Option Investor
Printer friendly version
  Jeff Bailey   7/14/200,  4:20:29 PM
Rambus (RMBS) $18.90 +1.88% .... trades lower at $18.30 (-3.1% from close) on headline numbers of $0.05 per share (misses estimates by a penny). RMBS said revenues rose 4% year-over-year to $29.2 million, above consensus of $28.3 million.

  Linda Piazza   7/14/200,  4:01:57 PM
And I'll be seeing you in the Market Wrap. What a day. Excitement for the first few minutes, boredom through most of the day, and then an exciting end.

  Linda Piazza   7/14/200,  3:58:49 PM
Swing Trade Signals
The 504.18 number achieved by the OEX a few minutes ago may be the low of the afternoon and the closest approach the OEX made to our 504 target on the unofficial play. I hope those of you who don't like to hold overnight in this uncertain climate took profit then. If not, consider whether you want to do so now.

  Jeff Bailey   7/14/200,  3:57:25 PM
Rambus (RMBS) $18.91 +1.94% ... has been a seller all day at $19.20. Company reports earnings after the closing bell with consensus at $0.05 per share and revenues of $28.3 million.

  Linda Piazza   7/14/200,  3:55:56 PM
The OEX's daily candle is a bearish candle with a small real body at the bottom of the trading range, yet the OEX currently holds 504 support. The hourly candles certainly set up the possibility that the OEX has formed a double top, but we can't jump to conclusions as that double top would not be confirmed until a fall below the trough between the two peaks. That's a long way away. It appears likely, but not certain, of course, that the OEX will now fall back to retest its 21-dma, currently at 500.42 and the bottom of its ascending channel support, also near 500, but perhaps not without testing resistance again first.

  Linda Piazza   7/14/200,  3:48:12 PM
Swing Trade Signals
Careful now. The OEX approaches the 504.24 day's open and the 504 first target on the nonofficial play. This is the top of the day's gap and might provide a bounce point. Consider now how you'll handle the end-of-day decision, too. Earlier in the day, Jane detailed the many economic reports due tomorrow. Also factor in the companies reporting tomorrow, including INTC, among others.

  Linda Piazza   7/14/200,  3:43:20 PM
Swing Trade Signals
If you're in this nonofficial OEX short/put play, consider lowering your stop now to 409.25, just above the 409 resistance.

  Linda Piazza   7/14/200,  3:41:31 PM
Swing Trade Signals
OEX 506 has also been support, and I mentioned the possibility of a bounce from that level when I talked about this potential high-risk nonofficial play earlier today. Watch now how the OEX handles this level. OEX 504 is the suggested target, with support layered in two-point increments below that level.

  Linda Piazza   7/14/200,  3:32:54 PM
As Jane just mentioned, it's difficult to plan or accommodate these kinds of order errors. Some of you--those who count themselves among the aggressive traders--are probably now in an OEX short/put trade. We still have solid reasons for entries and for stops, and all we can do is adhere to them and take our lumps when we must.

  Linda Piazza   7/14/200,  3:26:21 PM
Swing Trade Signals
To all the other risks inherent in trading this week, it appear we must now add the risk of large erroneous orders entered with some frequency of late.

  Linda Piazza   7/14/200,  3:18:03 PM
Swing Trade Signals
If you did enter short/put at OEX 508 after all those warnings, you're an aggressive trader who probably knows something about your own risk levels and feels confident of setting your own stops and targets. One stop that might be considered is a move over OEX 511, as the OEX has not been able to make it over that level since 11:00 ET.

  Linda Piazza   7/14/200,  3:11:56 PM
Swing Trade Signals
Wow, quick drop, and I don't imagine that many of you were able to get in on the drop through 508 unless you had orders parked, as Jonathan mentioned with relationship to the futures contracts. Premiums are sure to be inflated with a fast drop like this. One possibility for those of you who want to try the trade is to wait for a retest of broken support, buying on a rollover anywhere underneath 509. As I mentioned multiple times today, this would be a high-risk trade, and I'm not going to make it official.

  Jeff Bailey   7/14/200,  3:10:02 PM
QQQ $32.24 +1.28% .... stopped on long at $32.35 (see 11:51:14). Trying to write 03:15 PM EST Update so late on this comment.

  Jeff Bailey   7/14/200,  3:07:11 PM
Sell Program Premium Alert SPX = 1,009, OEX = 508, INDU = 9,218, NDX = 1,300, QQQ = $32.35.

  Linda Piazza   7/14/200,  3:06:35 PM
Swing Trade Signals
OEX 508 is about to be tested. The lateness of the day must now be factored into the other risks mentioned about a possible OEX play on a break of 508.

  Jeff Bailey   7/14/200,  2:59:52 PM
Q-Logic (QLGC) $53.40 +4.95% .... inching to a new 52-week high here. This is stock I profiled bullish back in April after double-top buy at $41.00. I doubt anyone still long here, but just a reminder stock near's bullish vertical count of $56.

