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  Jeff Bailey   7/16/200,  4:37:13 PM
Jeff: I just wanted to send you a note, please don't take any offense, but I did short the SPY back on July 1st and your trade entry (no offense) really stunk. Of course, I wouldn't have taken that trade if I didn't share your negative view of the S&P 500 at the time. However... (compliment coming) for the first time in my rather short time trading (about one year) I'm really starting to see how a trader can work himself out of a hole by trading the other side of things. While I have mixed thoughts on being long and short the same time, I think I'm beginning to see how hedge funds may actually operate. I've been trading the QQQ long and even some larger S&P-type stocks from the bullish side, and actually using my SPY short as a bit of an insurance policy. Thanks for all you are doing, but still.... your bearish entry point on the SPX wasn't very good. (smile)

You're onto me! But I've had enough "bad entry points" over the years to have spent and learned how to try and dig myself out of a hole. I "anticipated" further internal weakening in the S&P Bullish %, haven't quite gotten enough weakness at this point.

  Jeff Bailey   7/16/200,  4:11:09 PM
We're rich! We're rich! QQQ ... $32.17 and trying to mark a close above $32.12!

  James Brown   7/16/200,  4:08:36 PM
C.R. Bard - Shares of BCR have slipped from the $70 level and closed below its 50-dma after announcing earnings that were in-line with estimates. While one might suspect the $67.50 level (June 23rd's low) as short-term support a move to the $65 area certainly seems possible as investors sell the news.

  Jonathan Levinson   7/16/200,  4:07:02 PM
Jeff, check out the charts in my Market Wrap tonight. I believe that the heightened lending spread experienced by banks will be more than offset by the pain that same will cause to their borrowers.

  Jim Brown   7/16/200,  3:59:04 PM
Earnings after the bell
This matrix will update as the earnings appear.

AMD est -0.54 actual -0.40 cents - beat
CDWC est +0.52 actual +0.51 cents - missed
ET est +0.14 actual +0.14 cents - raised guidance
ISSX est +0.13 actual +0.12 cents - missed
PXLW est +0.04 actual +0.04 cents - inline
IBM est +0.98 actual +0.98 cents - no economic rebound
AAPL est +0.03 actual +0.05 cents - raised guidance
QLGC est +0.33 actual +0.33 cents - inline
SNDK est +0.30 actual +0.52 cents - $500 million in new stock
BRKT est -0.13 actual -0.06 cents - beat
PGR est +1.21 actual +1.29 cents - beat
ALL est +0.75 actual +0.84 cents -
COF est +1.10 actual +1.23 cents
KFT 55 cents, guided lower
RJF +0.48 cents
SSNC +21 cents, raised guidance

IBM said corporate spending remained weak and they only made the numbers due to cost cutting and acquisitions. They were also helped by currency translation due to the weaker dollar. Not a positive earnings release but not much info out yet. IBM -$2.00 in after hours.

  James Brown   7/16/200,  3:53:18 PM
so, Jeff, are you going to be making an appearance on CNBC's new "Ask the Analyst" spot?

  Jeff Bailey   7/16/200,  3:43:17 PM
03:15 Update posted at this Link

  Jonathan Levinson   7/16/200,  3:13:41 PM
The put to call ratio has dropped to .73. The QQV is down .65 to 29.80, VIX is up .44 to 22.28, and VXN +.19 to 34.14. The TRIN.NQ is 1.2. The indicators reflect the directionless price action at current levels.

  Mark Phillips   7/16/200,  3:10:28 PM
BLL $44.80 (+2.22) Holy Toledo! What happened here? In my earlier post, I mentioned that we were getting the expected rebound from support and that we'd look for a rollover in the $44.00-44.50 area for new entries. That never happened, as BLL blew right throough that expected resistance area and traded up to $45.18 before weakening a bive in the past hour. For those aggressive enough to take it, this rollover from just over $45 could be used as an entry point, but remember we're working with a closing stop at $45. I'd personally like to know the source for today's sharp rise before venturing into new positions. Simple short-covering in a weak overall market shouldn't have been able to propel the stock higher by more than 5% without a significant catalyst.

  Jeff Bailey   7/16/200,  3:07:34 PM
Good comments from CNBC and Bob Pisani on regional banks, along with their lending costs and Treasury bond action.

This is something I was thinking about to myself this morning. Banks borrow from Fed and prior to last couple of weeks, with YIELDS so much lower, banks had very narrow spreads (borrow at 1% bu lend at ???? say 4%). Recent move higher in Treasury YIELD will actually have them still borrowing at 1%, but now they can lend at 5%, thus get a larger sprend.

The million dollar question..... will lending activity be weaker due to the higher cost of borrowing among consumer due to the recent rise in Treasury YIELD?

Any subscribers/traders that are in the banking business and loan origination areas, I'd gladly be willing to read your comments/observations in coming weeks!

