looks suspiciously like a bear-flag pattern. Let's watch. Since bearish patterns haven't typically worked out as expected lately, I would wait for a confirming five-minute (at least) close below yesterday's OEX low of 484.33 before feeling confident that the bear-flag pattern had been confirmed.

 
 
  Linda Piazza   6/3/2003,  9:35:39 AM
Welcome again, Jane. We'll all be interested in learning about your system.

 
 
  Linda Piazza   6/3/2003,  9:34:47 AM
European markets have been holding steady since my last report, with the FTSE 100 currently at 4104.20, the CAC 40 at 3016.46, and the DAX at 3016.33. A sustained loss of the 4100 level for the FTSE and the 3000 level for the other two would add to negative sentiment in the global markets.

 
 
  Jonathan Levinson   6/3/2003,  9:33:41 AM
Opening TRINQ moderate at .89, QQV +.33 at 29.87, VXN flat, TICK.NQ +111.

 
 
  Jonathan Levinson   6/3/2003,  9:30:00 AM
FVX is off its lows as equities open, -3.9 bps.

 
 
  Jonathan Levinson   6/3/2003,  9:18:04 AM
The fed has 4.75B in 6 day repos and 3B in overnight repos expiring today, for a total of 7.75B to be refunded. We await the 10AM announcement with respect thereto.

 
 
  Jeff Bailey   6/3/2003,  9:16:09 AM
09:00 Update posted at this Link

 
 
  Jonathan Levinson   6/3/2003,  9:14:04 AM
Buying is picking up in treasuries, with the five year yield (FVX) now down 5.6 basis points, TNX down 6 bps and TYX -3.4.

 
 
  Jim Brown   6/3/2003,  8:42:53 AM
Market Monitor will be reloaded. (Server will be down for 5 minutes)

 
 
  Jonathan Levinson   6/3/2003,  8:33:23 AM
The US Dollar Index became a screaming buy at Europe's open, and jumped from 93.15 to the current 93.70 level. June gold is trading 364.20 x 366.50. ES is 967 , -1.5 and NQ 1186 -4.50. Bonds are being bought, with FVX -3.6, TNX -3.3 bps and TYX -1.9. QQQ is down .11 to 29.48.

 
 
  Linda Piazza   6/3/2003,  7:07:38 AM
Good morning. The Nikkei opened flat in Tuesday's trading, but soon dipped into negative territory. By the end of trading, the Nikkei had managed to eke out another gain, closing up 17 points or 0.2%, at 8564.49. Other Asian markets closed flat or slightly down.

Yesterday on the Nasdaq, the semis underperformed, and chipmakers and other computer-related stocks underperformed in Asian trading, too. They were affected by tech performance on the Nasdaq, IBM's notice of an SEC investigation into the company's booked sales, profit-taking after recent gains, and a weaker dollar. Market pundits across the globe agree that Bush's statements at the G8 conference would have no lasting effect on the dollar.

Despite announcing that its Q2 earnings would show a narrower-than-expected loss due to shipments that were stronger than expected, chipmaker Chartered Semiconductor fell. TDK, manufacturer of magnetic parts for hard disk drives, and Advantest, manufacturer of equipment needed for testing computer-memory chips, also dropped.

A Hong Kong newspaper theorizes that Hong Kong may elect to sell its 57% ownership of the upcoming Disneyland theme park. The government may take the measure because of its substantial budget deficit.

Most European bourses trade flat to down. The FTSE 100 currently slips just beneath 4100, trading at 4099.80, down 29.50 points or 0.71%. The CAC 40 trades down 29.17 points or 0.96%, at 3019.15; and the DAX trades down 46.55 points or 1.52%, at 3018.01. As happened in Asian trading, chips underperform, with many falling more than 3%. The World Semiconductor Trade Statistics, the WSTS, stated that Q1 sales came in below expectations. The WSTS lowered 2003 industry growth estimates to 11.5% from the previous 16.6%. Additional economic numbers include the Eurozone unemployment rate, meeting expectations at 8.8%; the April PPI, down 0.4% rather than expected easing of 0.3%; and the May French consumer confidence number rising to -27 from April's -29. In other news, Alcatel plummets today after it announced a 1 billion euro convertible deal to be used to partially repay three Alcatel bonds.

 
 
  Jeff Bailey   6/2/2003,  12:47:10 AM
The Index Trader Wrap has been posted: Link

 
 
  Jonathan Levinson   6/2/2003,  12:46:49 AM
The Futures Trader Wrap has been posted: Link

 
 
  James Brown   6/2/2003,  12:46:21 AM
Yesterday's Market Monitor has been archived. You may view it and any previous days here: Link

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