While QLGC is very different company/business/product than Autozone (AZO) $79.23 +2.45%, similar supply/demand technicals present today in AZO that QLGC presented back in April as it relates to trend.

Just as big test for QLGC was to trade the spread-triple top at $44.00, I think similar big test for AZO is to trade that $80 level and show some demand characteristics where supply is starting to dry up. Link

  Linda Piazza   7/14/200,  2:51:16 PM
Current volume patterns show adv/dec ratios of 2 for the NYSE and 1.99 for the Nasdaq. Up volume is 4 times down volume on the NYSE and 9 times down volume on the Nasdaq. Total volume, as of a few minutes ago, was 972 million on the NYSE and 1.4 million on the Nasdaq. New highs numbered 742 on the NYSE and Nasdaq, with only 5 new lows.

  Jeff Bailey   7/14/200,  2:50:39 PM
Oil Service (OSX.X) 87.58 -1.29% .... extending session losses here and matching Friday's low. Looks to want to at least try and test the rounding higher 200-day SMA of 86.73 at this point.

  Jeff Bailey   7/14/200,  2:47:16 PM
Dow Industrials (INDU) 9,254 +1.48% .... has been either side of its WEEKLY S1 after a sprint higher at the open. Breadth has been quite bullish and currently stands 26 up and 4 down.

McDonalds (NYSE:MCD) $22.21 -1.63% the only stock down more than 1%, but may be attractive bull entry back near $20.00 where stock did give spread triple top buy signal after break of long-term downward trend. Link

Bull probably isn't overly excited at this point as relative strength of MCD vs. INDU Link still rather bearish at this point. If anything, MCD might get a LEAPS trader's attention, but partials only on a nice pullback to $20 support.

  Linda Piazza   7/14/200,  2:44:57 PM
In my 13:19 post, I linked readers to a 30-minute OEX chart that showed the RSI moving in an ascending channel while the OEX traded in its potential bull flag pattern. I like to watch RSI patterns because they're often predictive of price action or at least can provide a fairly reliable confirmation of what you're seeing on the price. Currently, 30-minute RSI comes down to almost touch the bottom supporting line. A breakdown below that line might signal a change in outlook, especially if it occurs with a simultaneous break of OEX support. However, as this has been the supporting trendline for the RSI, it might also be the point at which it turns back up again.

  Jonathan Levinson   7/14/200,  2:41:17 PM
The put to call ratio is .59 for this past hour, .58 for the preceeding hour.

  Linda Piazza   7/14/200,  2:40:44 PM
President Bush's press conference has concluded.

  Jeff Bailey   7/14/200,  2:39:23 PM
I see www.stockcharts.com has changed their SPX box size above 1,000 from 50-box to conventional 10-point box and would like to thank them. This give better look of SPX and past resitance just below 1,020. While this does not "help" my bearish trade from 980, certianly gives the thought that stop firm at 1,020 MAXIMUM at this point, which would be another triple-top buy signal and would negate the prior observation of a "bear trap" where SPX traded 1,010 then quickly reversed lower, gave a sell signal at 980, but has since recovered. Link

  Jonathan Levinson   7/14/200,  2:35:48 PM
The TRIN.NQ remains at an eye-popping .20, TICK.NQ +215. Combined with the low put to call ratio and the positive volatility indices, it feels as if we're looking at blowoff-toppish breadth currently- if only price would oblige.

  Linda Piazza   7/14/200,  2:34:11 PM
For those at work, President Bush and the UN's Kofi Annan currently speak to the press.

  Jeff Bailey   7/14/200,  2:31:56 PM
Treasuries continued selling in Treasuries has YIELDS at their session highs here. 10-year YIELD ($TNX.X) now up 5.8 basis points to 3.97%.

Last week I showed head/shoulder top formation development on 10-minute chart, and set a retracement up, based on that pattern. Noting here that the retracement (19.1%) is at 37.31 or YIELD of 3.731%, which is this WEEK's R1.

BIX.X has already blown through its WEEKLY R1 and R2 and gives me the thought it is going to find SPX above a bears SPX stop of 1,018 in the not too distant future.

  Linda Piazza   7/14/200,  2:31:48 PM
Today hasn't been a good day for OEX plays because of the wide spreads, but then we knew that it would not likely be a good day since about 15 minutes before the open when futures levels showed that the OEX might gap too high to make a long play feasible. That didn't mean that the OEX wouldn't move higher, but only that risk/reward weren't going to be good for a long play. I don't think it's going to be until and unless the OEX retraces to the bottom of the ascending channel (near 500 currently) and bounces or else breaks through the midline resistance of its rising channel, currently near 516-517 and heads toward the top of the channel. Short entries might come on a rollover at that midline resistance or on a fall through support at 508, although that's risky, too.

