Option Investor
Printer friendly version
  Jeff Bailey   7/30/200,  3:49:43 PM
Cigna (CI) $45.35 +8.5% .... extends earlier gains to session high as Smith Barney upgrades to "in line" from "underperform" and raises bullish target to $55 from $38 (I'm thinking $38 might have been their bearish target) as Smith Barney now expects a quick sale of its pension business and thinks management can now focus on its core healthcare business. Smith Barney also thinks stock may benefit from potential takeover speculation from another healthcare provider as move to spin off its pension business throws the company into play.

I'm also noting that Bank of America made negative comment on July 14th, and cut its target to $40 (close to Smith Barney's $38) from $50. Might expect, or look for Bank of America to make an adjustment in the next couple of days.

  Linda Piazza   7/30/200,  3:45:09 PM
I agree with Jim's 15:40 post about grammatical errors in the Monitor. In my other life, I'm a novelist and I have the luxury of editing my books multiple times before they go to press. My editors comment frequently on how little editing my work requires, and then I'm humiliated to find myself making errors in the Monitor that I would never make in my fiction. It's a function of thinking of ten things at once that must be communicated at once, and getting it typed and uploaded as soon as possible. With that said, if I'm not communicating clearly, I want to know.

  Linda Piazza   7/30/200,  3:41:27 PM
I am afraid that we're in for choppy and range-bound trading for the rest of the summer, although I certainly hope that's not what we see. With the VIX as low as it is, we couldn't even rake in much money from premium-selling plays under those kinds of conditions.

  Jane Fox   7/30/200,  3:38:17 PM
Linda I don't think your prediction is out of line. I truly believe we are in for a really slow August which hopefully will pick up after Labor Day.

  Linda Piazza   7/30/200,  3:30:36 PM
Do you think that if I made an absolute prediction that the OEX would trade between 493 and 504 all summer that it would immediately begin moving, in the way of the great humiliator? I'd be willing to go out on a limb if anyone thought it would work.

  Linda Piazza   7/30/200,  3:27:35 PM
For reference tomorrow, the European markets closed as follows: The FTSE closed up 4.20 points or 0.10%, at 4141.20. The FTSE tried once to rise above 4160 but failed and then sank as the U.S. markets opened. The CAC 40 performed the best of the three European markets I usually cover, climbing 30.12 points or 0.96%, to 3172.51. Like the FTSE, the DAX closed flat, up 0.91 points or 0.03%, at 3429.03.

  Jonathan Levinson   7/30/200,  3:27:26 PM
Hilarious imagery in the 3:15 Update, Jeff!

  Jeff Bailey   7/30/200,  3:26:04 PM
03:15 Update posted at this Link

  Jonathan Levinson   7/30/200,  3:15:29 PM
Put to call ratio .74, VIX +.51 to 20.74. Treasuries closed off their highs, FVX -7.8 bps, TNX -8.3 and TYX -6.5 bps.

  Linda Piazza   7/30/200,  3:08:07 PM
I'm not sure if anyone has mentioned it already, but the SOX today approaches an ascending trendline that's been in place since mid-February. It looks as if a fall below 378 would violate the rising trendline, but a safer measure may be to watch the rising 50-dma, now at 376.77, since different hands can draw different trendlines. Currently, the SOX is 381.51.

  Linda Piazza   7/30/200,  3:04:18 PM
We now have bearish kisses on both the 5(3)3 and 21(3)3 daily OEX stochastics, with a 12.53 ADX value telling us that the market is range bound and that we can trust the stochastics. I don't, although I do like stochastics. Right now, MACD is flat and RSI continues to oscillate around the 50 value, so I'm not expected too much to come of those bearish kisses, at least not until I see further confirmation. I'm still watching price action. I'm particularly watching the candlestick formations on the daily chart. They still point toward a test of downside support before an upside breakout, but the OEX has resisted falling through key support levels.

  Linda Piazza   7/30/200,  2:53:15 PM
Currently adv/dec ratios are a mildly bearish .83 for the NYSE and a more bearish .67 for the Nasdaq. Down volume is 1.4 times up volume on the NYSE and 1.8 times up volume on the Nasdaq. As of a few minutes ago, total volume was 906 million on the NYSE and 1.1 billion on the Nasdaq. Does it seem to anyone else that the NYSE and Nasdaq stocks are taking turns over the last couple of weeks, with one showing weaker volume patterns one day and the other one on another day? No wonder the S&P's remain mired in their congestion zones, with the NYSE and Nasdaq seeming to work against each other.