You can bey Wall Street analysts are and will be on the phone with their contacts in the near-term.

  Ray Cummins   7/16/200,  3:00:26 PM
Spreads/Combos & Premium-Selling -- E-mail Replies Part III

Finally, don't jump into trades on "spur of the moment" emotions, wait for the proper entry points. Study and identify trends within individual issues before opening a position and once it is in place, use technical support/resistance areas, trend-lines, and moving averages to identify the exit points. If you discover that your losses are consistently larger than your gains, stop trading! Step back, take a break, and maybe a few days off from the market. When you are ready to try again, evaluate your trading plan and the strategies you are using, as well as the previous losses, in order to learn from your mistakes. Then, do the necessary research and follow the plan with your best effort. Above all, don't repeat past failures (very easy to say...incredibly difficult to do). Hope that helps!

  Mark Phillips   7/16/200,  2:57:16 PM
CFC $65.82 (-2.09) Aggressive bears looking for a breakdown in progress just might be able to have some fun with shares of CFC. The stock is obviously not responding well to the sharp increase in bond yields, as selling volume has been heavy the past two days. Completing the bearish picture, the stock is breaking below the $66.50 support level and falling into the late April gap. Taht brings the $62 level (bottom of the gap) into play as a short term target. The primary problem though is the rapid approach of earnings next Tuesday morning. So any play would have to be very quick, likely taking a momentum entry on a break below today's intraday low ($65.25) and getting out ahead of earnings by Monday's close.

  Jeff Bailey   7/16/200,  2:54:33 PM
Altria (MO) $39.67 -1.97% ... just off session low of $39.61, which was "frog's hair" from that $39.59 retracement level.

Thinking... "A bear can short MO till heck freezes over on up-ticks, but he/she really needs a bull to pull the plug and sell for the move lower."

  Ray Cummins   7/16/200,  2:52:52 PM
Spreads/Combos & Premium-Selling -- E-mail Replies Part II

Remember, emotion is the capital killer! Hope, greed and fear all conspire to remove money from your account that you will never see again. What generally happens when a play starts to go bad is the trader says: "If I just hold on...I'll eventually break even!"; "It can't go lower!"; "It's going to come back...it has to!" The reality is...it rarely does. One of the best ways to avoid this trap, especially with spreads and combination plays, is to use a trading plan with pre-determined exits. Stop-loss orders can be initiated to remove "on the spot" decision making from the equation, allowing the position the best opportunity to achieve the target profit while protecting for trend reversals. Also, if you are going to take the time to develop a trading plan, force yourself to stick with it until it proves ineffective.

  James Brown   7/16/200,  2:51:19 PM
Cullen Frost Bankers - Shares of CFR have not been slowed by today's market weakness or rollover in the BKX index. The stock has added some 2.5% and is currently hitting new nine-month highs. The daily chart is showing some potential overhead resistance between $35-$36 but a patient trader might want to look over the weekly chart to plan any potential investments. Watch out for earnings on July 23rd.

  Jeff Bailey   7/16/200,  2:50:55 PM
QQQ $32.07 -0.56% ... battles back and just traded $32.12 after a intra-day higher low at $31.92. Nothing major at this point, but some sign of intra-day stability forming.

Quick check of NASDAQ New high/new low shows 01:00PM 176:2 and 02:00 189:4

NYSE new high/new low shows 01:00 PM 77:12 and 02:00 81:13.

  Ray Cummins   7/16/200,  2:45:28 PM
Spreads/Combos & Premium-Selling -- E-mail Replies

Hi Ray...I'm in the bearish Lockheed-Martin (LMT) spread - a credit of $0.75 - and with the market selling off, defense stocks seem to be recovering. I didn't see anything listed about the play in Sunday's newsletter and I am wondering if I should take a small loss early in the interest of "money management." Your thoughts are much appreciated! JM

First, thanks for your interest in the Spreads/Combos and Premium-Selling sections. I'm glad you are using some of the candidates offered in those portions of the OIN (although this one isn't performing as expected) but one thing I must explain is that Wednesday's group of "Premium-Selling" positions is completely separate from the "Spreads/Combos" section offered on the week-end. As you might expect, the summaries are separate as well and they are updated once each week along with the "New Plays" for each section.

Your assessment that LMT seems to be in a "recovery" mode is fairly accurate by any standard and it appears that the trend may have changed in the near-term. As far as exiting now to limit losses, I can say that one of the most common traits among professional traders is the ability to manage losing positions effectively -- which means correctly and in a timely manner. Obviously, no one can successfully predict the market in every case so the key is to take small profits regularly and prevent losing plays from significantly eroding capital. Losses are bound to happen -- they are inevitable -- but that shouldn't keep a diligent, knowledgeable trader from earning money on a regular basis. The simple fact is, it's very difficult for most people to close out losing plays early and that's what separates the wheat from the chaff. Experienced traders understand there is no reason to hang on to a losing position when there are so many other profitable plays that deserve their time and money.