  Jeff Bailey   7/14/200,  2:25:48 PM
Micron Technology (MU) $14.45 +3.95% ... Pnf chart Link makes new session high here and looks to track the Semiconductor Index (SOX.X) 406.52 +4% in percentage terms today.

MU bulls like the relative strength vs. SPX Link recently, but would like to see RS chart vs. SOX.X Link get back into column of X pretty soon.

  Linda Piazza   7/14/200,  2:25:31 PM
On the 30-minute and hourly charts, it's possible to term that OEX formation that's been setting up throughout most of the day a bull flag with the OEX having popped just above the flag but now hesitating. (A trap, possibly?) If you watch it on a five-minute chart, it just appears to be aimless wandering, with price oscillating around the five-minute 21-pma (currently at 509.94). So far, OEX 509 has held support each time it's been approached.

  Linda Piazza   7/14/200,  2:03:36 PM
That formation off the OEX hourly charts still appears to have the shape of a bull flag (big zoom up, then a tight range of lower highs and lower lows). Both 60-minute 5(3)3 and 21(3)3 stochastics and RSI flattened while that potential bull flag was forming, and now RSI hooks up again as the OEX tries to break out to the upside. The hourly ADX has been turning up today, too, although it's still at a modest 22.60 level. I still can't suggest a long play with overhead resistance so close, which may mean we'll miss a great play if that potential bull flag was forming in the midpoint of a rise, as sometimes occurs. There's just too much important resistance overhead to risk it. There's too much chance of a downturn soon.

  Jeff Bailey   7/14/200,  1:59:51 PM
LookSmart (LOOK) $4.10 +22% ... another stock being names as potential Microsft (MSFT) acquisition target after YHOO/OVER deal.

  Jeff Bailey   7/14/200,  1:56:44 PM
Mirant (MIR) $2.20 +25% .... per subscriber question regarding MIR where trader was long and had written covered calls. Not sure it trader still involved, but there is some talk that stock rebounds today that company me be having favorable talks with banks regarding its debt obligations.

  Jeff Bailey   7/14/200,  1:48:18 PM
01:00 NH/NL ....

NYSE reports 300 new highs and 0 new lows. (daily ratio 100%, 10-day 97.1%)

NASDAQ reports 368 new highs and 2 new lows. (daily 99.5%, 10-day 96.3%)

10-day average continues to press back higher.

  Linda Piazza   7/14/200,  1:43:41 PM
I barely got that reference to the push typed before it began. It's most definitely to the upside. Let's see if the OEX can break the previous day's high of 511.34 and sustain that level or if the OEX instead zooms down and breaks support.

  Jeff Bailey   7/14/200,  1:43:40 PM
QQQ/SPX intra-day observations .... both SPX and QQQ came back to their WEEKLY R1 and MONTHLY R2 respective, found support and look to rebound. QQQ (now moving back above WEEKLY R1 here) long and SPY short might look for both indexes to retest highs into their close.

Those willing to take an intra-day chance could close out SPY/SPX bearish here, and look to sell QQQ at session high for potentially "break even" type of trade between the two.

Just a thought for trader that may have established "sythetic hedge" between the two indexes in recent weeks.

  Linda Piazza   7/14/200,  1:37:47 PM
The 1:35-1:55 ET push nears, with the biggest push often occurring nearer 1:45 ET. We'll get our first glimpse at whether support or resistance might hold for the afternoon. Be prepared, but don't assume the direction of the push will be the final direction for the afternoon. It's the strength of the push coupled with how the indices act afterwards that tell us whether support or resistance has held.

  Jeff Bailey   7/14/200,  1:25:05 PM
01:00 Update posted at this Link

  Linda Piazza   7/14/200,  1:19:56 PM
Swing Trade Signals
Here are some of the things I'm watching on an OEX 30-minute chart: Link If that is a bull flag, an upside break would normally be a good long/call signal, except that the OEX then soon faces the resistance detailed in my 11:17 post. No go for an official signal, then. A break below 508 might be a better bet for aggressive traders seeking a quick target of 504, as I detailed earlier, but if 508 does break, traders should be aware of the possibility of a bounce in that 506-506.50 area. No go for an official trade there, either.

  Jonathan Levinson   7/14/200,  1:16:08 PM
The put to call ratio drops to .58 for this past half hour.

  Linda Piazza   7/14/200,  12:48:08 PM
As the OEX maintains 509 support, the VIX creeps back down again.

  Linda Piazza   7/14/200,  12:36:26 PM
Various observations: Volume patterns remain strong. The VIX and VXN both move up a bit, however, as the markets attempt to rise again, perhaps signaling increasing uncertainty. The last 60-minute candle was a red candle, but not the big red candle we needed to complete the potential reversal signal on the 60-minute chart. It was small enough to keep alive the possibility that a bull flag is forming off that chart--a wider bull flag than the one that broke down on the five-minute chart.