  Jonathan Levinson   7/30/200,  2:51:23 PM
Thanks, Jeff, much appreciated. I had just finished writing this paragraph for tonight's market wrap:

The inability of the report to spark more that a fleeting bid no doubt owes itself to the more negative "hard" data we've been following, including initial and continuing jobless claims, the current account deficit, the CPI and the PPI. Statements like "inflation remains tame" and "consumer spending is lackluster" did nothing to rally bonds, contrary to what one might otherwise expect. The markets all but ignored the Beige Book, but what I find to be most interesting is its reflection of the Fed's perception of current and ongoing economic conditions. The full report can be accessed at Link.

  Jeff Bailey   7/30/200,  2:47:31 PM
Per Jonathan's 14:43:53 .... bond traders were shouting all day yesterday that they only look at "hard data" these days. Beige Book is just anecdotal. (I say this with sarcasm, and not at Jonathan)

Reason for sudden change to "hard data?" Bond bulls probably a little upset after Fed Chairman Greenspan hinted the Fed might buy back longer-dated maturities, then didn't do it. I'd say Mr. Greenspan's comments were not based on any "hard data." So... fool me once, shame on you. Fool me twice, then shame on me.

  Jonathan Levinson   7/30/200,  2:40:13 PM
The put to call ratio rises to .71, VIX +.53.

  Linda Piazza   7/30/200,  2:29:21 PM
I feel as if I've been typing the same numbers over and over for weeks. 498.65. 465.50. 493. 491. Oh, wait. I have been typing the same ones for weeks.

  Linda Piazza   7/30/200,  2:18:40 PM
The OEX again tests 496.50 support. Perhaps this time it will break? Those who entered short/put yesterday on a break of 498 sure hope so. If this level breaks, watch the 50-dma at 494.56 for possible strong support.

  Jeff Bailey   7/30/200,  2:17:01 PM
Intl. Business Machines (IBM) $80.95 -1.03% ... downsider alert here at $81. Looks good for partial bearish here. Link

  Jeff Bailey   7/30/200,  2:14:58 PM
Dow Jones Home Construction (DJUSHB) 425.72 +1.11% .... all sector components (CTX, KBH, NVR, PHM, MDC, TOL, DHI) show even gains of approx. 1%.

CMH -0.47%, LEN -0.05%. CHB +8.3%.

  Jeff Bailey   7/30/200,  2:10:20 PM
Treasuries steady and little response. Maybe there is a difference between "hard data," which the Fed Beige Book is not. Here's the Link to the report, also in Jim's post, and no hard data to be found, but good commentary from Federal Reserve officials.

  Mark Phillips   7/30/200,  2:06:02 PM
After watching the first hour of trade this morning, I came to the conclusion that rangebound chop would be the primary theme for the day, at least up until the Beige Book release this afternoon and spent the past 3 hours away from the screens to avoid the mind-numbing "action". It looks like that was a good move too, as very little has changed in the broad market since then, with the DOW still trolling around the 9200 area and the SPX bouncing in the 986-990 area. Despite this lack of action, there are a couple of notable developments on the OI Play list in the past few hours.

HD $30.70 (-0.87) We've been waiting for the $31 support level to finally crack and it did so on a surge of selling volume near 11:30 am ET. After a brief bounce attempt from the $30.80 level, the stock once again appears to be rolling over and is breaking to new lows for the day. Look for the $30 level to be tested before the week is out, and conservative traders will still want to consider harvesting gains near that level in anticipation of a short-term bounce. Stops may now safely be lowered to $32.50.

LEH $64.48 (+1.52) On the other end of the spectrum, our bearish play on LEH is getting the oversold rebound we've been expecting over the past week, and shot through recent resistance, the descending trendline and the 10-dma to trade as high as $65.09 just over an hour ago. That push through $64.50 should have triggered stops on the way up, and even though the stock is dropping back under that level as I type, the play is looking like a drop tonight. The rebound is interesting in that it comes on a complete lack of strength in the XBD index, which it has been underperforming for several weeks now. While this may be just an oversold rebound, we want to err on the side of caution in case the $63 level does end up being the turning point due to that 50% retracement of the March-June rally. Unless LEH falls back under the 10-dma by the close, we'll be dropping the play tonight.

  Jeff Bailey   7/30/200,  2:05:39 PM
Beige Book Jim reported in Futures, but not Option Monitor. To repeat Jim... Economy increased a notch, 8 of 12 districts see small increase. No drop since previous beige book.