  Jonathan Levinson   7/16/200,  2:41:46 PM
The put to call ratio has dropped to .76, while the VIX is up .71 to 22.55, the VXN is up .09 to 34.04, and the QQV is down 2.65 to 27.80. It looks like opex antics have begun.

  Jeff Bailey   7/16/200,  2:40:05 PM
Harley Davidson (HDI) $45.75 +4.73% ... stock has really been on the move higher in past four sessions. Up strong again today after RBC Capital Markets upgrades to "outperform" from "sector perform" (is there a motorcycle sector?) based on bullish turn in sentiment following difficult selling season this spring. RBC raising 2003 estimates to $2.35 from 2.26 and 2004 to $2.65 and $2.53. Price target raised to $60 from $48, which is roughly 23-times 2004 estimates. Link

Pnf notes are that trade at $47 would be double-top buy signal, and get a preliminary bullish vertical count of $61.

Dorsey/Wright and Associates classifies HDI as belonging to "Leisure" group (makes sense to me, as a Harley is more of a leisure product) and sector status for Leisure Bullish % (BPLEIS) is "bull confirmed" at 63.5%. It would take a reading of 58% to see a reversal back lower to "bull correction" status. HDI would be one stock in this sector bullish % that still has a "sell signal" associated with chart, but trade back at $47 would have HDI contributing bullishly.

  Jeff Bailey   7/16/200,  2:34:20 PM
Clorox (CLX) $45.04 -0.11% ... off session high of $45.95 and $46 resistance from early June. Announces it is raising quarterly dividend to $0.27 from $0.22 and increasing share repurchase program by additional $700 million.

CLX also said its Board of Direcctors approved an agreement between it and HC Investments that authorizes CLX to repurchase up to $255 million shares from Henkel over the next two years. Link

  Jeff Bailey   7/16/200,  2:17:11 PM
Indexes look like they are setting to test their morning lows here. Seeing some breaks back lower of retracement levels from intra-day charts.

  Jeff Bailey   7/16/200,  2:14:18 PM
Washington Mutual (WM) $41.40 -1.75% .... may have sniffed out a long bull that is a seller of stock from 12:13:23.

Heck, if I was looking to take some profits on 500,000 (just guessing) shares, I'd of probably have been selling some calls and puts too if I sensed few buyers for liquidity.

  Jonathan Levinson   7/16/200,  2:13:02 PM
The put to call ratio drops to .79.

  Jeff Bailey   7/16/200,  2:09:38 PM
Dow Industrials (INDU) 9,068 -0.66% ... here's intra-day chart of INDU and tie in some things from last night's wrap. Also keeping eye on Altria (MO) which might be a leader for weakness. Link

If not for Intel (INTC) $25.35 +5.18%. Dow may be trading WEEKLY S1 today.

  Jeff Bailey   7/16/200,  1:58:24 PM
Altria (MO) $39.75 -1.85% ... I'm holding bearish position from Friday's alert to weakness. Am monitoring intra-day action today. Here's how I have used retracement technique of "conventional" but two retracements. Both attached at March lows, but different highs. I like the way MO has tended to trade these two retracment. Seems to have "two" traders at work. One longer-term and one shorter-term. Link

  Jeff Bailey   7/16/200,  1:45:26 PM
S&P 500 Index (SPX.X) intra-day chart with WEEKLY/MONTHLY retracement. Link

Making note that morning low was DAILY S2. Also see how "old downward" trend looked to be in play early yesterday.

  Jeff Bailey   7/16/200,  1:32:50 PM
QQQ Intra-day chart on 5-minute interval for those that may not have a charting systems where they can monitor the WEEKLY/MONTHLY levels. Link

One question, and a good one at that, I received is why I profile bullish at $32.12 if I think trader wanted to see some type of intra-day consolidation first, and why not profile bullish lower?

I (Jeff Bailey) want to try and "match" some of my comments here with that found in the Index Trader Wrap. How frustrating is it to be a trader, see Jeff look for bullish entry back at a level, and find him say later that he's a buyer lower?

To try and "dodge" this frustration, I try and stick as close to the Index Wrap as possible.

  Mark Phillips   7/16/200,  1:32:16 PM
Relative Strength/Weakness - Lookinbg again at the breadth measures, I can see things haven't changed much since my earlier post on this topic. The ADVDECV indicator on the NYSE is still hitting new lows for the day, despite the slight bounce in price. At the same time, the NASDAQ ADVDECV indicator has produced a feeble bounce off its lows hit just before 11:30am ET, but appears to be rolling over again. In short, the NASDAQ is still the stronger market today, but I'd be hard pressed to find the justification for buying this weakness.