  Jeff Bailey   7/14/200,  12:27:07 PM
Altria (MO) $41.92 +0.26% .... just off session low of $41.80 that was traded last couple of minutes. I have retracement from $57.79 to $27.70, which marks retracement from June 2002 high and March 2003 lows. Did see morning strength find sellers at 50% retracement of $42.74. Stock looks near-term vulnerable on technical basis to rising 50-day SMA of $40.60 and 38.2% retracement of $39.19, which marks a level MO gapped higher from on May 21, when it closed $38.30 and gapped up to $40.62 on May 22nd. It was on May 21 that MO made strong move higher on tobacco companies' being able to pursuade Florida appeals court to throw out a $145 billion jury verdict. Link

  Linda Piazza   7/14/200,  12:18:37 PM
The OEX has now fallen through the bottom of that potential five-minute bull flag, but now rests just above 509 support.

  Jeff Bailey   7/14/200,  12:09:34 PM
Microsoft (MSFT) $27.64 +1.17% .... after session high of $27.81, now pulling back to this morning's openin gap higher of $27.63. Does have QQQ $32.50 off its highs of $32.75 after test of upper-end of regression channel.

  Linda Piazza   7/14/200,  12:08:32 PM
Be careful about drawing too many conclusions too soon, as after the disintegration of the rising bearish wedge on the OEX five-minute chart, and the fall through the bottom of the wedge, the OEX settled into a pattern that now looks a bit like a bull flag. That's not the usual action we see when a bearish rising wedge breaks to the downside, but these wedges haven't been particularly predictive of downside action since early spring this year.

  Jonathan Levinson   7/14/200,  12:07:08 PM
Put to call ratio .61.

  Linda Piazza   7/14/200,  12:05:37 PM
I'm keeping close tabs on the volume patterns today. Currently total volume stands at 555 million on the NYSE and a strong 908 million on the Nasdaq. There are still only two new lows between those two exchanges, with both on the Nasdaq. New highs number over 600. Adv/dec ratios are 2.5 for the NYSE and 2.2 for the Nasdaq. Up volume is 6 times down volume on the NYSE and 8.3 times down volume on the Nasdaq. Those levels have moderated quite a bit from this morning's numbers, but have they just moderated to more sustainable levels or does this show a sea change? So far, it appears only that they've moderated to more sustainable levels, but let's keep watching. That may be about to change.

I do note that the VIX and VXN are positive on a day when the indices have made strong gains, but I often notice that they rise as markets approach strong resistance.

  Ray Cummins   7/14/200,  12:03:41 PM
Spreads/Combos & Premium-Selling -- Portfolio Activity

Despite the recent bullish activity, the bearish portion of our portfolio has performed relatively well. However, there are a few early-exit candidates as well as some issues on the "watch" list. Among the most critical plays are: Cerner (NASDAQ:CERN), which is now trading above the break-even point in the "premium selling" position; and Affymetrix (NASDAQ:AFFX), Harley Davidson (NYSE:HDI), Lowe's (NYSE:LOW), Cephalon (NASDAQ:CEPH), and Adobe Systems (NASDAQ:ADBE), all of which are within a few cents of their respective sold (call) strikes. Issues that require close attention include: Genentech (NYSE:DNA), General Motors (NYSE:GM), Maxim Integrated Products (NASDAQ:MXIM) and Linear Technology (LLTC), among others. In the Calendar Spreads section, exits or adjustments should be considered in Guidant (NYSE:GDT) and Overture (NASDAQ:OVER), due to today's extreme upside momentum.

  Jeff Bailey   7/14/200,  11:58:45 AM
Autozone (AZO) $78.90 +2.01% ... Jeff: AZO seems to be lagging the overall market strength, do you any further upside to this one or is time to step aside for now??

e-mail from earlier this morning just after open. I was monitoring AZO along with MO and other 1,2 and 3-lettered stocks. Saw many see selling back to Friday's close. While AZO has been lagging since bullish profile of $79.00 (current levels of trade), still view AZO as bullish.

One thing I did see for a shorter-term trader, that may not like AZO is that there was an reverse head/shoulder pattern on 10-minute intervals, which gave bullics target back to $78.50 (pattern has left shoulder on Thursday at $75.50, head at $75.00 on Thursday, right shoulder at $75.50 on Friday, with neckline at $77.00. As such, shorter-term trader may look to snug a stop at $75.45 after seeing some 3-day underperformance, but I (Jeff Bailey) still like these types of PnF technicals at this point. If I or you the trader find something better to trade with AZO cash, then I have no problem moving onto an alternative. Today's trade at $78.00 gets 3-box reversal back higher after another successful test of bullish trend. Would like to see trade at $80 give a second conecutive double-top buy signal from here. Link

AZO relative strength vs. SPX still column of O and would be read... "Relative strength buy signal, but column of O." Longer-term outperformer, but intermediate-term underperformer. Here's RS chart of AZO vs. SPX Link

  Linda Piazza   7/14/200,  11:55:05 AM
So far, that third hourly OEX candle is not cooperating with the possible-reversal-signal scenario. Support is holding.