  Linda Piazza   7/30/200,  2:03:46 PM
Those starlings just took off from the telephone line (see my previous post). I notice that today's 1:45 push was delayed until after the release of the Beige Book. Let's see if resistance holds.

  Linda Piazza   7/30/200,  2:01:34 PM
My OEX five-minute chart looks like a flock of starlings lined up on a telephone line, with five-minute candles lined up on yet another trendline, this one the extended neckline of a reverse malformed H&S from Friday.

  Jeff Bailey   7/30/200,  1:56:35 PM
eBay (EBAY) $108.23 +0.08% ... A reader talked yesterday about playing a call into the split on Ebay. As I remember this did not work on Msft. Do you have an opinion as Ebay continues to drop.

Let's look at eBay on its current scale first. I see a good level of support at $104.00 on the PnF chart Link , which would equate to $52 on a post-split basis.

OK... let's take a look at what eBay might look like with 2:1 spit payable August 28th to stockholders of record on August 4th. (remember, the record date is more important if you are an investor that holds stock certificates only. If you were to hold eBay certificates prior to Aug. 4th, then you should have your new/additional certificates by August 28th split.) Here's a chart of EBAY on a post split basis. Link

Now... $116 is going to be thought of as $58 and current trade near $108 is $54 and support from the current scale was identified at $104, which would be lower end of the bollinger band at this point. You can see that on a post-split basis, it becomes very difficult to establish a decent risk reward profile at this point.

Is/was there something present and unfavorable in MSFT technicals before its split that might help? I will investigate and see if there was. Need to do some work there.

Will also make a note of short interest on eBay Link as I'm not sure if NASDAQ will adjust historical for the split. June 13th was 18.1 million, July 15th was 20.4 million, with respective days to cover of 2.56 and 3.02.

  Jonathan Levinson   7/30/200,  1:47:11 PM
The put to call ratio is up to .66, VIX +.55 to 20.78.

  Linda Piazza   7/30/200,  1:11:46 PM
The TRAN is dropping back toward 2600 today, retesting that S/R level. It's also getting turned back at an ascending trendline that I've had marked on my charts since early October. That's significant because the TRAN tends to lead its sister index, the DJI. The TRAN recently made new highs and the DJI should follow soon or there's divergence. If the TRAN instead declines, that perhaps shows underlying weakness. Link

  Jonathan Levinson   7/30/200,  1:07:38 PM
The put to call ratio is .64,VIX +.49 at 20.72, QQV +.83.

  Jeff Bailey   7/30/200,  12:54:01 PM
Aetna (AET) $69.31 +1.19% ... was scheduled to report earnings after the bell. Comes early and intra-day with headline number of $1.28 per share, which is well above consensus of $1.02. Link

Hey, that was a bullish triangle at $65. Hey... AET is a component of the HMO Index (HMO.X).

  Jeff Bailey   7/30/200,  12:47:52 PM
HMO Index (HMO.X) 800.37 +0.95% .... trying to make a move above psychological 800.00 today (bullish vertical count is 1,035 on 5-point box) and yet another all-time high. Today's driver? It comes from the bottom in Cigna (NYSE:CIG) $44.05 +5.38% Link which has been big underperformer in group. Bloomberg reports Cigna has hired Goldman Sachs to arrange the sale of it pension business for as much as $2 billion. The news comes after Cigna has seen two credit-rating cuts in the last 9 months.

  Linda Piazza   7/30/200,  12:33:10 PM
It's reassuring to read other Monitor posts--Jim's and Jonathan's--and find that I'm not the only one seeing those EKG prints, as Jim calls them, and thinking that sitting out might be the best idea. I know the object of making Swing Trade calls is to make them, but in the environment this week, I've decided that cash is the best position for us to take on an official basis. I keep thinking that I should be able to find a viable play, but I can't.

  Jeff Bailey   7/30/200,  12:29:46 PM
90-minutes until Fed Beige Book is scheduled to be released at 02:00 PM EST.

Benchmark .... INDU = 9,207, SPX = 990, OEX = 498, NDX = 1,268, QQQ = $31.55 $TNX.X=4.287%

  Jonathan Levinson   7/30/200,  12:26:02 PM
No kidding, Linda. I've been infuriated lately by the number of false signals and stop runs I've been seeing. Almost better to avoid the melody and play harmony, to use a jazz analogy. The straight setups have begun to look like traps to me.

  Linda Piazza   7/30/200,  12:24:40 PM
The OEX currently retests the violated ascending trendline built from the rising lows since Friday morning. It may be breaking back above it. Remember when a violation of a trendline or formation could be trusted? I dimly remember those days.