  Jeff Bailey   7/16/200,  1:20:42 PM
01:00 Update posted at this Link

  Jonathan Levinson   7/16/200,  1:09:21 PM
The put to call ratio has dropped to .81. I'm still getting bad data from quote.com for the volatility indices.

  Mark Phillips   7/16/200,  12:59:05 PM
SNDK $49.16 (+0.16) This has been one of the most persistently bullish storage-related stocks in the market in recent months. The stock has been working higher since mid-April in an aggressive ascending channel, nearly tripling in price in the past 3 months. Well, the day of reckoning is at hand for those bulls that have been buying the stock hand over fist. the company is set to report earnings after the closing bell tonight with estimates of 31 cents and a whisper number (yes, they're back) of $0.33.

As with other stocks, I suspect the real catalyst for further price action will be the guidance, and if investors don't like what they hear, there's a lot of potential downside, with the nearest identifiable support (aside from the bottom fo the channel at $45) being the June congestion zone in the $35-39 area. While SNDK is not a major stock with heavy weighting on any major index, I think their earnings release could be important as a litmus test for whether hopes of a second-half recovery are warranted. The stock has been bid sharply higher over the past few months on expectations of improvement -- if the company isn't able to deliver, it could send shock waves through other technology stocks.

  Jeff Bailey   7/16/200,  12:37:35 PM
Intel (INTC) $25.29 +4.89% .... back near morning highs.

QQQ $32.06 -0.65% here.

  Jeff Bailey   7/16/200,  12:34:50 PM
Cyclical Index (CYC.X) 508.65 +0.05% ... slight bid back to green here.

  Jonathan Levinson   7/16/200,  12:28:49 PM
Al Green holds up the possibility of "unconventional" unconventional measures, but in a transparent manner.

  Mark Phillips   7/16/200,  12:22:25 PM
BLL $43.55 (+0.97) Sure enough, yesterday's breakdown in this bearish OI play provided the perfect opportunity for some short profit taking and the stock is bucking the bearish trend in the rest of the market today. As mentioned in last night's update, this rebound was expected and now we're looking for the failure as our next opportunity to initiate new positions, ideally in the $44.00-44.50 area.

  Mark Phillips   7/16/200,  12:19:04 PM
HD $33.38 (+0.21) We're certainly seeing some resilience in this OI Put Play, as the stock continues to hover just above $33 support, but below $34 resistance. This could be just residual strength from last week's upgrade, but what concerns me is that I would expect the weakness in bonds (strength in yields) that has knocked back the shares of the homebuilders to have more of a deleterious effect on shares of HD.

Time will tell and price action is paramount at this point. The first constructive bearish development we will be able to hang our hats on will be a close below $33 -- unless there's some serious deterioration into the close, it doesn't appear we'll see that today.

  Jeff Bailey   7/16/200,  12:19:04 PM
Computer Technology Index (XCI.X) 630.38 +0.05% .... index bids back to slight positive territory. (this catches a QQQ trader's eye)

  Jeff Bailey   7/16/200,  12:15:01 PM
QQQ $32.02 -0.8% .... trying to make a little move here above morning consolidation of $32.00 resistance. First test back higher is $32.12 right now.

  Jeff Bailey   7/16/200,  12:13:23 PM
Washington Mutual (WM) $41.88 -0.61% .... some action in the Aug. $40 call and Aug. $42.50 puts. I'm thinking that there is a buyer in the puts and he/she is selling calls at this point. This gives impression that WM headed for $40.

I'm monitoring WM as it has rather large mortgage lending business and trying to monitor a stock that is still tied to homebuilders, but slightly different business.

Scenario I'm trying to test against is MARKET's thought on how recent higher Treasury YIELD may impact mortgages and business activity there.

  James Brown   7/16/200,  12:13:10 PM
Intuit Inc. - Shares of INTU, a current OI put play are finally starting to see a small pick up in the velocity of its decline. A close under $42.50 would certainly be encouraging.

  Jonathan Levinson   7/16/200,  12:12:14 PM
The put to call ratio has climbed to .84, index pcr 1.52 and equity pcr .63.

  Jeff Bailey   7/16/200,  12:08:06 PM
Sears (S) $38.42 +9.8% ... main driver among retailers today after spinning off credit unit to Citigroup (C) $45.47 -2.9%.

  Jeff Bailey   7/16/200,  12:06:47 PM
S&P Retail Index (RLX.X) 341.01 +0.04% .... slight bid back into green here too.

Sectors in the green are.... Airline +1.59%, Defense +0.56%, Transportation +0.44%, PHLX Housing (has some retailers in it) +0.21%, Retail +0.03%.

  Jeff Bailey   7/16/200,  12:01:54 PM
S&P 500 Index (SPX.X) 991.21 -0.92% ... today's trade at 990 enough to have SPX's PnF chart seeing 3-box reversal back lower.