  Jeff Bailey   7/14/200,  11:51:14 AM
Index Trader Wrap .... Will have firm stop in QQQ at $32.35 (just under MONTHLY R2 of $32.40) as it relates to SPX/SPY firm stop above the June highs (1,018 / $102.50).

Thinking for DOWNSIDE move is this. If QQQ trades $32.35, then some weakness seen from "leadership" index, may then have SPX/SPY vulnerable back to 996-998 where bearish trade could either be closed out, or continued to hold with stop above the June highs.

Thinking for UPSIDE move is this. If SPX/SPY destined for new nighs (and it is looking like it) then QQQ "should not" get stopped, SPX/SPY will get stopped for loss. FIRST PRIORITY is to not suffer a loss, or much of one with QQQ hedge, and will eyeball account status between the two for trader to then establish a "comfort" stop in the QQQ.

  Ray Cummins   7/14/200,  11:43:07 AM
Spreads/Combos & Premium-Selling -- Portfolio Activity

The market is off to another great start this week with stocks up in almost every major sector. Bank of America (NYSE:BAC) was one of the primary catalysts for the bullish activity and the upside momentum in the issue boosted the potential profit in our recent debit straddle to over 100% on an initial investment of $2.40 per contract. Gilead Sciences (NASDAQ:GILD), which has been a very popular issue in the "Premium-Selling" section, also powered higher, up over 10% as it left biotechnology stocks in its wake. Other big movers in the bullish portion of our portfolio include: Mercury Interactive (NASDAQ:MERQ), Netflix (NASDAQ:NFLX), Omnivision (NASDAQ:OVTI), Novellus (NASDAQ:NVLS), Avocent (NASDAQ:AVCT), Sandisk (NASDAQ:SNDK), Integrated Circuit Systems (NASDAQ:ICST), International Rectifier (NYSE:IRF), Adtran (NASDAQ:ADTN), and Qlogic (NASDAQ:QLGC), among others. Three of the new positions, eBay (NASDAQ:EBAY), Genzyme (NASDAQ:GENZ) and Symantec (NASDAQ:SYMC) are trading sharply higher and that has limited the entry opportunities in each play.

  Linda Piazza   7/14/200,  11:39:31 AM
Swing Trade Signals
I will not be issuing an official signal while volume patterns remain so strong, but those aggressive traders who do not mind taking on a large risk could go short/put the OEX on a fall through 508, targeting 504. Those traders might set a stop at 510.25, and would need to be aware of strong support at 506.

  Linda Piazza   7/14/200,  11:33:59 AM
The OEX 60-minute chart now shows two candles of a potential three-candle reversal signal having been printed: first a larger white candle and then an inverted umbrella--almost a gravestone doji. Since this potential reversal signal formed at resistance, it should be watched, but it's important that we not anticipate the outcome. The current hour's candle is showing a propensity to move up and not fall. To complete the signal, the next hour's candle should be a red candle that falls from the current level.

  Jeff Bailey   7/14/200,  11:23:49 AM
11:00 Update posted at this Link

  Linda Piazza   7/14/200,  11:17:40 AM
Swing Trade Signals
Today's OEX climb leaves the ADX level low, showing the propensity that range-bound trading will continue. +DI has kicked above -DI, but these two lines have intertwined of late, and this isn't a strong cross. It's just something we should watch, indicating that ADX could turn up again and a trend could resume. Daily oscillators have turned back up or made bullish kisses, but the OEX soon faces the June high, the midline of its daily regression channel, and the top Bollinger band, all between 512-513. That's going to be strong resistance, perhaps signaling a need for consolidation or a pullback. As Jim said earlier this morning, however, a push through that resistance could bring on a new wave of buying.

What about support? OEX 509.75-510.10 has been a S/R zone since 10:00 ET this morning. A move below that level would signal that something had changed, but there's support below at 508, 506, and 504. The OEX could stop its descent and stabilize at any of those levels. Volume patterns remain strong, and I could not with any sense of responsibility to readers issue an official short/put signal with support nearby and volume patterns so strong. That doesn't mean that either a long or a short could not be wildly successful today, but risk/reward doesn't seem good enough for me to issue an official signal with equanimity. I'll be watching to see if anything changes, of course.

  Jonathan Levinson   7/14/200,  11:12:54 AM
Put to call ratio rises to .60. VIX +.32 at 21.04, QQV +.84, VXN +.03.

  Linda Piazza   7/14/200,  10:52:45 AM
Total volume as of a few moments ago was 311 million shares traded on the NYSE and 558 million on the Nasdaq. There were zero new lows on those two exchanges! New highs measured 521, among those six of the Dow's 30 components. Adv/dec ratios are 3.4 and 2.83: high but probably sustainable numbers. Up volume is 6.75 times down volume on the NYSE and 12 times down volume on the Nasdaq. That Nasdaq number has moderated from the 16 times down volume seen earlier, but is still very high: too high to tempt me into a short play just yet but, curiously enough, also too high to tempt me into a long play with blow-off type volume.