  Jeff Bailey   7/30/200,  12:19:58 PM
General Motors (GM) $37.04 +0.32% .... the fundamental side of me began thinking last night. Unless a consumer has had their head in the sand in recent weeks and not seen the sharp rise in YIELDS and consumer interest rates, I'm wondering if "0% financing" still available from the automakers is the last chance opportunity for consumers to take advantage of the offer. Think about the consumer, looking to buy a new auto that didn't take advantage of refinancing several weeks ago. He/she is upset and thinking the "bottom" got away. Then think about the "smart" refinancer that did refinance, has seen some of his/her good fortune and might be looking for a new auto. Is 0% refinancing about to go poof? If so, might spur a "surge" in demand. Link

A tempting LEAPS play in my opinion. Look at those 200-day SMA, 50-day SMA and 21-day SMA all around $36. Link

  Linda Piazza   7/30/200,  12:09:51 PM
Doing a scan of 30-minute, 60-minute, and daily OEX charts, I still see scrambled or inconclusive indicators, particularly on the 30-minute chart. Price always has to be our ultimate arbiter, and that's even more important when oscillators don't give conclusive evidence.

  Jeff Bailey   7/30/200,  11:59:18 AM
Monster Worldwide (MNST) $24.34 -1.6% .... today's trade at $24 has MNST's Pnf chart showing 3-box reversal Link and this now has the bullish vertical count column in place ($18.50 to $27) at $45.50. For further bullishness, looking for 3-box reversal back up and trade at $28 to give "catapult" type action for move higher. Reaction to tomorrow's weekly jobless claims will be monitored closely.

Stock has been an outperformer in the NASDAQ-100 since April and relative strength chart still reading "buy and column of X" Link

Disclosure: I continue to hold SPECULATIVE and partial position in the MNST Sep. $25 calls.

  Linda Piazza   7/30/200,  11:58:31 AM
The OEX hasn't been able to move back above the ascending trendline off the rising lows since Friday. It has not yet dropped beneath the ascending trendline off the rising lows since July 1, however.

  Jeff Bailey   7/30/200,  11:41:58 AM
International Business Machines (IBM) 81.14 -0.8% .... Not unlike SUNW, IBM breaking below a rising 200-day SMA today. A trade at $81 is further sign of weakness as this would have IBM breaking below bullish support trend on PnF chart Link and generating a double-bottom sell signal, which would have preliminary bearish vertical count of $74. As noted in June at $84, when stock broke a double bottom at $84, relative strength on IBM has been weak and it hasn't improved since. Here's RS chart of IBM vs. SPX Link and would read "sell signal and column of O"

  Jonathan Levinson   7/30/200,  11:39:12 AM
The put to call ratio is steady at .69, VIX +.78, VXN +.98 and QQV +1.47.

  Linda Piazza   7/30/200,  11:36:29 AM
My OEX intraday chart looks as if someone dumped a can of Pick-Up sticks over it. Still, there's another trendline that the OEX will soon touch, and it, too, may be important. It's one version (the "best fit" one) of a rising trendline off the July 1 low, and the OEX would touch it at about 495.90. The OEX has spiked below this line several times this month, most notably on July 25, but then moved above it again, so don't take a momentary violation of this trendline as definitive evidence, but still this bears watching. It's also a possible bounce point, so those short/put the OEX should be watchful as this trendline is approached.

  Jeff Bailey   7/30/200,  11:34:50 AM
11:00 Update posted at this Link

  Linda Piazza   7/30/200,  11:30:00 AM
Those who elected to enter an unofficial short/put position when the OEX dropped below 498 next want to see the 496.50 support broken.

  Linda Piazza   7/30/200,  11:16:05 AM
Volume patterns still show more decliners than advancers on both the NYSE and the Nasdaq, although the difference is minimal on the NYSE. Down volume leads on both exchanges, too, although the difference is minimal on the NYSE, too. Total volume as of a few minutes ago was 345 million on the NYSE and 517 million on the Nasdaq.

  Linda Piazza   7/30/200,  10:47:51 AM
Several of the 60-minute OEX indicators have flattened, including MACD, RSI, and the 21(3)3 stochastics. No clues here.

  Linda Piazza   7/30/200,  10:40:44 AM
So much for the short-term move below that trendline from my 10:16 post. We have chop and more chop.