Traders can perhaps see my "contemplation" with being short/put on that 3-box reversal back higher from 965 to 980, but still seeing resistance below 1,020 hold, or find sellers. Link

If not for the still rather strong internals, I'd be more comfortable short at this point.

Per earlier monring e-mail discussion, you can also put yourself in that trader's bearish shoes of 1,000 and see he is currently better off than me at 980.

  Jonathan Levinson   7/16/200,  11:57:12 AM
Al Green to comment on allegations of currency manipulation by central banks.

  Jeff Bailey   7/16/200,  11:55:36 AM
Gold stocks may be in trouble (bearish) .... Randgold (GOLD) $15.11 -4.3% was "the stock" that gave a sell signal back in June at $16.50, which had Dorsey/Wright's Precious Metals bullish % (BPPREC) reversing back into "bear confirmed" status. I see today that Randgold (GOLD) gives a "confirming" spread-triple bottom sell signal at $15.50 and breaks that upward trend we had been monitoring. Link

  Jeff Bailey   7/16/200,  11:43:19 AM
Dow Transports (TRAN) 2,585 +0.43% .... bid fractions green here. Most likely attributed to airline action.

  Jeff Bailey   7/16/200,  11:42:03 AM
AMR Corp. (AMR) $11.20 +6% ... reverses early losses on earnings. AMR reports Q2 loss of $2.26, which was $0.39 better than consensus. AMR said revenues fell 4.1% year-over-year to $4.32 billion versus $4.35 billion estimate.

  James Brown   7/16/200,  11:40:24 AM
Wellpoint Health Network - WLP was recently highlighted on the OptionInvestor.com watch list. We suspected it was building a head-and-shoulders pattern (H&S) and a breakdown under the neckline would offer bears a clearly defined entry point (Aggressive types could have used the break down under its simple 50-dma, pink line in the chart). The market weakness today has spurred the move through the neckline but we are hesitant to suggest plays because WLP has its earnings report on July 22nd. Aggressive traders can use their best judgment. See chart: Link

  Jeff Bailey   7/16/200,  11:40:13 AM
Airline Index (XAL.X) 55.45 +1.35% ... reversing into positive territory, with strong move in past 10-minutes from session low of 53.86.

  Jeff Bailey   7/16/200,  11:38:05 AM
11:00 Update posted at this Link

  Jonathan Levinson   7/16/200,  11:35:58 AM
The put to call ratio has risen to .78 and the QQV is now down .68, but my volatility quotes have been iffy all day.

  Mark Phillips   7/16/200,  11:19:35 AM
For traders tempted to buy this dip, I'll offer my opinion as possible dissuasion. On an intraday basis, I'm hard-pressed to see why this is a buyable dip. The daily oscillators are clearly rolling bearish and we're witnessing another round of selling the good news and a failure to set new highs on any of the major indices.

Looking at the market internals, there's nothing for the bulls to be cheery about either, as advancing volume continues to be swamped by declining volume. My ADVDECV indeicators for both the NYSE and NASDAQ did start the day slightly in positive territory, but quickly rolled over and have been heading steadily lower throughout the session. Currently, they are both hitting new lows for the session and showing no sign of being ready to turn up. Unless there is a decided turnaround in these indicators later on today, then I would view any price bounce as transitory.

  Jeff Bailey   7/16/200,  11:13:06 AM
SPX 989.52 -1.08% ..... breaks to session low from little "pennant" an looks MONTHLY pivot of 985 here.

  Jeff Bailey   7/16/200,  11:12:14 AM
SPX 992.52 -0.80% .... In recent sessions I discussed the potential selling of a put in the SPX, for July expiration should the SPX decline near current level. Trader that is short/put 980 per my original bearish profile of 980 with longer than July expiration, might consider the selling of an SPX July 985 put (SXBSQ) bid/offer $3.20 x $4.20 here, but work it inbetween, say $4.00 to start with.

MONTHLY Pivot is 984.49 and WEEKLY S1 is 985.75 as support levels into expiration?

If filled at $4.00, then thinking here is... "I'm basically short 980 (spy $98) and selling 985 - $4.00 has be OBLIGATED to buy 981. If SPX settlement above 985, then work cost basis in SPY short $98 higher to $102.

Economic calendar does have tomorrow ... weekly jobless claims, housing starts, building permits, Philly Fed.

  Mark Phillips   7/16/200,  11:07:06 AM
Just to be clear, we don't have anything approaching a technical failure for the SOX just yet, as the index continues to trade within the ascending channel that has been in force since the February low. But I do take it as rather interesting that with the "good" news, the index was unable to solidify or even extend its move over $400. If the weakness persists, look for a decisive break under the midline of the channel (currently $394) to have the potential for a decline near the bottom of the channel ($375) without violating the current uptrend in the sector.