  Jonathan Levinson   7/14/200,  10:42:54 AM
Put to call ratio drops to .57, equity pcr .38.

  Jeff Bailey   7/14/200,  10:39:26 AM
QQQ $32.69 +2.66% ... here's may QQQ chart on 60-minute interval. Link

So many "options" that a trader has here. Expiration is this Friday. Bull in QQQ underlying could sell out the money July $33's here.

SPY bear short 100 shares of SPY could sell 1 SPX 1,000 strike for July too, then do nothing with either QQQ/SPY until Friday perhaps.

  Linda Piazza   7/14/200,  10:37:51 AM
One headline on Marketwatch.com reads "Six Dow Stocks Reach 52-week Highs." That's 6 out of 30. Twenty percent.

  Jeff Bailey   7/14/200,  10:30:13 AM
QQQ $32.69 +2.54% .... has exceeded bullish trade target of $32.1 from Thursday's entry at of $31.37.

Per this weekend's Ask the Analyst column, between QQQ long and SPY short (both prior trade profiles), SPY short is about $40.00 underwater at this point.

A trader holding similar QQQ long and SPY short, may look to close out both at this point, if simply monitoring account gain/loss.

I'll show QQQ chart in a minute, but see QQQ upper end of regression and WEEKLY 19.1% retracement of $32.71 crisscrossing resistance at $32.71 here. This tempts me to sell QQQ long, but hold SPY near-term.

  Linda Piazza   7/14/200,  10:24:09 AM
The OEX five-minute chart shows a rising wedge--usually a bearish formation--rather than the bull flags we've usually seen forming off these quick rises of late. This is a divergence from the OEX's pattern last week, but as we've seen since March, bearish rising wedges can break to the upside.

  Linda Piazza   7/14/200,  10:18:58 AM
As of a few minutes ago, Nasdaq up volume was 16 times down volume. That's probably not a sustainable number, indicating blow-off type volume patterns. That doesn't mean that it can't moderate down to more reasonable levels that will continue throughout the rest of the day, but it's one more piece of information that should perhaps be evaluated from a contrarian viewpoint as a sign of danger to bullish plays. It also indicates that there's no way I would want to step in front with a bearish play right now.

  Linda Piazza   7/14/200,  10:11:09 AM
Swing Trade Signals
It's looking as if my original idea this morning of going long on a move over OEX 504 with a first target of 508 and a second of 510 would have been a reasonable estimation of upside targets since the current high has been 509.74. It's too bad that it happened on a gap and there was never a retest of 504. That's just the breaks sometimes. Even if we had entered on the open, those options tend to be expensive right at the market open and we would have faced even more risk than usual. I'm watching now for a shift in volume patterns that would signal that a short/put play would be appropriate, but we must face the possibility that a downturn would be well underway before those volume patterns would shift. If they continue as strong as they are now, we might get that test of 512-513.

  Linda Piazza   7/14/200,  10:05:43 AM
The early volume patterns showed blow-off type up/down volume patterns on the Nasdaq, but not on the NYSE, and adv/dec ratios appeared sustainable on both indices. We're going to have to wait a while to learn more about volume patterns, however, as those early patterns can be distorted. So far, they're showing that it would be dangerous to stop in front of this train with a short.

  Jonathan Levinson   7/14/200,  10:02:32 AM
Opening put to call ratio .66.

  Linda Piazza   7/14/200,  10:01:04 AM
Reader Question: I know that XEO is an European style option, i.e cannot be exercised until expiration. Is the SPX also an European style? Thanks for the info.

Response: I'm glad you're addressing this early this week. Here's a link to the CBOE page showing the specifications for SPX options: Link As this link mentions, SPX options are European-style. Note also that the settlement value is calculated using the opening price in the primary market of each component stock on the last business day (usually a Friday) before the expiration date. While the XEO (whose underlying is the OEX) is also a European style option, its settlement value is calculated using the last closing reported sales price in the primary market of each component stock on the last business day before the expiration date. Big difference. Here's a link to the XEO information: Link

  Jonathan Levinson   7/14/200,  9:55:12 AM
The fed has announced an overnight repo in the amount of 6B, for a net addition of 4.25B against the expiring weekend repo.

  Jonathan Levinson   7/14/200,  9:51:10 AM
Trader talk to the effect that Spitzer will announce investigation into MWD's mutual fund and ipo practices today at noon.

  Linda Piazza   7/14/200,  9:50:31 AM
Swing Trade Signals
I'm ready to trade just like everyone else, but this morning's gap open has made that tough to do. Above 508 is the 512-513 zone that markets the June highs. If the OEX should retrace to 506 satisfactorily and maintain that support, and if volume patterns should remain strong, there might be a possibility for a long play up to 512-513, but everything would have to come together just right for that to happen, and it would be a risky trade, as there's just too much possibility for a rollover here.