  James Brown   7/16/200,  11:04:10 AM
Nimble short-term investors might have a potential trade in shares of Kronos Inc (KRON). The stock had broken out above $50.00 two weeks ago, rallied to $60.00 and is now seeing some profit taking. The last few days had seen some support at $56.00 but this level has succumbed to minor selling this morning. The stock's MACD is about to rollover and produce a new sell signal while its other oscillators have already rolled. Bears might be looking for a retest of $50.00. Watch out for KRON's upcoming earnings on July 24th.

  Mark Phillips   7/16/200,  11:02:47 AM
After trading over the critical $400 resistance level at some point during 5 of the past 6 sessions, the Semiconductor index (SOX.X) is seeing some definite weakness today, now off by 1.60%. Traders will note that this is right after what many would call a solid earnings report from chip giant INTC last night. More than anything, I think today's weakness is confirming the validity of those who have been referring to the current market as "priced to perfection". INTC didn't deliver perfection last night and investors are selling the stock in response. As Jim pointed out last night in the Wrap, this is the sort of trading pattern we can look for to be repeated on numerous occasions, as investors sell stocks when earnings don't meet all the fantasy growth prospects that have been already factored into the price.

  Jeff Bailey   7/16/200,  10:56:57 AM
QQQ $31.88 -1.14% ... after rather sharper drop from $32.12 (WEEKLY 38.2% retracement), QQQ has been trading sideway for 30-minutes, just above its WEEKLY pivot of $31.77. Per 10:13:17 comment, this is better type of consolidation to look for bullish trade than $32.12 setup was.

  James Brown   7/16/200,  10:55:13 AM
GD - The stock has dropped quite a bit in just the last 15 minutes.

  Mark Phillips   7/16/200,  10:51:55 AM
Interesting you should mention GD, James. I was just looking at it on the heels of the company's earnings report. What caught my attention though was not so much the extend of the early rise as the point it reversed to after the first hour of trade. That reversal down to $76 brought the stock down to $76, which is exactly the level of an old descending trendline from september of last year. Linda often mentions the value of leaving old chart studies in place due to the fact that frequently come into play much later, and this would be one glaring example that bears her point out.

  James Brown   7/16/200,  10:51:17 AM
Just an observation but today's candle on J.P.Morgan - JPM is currently shaping up to be a bearish engulfing pattern. It's way too premature to consider this a reversal but could be a stock to watch.

Coincidentally, the BKX banking index, which had broken out above the 900 level three days ago is now back under 900. This time previous resistance did not act as support. Watch the simple 30 & 50-dma's for support on the BKX.

  Jeff Bailey   7/16/200,  10:51:02 AM
Dow Industrials (INDU) 9,059 -0.75% .... has broken below our "overlapping" support between WEEKLY and MONTHLY retracement of 9,063 in this morning's early trade. Dow showed first drop in early part finding some support, and little "undercut" here. As I type, Dow 9,063 right here and building little "triangle" on 5-minute bars.

DAILY range looks defined between WEEKLY pivot of 9,125 and WEEKLY S1 of 8,990 here.

SPX 992.26 -0.81% ... 5-minute chart almost "identical" looking intra-day. See how SPX hovers, builds triangle right at its WEEKLY 61.8% retracement? Computers in control here and traders like you and I just trading the levels. Think here is if short/put the open and you're a short-term trader, you may be locking in some gains with INDU/SPX observation on intra-day basis.

  Jonathan Levinson   7/16/200,  10:48:06 AM
CBOE put to call ratio rises to .70.

  James Brown   7/16/200,  10:44:56 AM
General Dynamics - Shares of GD are trading higher by nearly 3% after a strong earnings report. The company announced $1.22 per share, beating estimates of just $1.17. The stock has broken out above its short-term trend of lower highs and its MACD is about to produce a bullish buy signal. While the stock "should" have resistance at $78, it wouldn't take much (more short covering) to drive shares to the $80 level where it truly has plenty of congestion from the 2nd half of 2002.

  Jeff Bailey   7/16/200,  10:39:49 AM
Fed Chairman Greenspan begins question/answer session.

SPX = 993, OEX = 500.5, INDU = 9,068, NDX = 1,283, QQQ = $31.89 , $TNX.X = 3.942%

  Jeff Bailey   7/16/200,  10:34:56 AM
Homebuilders have DJUSHB 426.70 -1.74% and $HGX.X 278.40 -0.9% lower.

Ryland Homes (RYL) $74.50 -2.6% .... I (Jeff Bailey) with bearish position in RYL and CTX am going to close out bearish in RYL at this point after seeing new 52-week high yesterday and recent week's more bullish trade from this homebuilder than I've seen in others like CTX. Right now, I don't think I need two bearish homebuilder positions, at least not a relative strength/stronger stock like RYL.

  Jeff Bailey   7/16/200,  10:30:34 AM
Sector action broadly lower at this point. Defense Index (DFX.X) 165.44 +0.27% only sector I see with gain.