What about a short play then? The earliest volume patterns don't yet support that possibility, and I want that confirmation, as a trade over 508 coupled with strong volume patterns most likely points to a try for that 513 level, although the possibility for a pop-and-drop still exists.

  Jeff Bailey   7/14/200,  9:45:10 AM
Sector action broadly positive in early going with Semiconductor (SOX.X) 403 +3.15%, Internet (INX.X) 150.12 +2.56%, KWB Bank Index (BKX.X) 915 +2.42% leading gains.

Fractional weakness in energy with Oil Index (OIX.X) 269.08 -0.17%, Natural Gas (XNG.X) 193.77 -0.3% and Oil Service (OSX.X) 88.53 -0.2%.

  Linda Piazza   7/14/200,  9:37:41 AM
That first five-minute OEX candle was certainly larger than normal. The 50% retracement lies at 506.55, giving us our first benchmark to watch on any pullback.

  Jeff Bailey   7/14/200,  9:36:20 AM
YHOO / OVER both halted on news that Yahoo! (YHOO) $32.90 +2.2% will buy Overture (OVER) 21.51 for $1.63 billion. Under the terms of the agreement, each outstanding common share of Overture will receive 0.6108 shares of Yahoo! common stock and $4.75 in cash

  Linda Piazza   7/14/200,  9:34:42 AM
The OEX butts right up against the descending trendline off the June 17, June 18, and July 9 tops. This morning's open has turned the daily 5(3)3 stochastics back up again and made the RSI upturn more prominent, but it's still early in the day.

  Jeff Bailey   7/14/200,  9:29:20 AM
Geron (GERN) $8.87 ... higher at $9.35 after company announces preclinical data on its telomerase inhibitor anti-cancer drugn GRN163 demonstrated excellent safety and tolerability of daily intravenous dosing in rats for 4 weeks and, in a separate study, in dogs for 7 days, as well as good tolerability of continuous intracranial delivery for the same time periods in both species. GERN also said a series of stability studies also demonstrated that GRN163 has appropriate stability in both powder and liquid formulations.

  Linda Piazza   7/14/200,  9:27:33 AM
Swing Trade Signals
Futures climbed right into their close a few minutes ago. Sometimes markets do not open quite as strongly as the levels the futures indicated, but if they do, that will cause a re-evaluation of our possible trading plan. I am not going to initiate any long play just under Dow 9200 and SPX 1010, as both could provide resistance. Let's look at how the opening progresses. Please feel free to initiate any plays that seem appropriate to your trading style, but it may be that the Swing Trade model lets a good trade or two go past. Readers buy a variety of ITM, ATM, OTM, and front-month and distant-month options, and I must keep all that in mind as I initiate official plays.

  Jonathan Levinson   7/14/200,  9:27:27 AM

  Jeff Bailey   7/14/200,  9:25:35 AM
Merck (MRK) $61.44 .... Dow component upgraded to "sector perform" from "sector underperform" at CIBC on increasing visibility for revenue acceleration following expected spin-off of Medco business unit, with better comparables for Vioxx (arthritis drug) and Singulari (asthma drug). Established target of $64.

  Jeff Bailey   7/14/200,  9:22:38 AM
American Express (AXP) $43.96 ... favorable article in this weekend's Barron's with article noting strength in AXP being somewhat clouded by the weak performance in its financial advisory business being more than offset with strong results from its credit card business producing 2.6% on average in fees per transaction. Article goes on to hint that AXP is poised to shatter its 2000 earnings record with analysts expecting the company to earn $3 billion or $2.2 per share in 2003 and $2.54 per share in 2004. Other notes had the article stating that the credit card litigation with Visa USA and Mastercard Intl. could also provide further upside if they lose a court appeal to bar member banks from issuing competing brands.

  Jeff Bailey   7/14/200,  9:16:23 AM
CIGNA (CI) .... S&P cuts CIGNA's debt to BBB with negative outlook. (see 09:00 AM EST Update).

  Jeff Bailey   7/14/200,  9:15:09 AM
Citigroup (C) ... increases quarterly dividend by 75% to $0.35 per share.

  Jeff Bailey   7/14/200,  9:10:08 AM
09:00 Update posted at this Link

  Linda Piazza   7/14/200,  8:59:13 AM
Swing Trade Signals
Here we are, the Swing Trade model flat, opex week upon us, and earnings season in full force. As you've probably heard by now if you're listening to CNBC, 11 of the Dow's 30 component companies report this week. The economic calendar is full later in the week, too, so that there are multiple opportunities for any swing trade to be swamped. I've been thinking all weekend about how to handle this situation. For those reasons I've listed, I would be leery of initiating any trade that lasts more than a day although our usual Swing Trade model will consist of initiating trades that will likely take days to unfold.

Our choice is to remain flat or daytrade. I will be leaving for a week's vacation beginning Wednesday, but will look carefully at any opportunities for a daytrade that present today or tomorrow. My requirements will be strict. Since the OEX has wide spreads, I will want a target at least four points from the entry and preferably more. I will want volume patterns moving the direction of the trade. Unfortunately, that will probably mean we'll miss any opportunities to enter on a rollover, because volume patterns typically will be positioned opposite the trade direction as a rollover begins.

Here's what I'm watching on the OEX 60-minute chart. At the end of the week, the OEX settled into a triangular trading pattern within an ascending regression channel (hand-drawn, with two possible black midlines). Link A breakout over 503.31 would appear to signal an upside breakout. A drop below 500.50 would appear to signal a downside breakdown. There's known upside resistance at 504, 506, and 508, with 504 and 508 being the strongest of the two. There's known downside support at 500, 498, and 494-496, with 500 and 494-496 being the strongest.

With futures trending strongly upward this morning, it's possible that the OEX will break 504 on the open this morning. I would like to wait for a pullback at 9:50 to see if the 504 support holds. If so, and if our first glimpse of volume patterns shows that volume patterns are positive, I will consider initiating a long/call play with a first target of 508 and a second target of 510. Unfortunately, waiting for this kind of confirmation may mean we'll miss what could be a highly profitable play entirely. So be it. With this kind of iffy trading week, that's going to happen and I'm not going to pull our readers into a pop-and-drop play if I can help doing that. As I mentioned in this weekend's Market Wrap, the daily charts present conflicting evidence, so I don't feel that market direction is necessarily clear.

If the OEX opens above 504, but then hesitates and moves below that level on the first retracement, we'll have to re-evaluate our options.

  Linda Piazza   7/14/200,  7:26:54 AM
Good morning. With the help of a firming U.S. dollar, the Nikkei opened up almost 80 points on Monday morning. It dipped about 50 points in the morning and then climbed through most of the afternoon. After two attempts to achieve 9800, though, the Nikkei fell back toward the close, retaining most of its gains. The Nikkei closed up 120.28 points or 1.25%, at 9755.63. Tech stocks led early gains, with several being the recipients of positive media attention this weekend. Sony benefited from a positive article in Barron's, drawing the attention of other news sources such as Reuters, CNBC, Bloomberg.com, and Marketwatch.com.

The Bank of Japan began a two-day meeting on Monday. Market watchers do not expect any changes in monetary policy to proceed from this meeting, pointing to the better stock market performance. In another sign of improvement, Japanese corporate bankruptcies fell 9 percent in the first half of the year, according to research firm Teikoku Databank.

Most other Asian bourses gained, too. The Taiwan Weighted gained 2.10%, and Singapore's Straits Times gained 1.92%. Despite political turmoil, South Korea's Kospi and Hong Kong's Hang Seng gained, 2.27% and 2.13% respectively.

Most European bourses currently trade up, too. Semi-related stocks gained as Citigroup Smith Barney raised European chipmakers from an underweight to marketweight rating and raised price targets for ASML (ASML) and STMicrolectronics (STM). Citigroup Smith Barney also raised ASML's rating to outperform from in-line. Merrill Lynch upgraded Deutsche Telekom to buy from neutral, sending its stock higher, too. Insurers gained. As of this writing, the FTSE 100 trades up 21.80 points or 0.54%, at 4079.90; the CAC trades up 22.55 points or 0.72%, to 3160.82; and the DAX trades up 47.99 points or 1.44%, to 3374.50.

  Jeff Bailey   7/13/200,  10:45:24 PM
Pivot Analysis Matrix for Monday posted at this Link . WEEKLY levels also updated.

  Jim Brown   7/13/200,  5:28:16 PM
Yesterday's Market Monitor has been archived. You may view it and any previous days here: Link

Disclaimer: Stocks discussed in the Market Monitor are for educational purposes only and any analysis is not meant to imply a recommendation for or against that stock. The analysts in this forum as on any other website are prohibited by the SEC from giving any specific advice to ANY individual trader. All information posted is for ALL readers and is not meant to be directed to any individual. Our analysts cannot answer any email questions regarding any specific stock. Please do not ask and please do not take offense if requests are denied.

Results posted in the Market Monitor are hypothetical and OIN does not claim that any reader achieved these exact results. Due to the lag time between research, writing, posting, uploading, reading and execution there will be differences between the actual signal given and the fill achieved by the reader. Fills may be better or worse but in many cases they will be different. The writers will make every effort to give advance notice of intended signals and indicate potential price targets. Your individual results may vary depending on your activity level and aggressiveness. This forum is intended as an education service only. Trading involves risk and should not be attempted by anyone not ready to accept this risk. By acting on any signal in this forum you agree and personally accept this risk.


Market Monitor Archives