Losers are Networking (NWX.X) 185 -3.26% (it was early weakness), HMO Index (HMO.X) 716.64 -2.36%, Semiconductor (SOX.X) 393 -2.07%, Internet (INX.X) 146.21 -2.1%

  Jeff Bailey   7/16/200,  10:26:50 AM
Good update from James (see 10:24:45) .... foreign markets were somewhat mixed, especially Europe ahead of U.S. market open. Here too the impression that Intel's news was taken more "stock specific" and not broader thinking that every company out there seeing same type of results.

  James Brown   7/16/200,  10:24:45 AM
Major European Indices

British FTSE 100, -17.40 to 4084
German DAX, -16.04 to 3368
French CAC 40, -22.85 to 3156

  Jeff Bailey   7/16/200,  10:23:30 AM
Morning's economic data .... while I'm not an economist, my general view of data released is positive. Only negative I saw, which we discussed in an Index Trader Wrap last week regarding PPI and then CPI data, was that the PPI was higher than CPI, and gives me the impression that comanies are not willing/able to pass along the higher prices from PPI to consumers at this point.

This slight PPI and CPI negative spread can pressure earnings.

  James Brown   7/16/200,  10:21:07 AM
Photon Dynamics - PHTN - missed earnings last night by 2 cents despite a 20% increase in revenues. The bigger issue was the company's guidance for Q4, which is lower than consensus estimates. There have been dueling brokerage calls on the stock pointing both ways. Currently, sellers are in the driver's seat. The stock gapped down, falling through the bottom of its rising channel and is desperately clutching at its simple 50-dma for support.

  Jeff Bailey   7/16/200,  10:21:03 AM
S&P 500 Index (SPX.X) 994.20 -0.62% ... session low here and right at DAILY S1. Below WEEKLY pivot is noted by QQQ trader, as QQQ WEEKLY pivot lowe at $31.76, so if long QQQ $32.12, knows there may be some near-term heat to be taking.

Yesterday, QQQ found buyers at DAILY S1, and SPX short-term trader maybe alert to that observation here.

  Mark Phillips   7/16/200,  10:17:42 AM
BEAS $13.25 (+1.17) This is a little software stock I've been following for the past couople months, as the daily price pattern has looked rather intriguing. It hasn't been able to gain much traction, but has been coiling up since early March, posting a continuing series of slightly higher lows, while finding consistent resistance just above $12. That picture changed this morning with the stock being added to the Merrill Lynch Focus 1 List and getting a Buy rating. That gave the bulls just what they were waiting for, as the stock gapped up above the $13 level, and has already traded over its average daily volume.

The PnF chart provides a likely explanation for the heavy volume this early in the day, as the stock gave a new Buy signal for the first time since April, after yet another rebound from the bullish support line. Doing a quick vertical count, BEAS looks like it could target $17.50, but will have to first clear $14 resistance (January high) and then additional resistance near $16. But for now, Merrill's $15 target certainly seems reasonable.

  Jeff Bailey   7/16/200,  10:15:14 AM
S&P Banks (BIX.X) 309.08 -0.7% .... loks to test "first support" at DAILY S1/WEEKLY Pivot (308.96-308.80) here.

Washington Mutual (WM) $42.05 -0.09% ... backfills its "gap higher" from yesterday's close here as BIX.X comes into first support.

  James Brown   7/16/200,  10:14:03 AM
Current Sector Losers

NWX, networking index -2.40%
GHA, Hardware index -1.34%
SOX, semiconductors -1.41%
INX, Internet index -1.23%
XBD, broker/dealers -1.40%
BTK, biotech index -1.71%

  Jeff Bailey   7/16/200,  10:13:17 AM
QQQ $32.12 ... will stick with bullish profile for QQQ $32.12 here. You traders in the market monitor may simply monitor things, look for firming, and perhaps wait to see some stability.

QQQ long $32.12, stop $31.45, target $33.20

  James Brown   7/16/200,  10:11:51 AM
Current Sector Winners

DDX, disk drive index +0.26%
DFI, defense index +0.71%
RLX, retail index +0.21%
OIX, oil index +0.01%
TRAN, transports +0.10%

  Jeff Bailey   7/16/200,  10:10:16 AM
Dow Industrials (INDU) 9,117 -0.13% ... session high of 9,153 didn't get close to the 9,185 "zone of resistance" and current trade is right at Dow's base trend of regression.

Can perhaps "tie" QQQ here at $32.19, just above WEEKLY pivot retracement 38.2% of $32.12 at this point.

I would stress, partial positions ONLY in QQQ bullish of $32.12, which certainly looks to be traded soon.

  Jeff Bailey   7/16/200,  10:06:31 AM
Washington Mutual (WM) $42.51 +0.83% ... reported earnings last night that beat by a penny. I saw some "crazy" after-hours trades as high as $44.90 and quite a few above $43.50. That action gives me the impression there were some short-term bears in the stock, "panicked" and willing to buy at any price.

Sometimes it is not a good idea to "chase" things in after-hours as it is not really considered a "true" market. Especially tougher on NYSE listed stocks where you may only have a couple ECN's around on the Pacific hanging around after the close.

  Jonathan Levinson   7/16/200,  10:03:45 AM
The opening CBOE put to call ratio is .64.

  Jeff Bailey   7/16/200,  10:00:46 AM
30-year YIELD .... have seen reversal in early going from selling to fractional buying here. YIELD jumped to 5.023% at session high (caused by selling), now YIELD fractionally lower on session at 4.918%. I would think 5.0% is a "psychological" YIELD where some money would find this bond more attractive near-term.

  Mark Phillips   7/16/200,  9:59:08 AM
AMGN $70.97 (-0.57) The past few weeks have seen a very impressive bullish performance from shares of AMGN, as the stock has handily outperformed even the strong Biotechnology index (BTK.X). In a rare example of cooperation, the stock traded our target of $72 (also the PnF bullish price target) yesterday and we happily dropped the play for a nice gain. Incidentally, AMGN has also been a bullish play in the LEAPS Portfolio for the past couple months and we were using the same $72 target. It should be clear from recent commentary and yesterday's price action, but just to remove the possibility of confusion, we also dropped the LEAPS play on AMGN as of yesterday's close.

  Jeff Bailey   7/16/200,  9:58:26 AM
QQQ $32.24 -0.03% ... did tick at $32.12, but looked to be a cross of 50,000 at that level. I don't think any "retail" traders got a piece of that.

  Jonathan Levinson   7/16/200,  9:58:25 AM
3B repo drain from the Fed, with a 6B overnight repo against 9B expiring.

  Jeff Bailey   7/16/200,  9:53:45 AM
Intel (INTC) $25.17 +4.5% .... action here gives hint early that last night's earnings were very "Intel specific" and not necessarily being taken as broader industry type of turnaround. I think today's action speaks highly of Intel's execution and management.

Advanced Micro (AMD) $7.20 -1.09% is INTC's "rival" and as I've discussed over the years, walks in INTC's shadow.

Ability for INTC to see gains in gross margin gives certain hint that INTC processors more favored among consumer than AMD's.

  Jeff Bailey   7/16/200,  9:51:11 AM
S&P 500 Index (SPX.X) 1,000.95 +0.05% ... session high has been 1,003.47, so "bear is safe with stop 1,006" at this point.

S&P Banks Index (BIX.X) 310.95 -0.08% fractions red, with session high of 312.04 finding sellers at DAILY Pivot of 312.37, which was my first level of Pivot Matrix resistance from last night's Index Wrap. So far... me thinks somewhat bearish tone early.

  Jeff Bailey   7/16/200,  9:46:53 AM
A little "pump and dump" in the QQQ as discussed in last night's Index Trader Wrap. Session low $32.23 and QQQ $32.33 here.

Profiling bullish trade in QQQ here, but looking for $32.12 entry point. I don't necessarily like the NWX.X 188.14 -1.88% weakness at this point. CSCO $18.53 +0.09%.

  Jeff Bailey   7/16/200,  9:37:42 AM
Networking Index (NWX.X) 189.62 -1.12% ... sector weakness in early going. Intel made comments in earnings that its communications chip business continued to struggle.

  Jeff Bailey   7/16/200,  9:34:30 AM
Index Trader Wrap question .... Hi Jeff,

After reading your index trader wrap I was trying to determine what the significance of 1006 is that would have you pull the plug on your bearish SPX trade? I too am short at 1000.

Hope all is going well,

Good question and glad it was asked. I think your short/put at 1,000 is better than me at 980. I advised stop at 1,006 based on profile from July 1 at SPX 980 and this 1,006 level was derived from MONTHLY R1 of 1,005.35, based on near-term current risk assessment to WEEKLY R1 of 1,010.48.

  Jonathan Levinson   7/16/200,  9:16:50 AM
June industrial production up 0.1%, which was inline with forecast and compares to May's 0.1% gain.

  Jeff Bailey   7/16/200,  9:13:02 AM
09:00 Update posted at this Link

  Jonathan Levinson   7/16/200,  9:01:06 AM
The drop in business inventories was the first since April 2002.

  Jonathan Levinson   7/16/200,  8:32:56 AM
CPI rose 0.2 percent in June, while the core rate remained unchanged. CPI met expectations, core rate disappointed by .1%.

  Jonathan Levinson   7/16/200,  8:29:32 AM
Treasury yields are jumping again, FVX +9.1 bps, TNX +13 bps and TYX +10.6.

  Jim Brown   7/15/200,  10:09:54 PM
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