  Jeff Bailey   7/30/200,  10:39:52 AM
Sun Microsystems (SUNW) $3.71 -3.5% .... most actively traded on the NASDAQ at 25.8 million shares. Edging below its 200-day SMA and upward trend on bar chart if taken from the October low with attachment to March 12, 2003 low of $3.07.

If I "cheat" trend further, still anchor at October low, but attach to the April 17th low of $31.14, then this trend might offer support at $3.59. Still... SUNW looking rather sick and breaking down.

Conventional retracement from October low to recent highs has 50% at $3.97 and 61.8% at $3.59. This makes $3.59 a rather important level of support for SUNW.

  Linda Piazza   7/30/200,  10:36:49 AM
The OEX returns to test that trendline I mentioned in my 10:16 post, and this time has moved below it, at least on an interim basis. There's been one five-minute close just barely below it.

  Jonathan Levinson   7/30/200,  10:35:16 AM
The put to call ratio has bounced smartly to .69, VIX +.53 to 20.76, QQV +.88 at 26.29.

  Jeff Bailey   7/30/200,  10:22:18 AM
Question regarding 09:56:28 on Gold ... does "...has the bullish vertical count column now completed to $418" mean that is the projected price?

you also said we are in bear correction? if we are in an uptrend isn't it bull correction?

sorry for all the questions.

Yes.... the $418 becomes a trader's longer-term price objective (not just December), by which you might assess risk to the downside, which could have you using the first place the contract would generate a sell signal, which is 342 right now.

Yes... the precious metals sector bullish % is "bear correction." You see, in December, the bullish % was "bull confirmed" and by January reached 76% bullish, then reversed lower to "bear alert" by February at 68%. In March, bullish % turned "bear confirmed" at 40% (took out a prior bullish % low of 42%) then fell further to 34% by late March, then in early April reversed up to "bear correction" and in June reached 66% bullish, but didn't get above the prior high reading found in January of 76%. So, in June, you're still "bear confirmed" and by late June, we saw the reversal back lower to "bear confirmed" at 60% and fell to 56%. Now, just recently the bullish % reversed back up to 62% bullish, which is "bear correction."

Here's a link for how to calculate a bullish vertical count Link which is based on the science of ballistics.

Here is a Link to an article written on the 6 stages of bullish %.

  Linda Piazza   7/30/200,  10:19:11 AM
The earliest volume patterns showed advancers and decliners roughly equal on the NYSE, but decliners leading advancers on the Nasdaq. Down volume is also bigger than up volume on the Nasdaq.

  Linda Piazza   7/30/200,  10:16:50 AM
We've got yet another of those multiple trendlines coming into play currently on the OEX. This ascending trendline has formed off the higher lows since Friday morning, and the OEX currently challenges it. As I mentioned yesterday, this congestion zone has resulted in a trendline for every occasion, describing each hesitation.

  Jonathan Levinson   7/30/200,  10:05:53 AM
The put to call ratio is .46 for the first half hour, VIX up .63 and QQV +1.27. It looks like a bad setup for the bulls so far.

  Jeff Bailey   7/30/200,  10:05:00 AM
S&P Banks Index (BIX.X) 307.05 -0.31% .... morning high has been 309.15, but first 30-minutes of trade looks to have correlative resistance from the matrix DAILY R1 and WEEKLY pivot holding early resistance. SPX 987.52 -0.17% is smack dab in the middle of WEEKLY S1 and WEEKLY pivot here.

News that weekly mortgage refinancing fell 32.7% has me tying that into recent wondering regarding the rise in Treasury YIELDS offering better spreads to banks, but what impact they might have on numer of new loan applications.

  Linda Piazza   7/30/200,  10:04:47 AM
Swing Trade Signals
Those who entered an unofficial OEX short/put position when the OEX dipped beneath 498 yesterday may be breathing slightly more comfortably, but probably only slightly more so. Although some indicators on the 60-minute chart approach levels indicating oversold conditions, they're all still pointing down. This unofficial play isn't out of the woods and won't be until profits are taken, but at least it's looking slightly better.

  Jeff Bailey   7/30/200,  9:56:28 AM
December Gold Futures (gc03z) 359.80 -1.07% .... I like Steve Forbes' rule or observation of gold price versus how well the Fed is doing its job. I'm looking at Dorsey/Wright and Associates point and figure chart on December gold futures (gcz3). Today's trade at 362 was a 3-box reversal back lower from 368 (2-point box size) and has the bullish vertical count column now completed to $418. The recent declines into the 200-day SMA of 343 on the bar chart also came as the point and figure chart pulled into its bullish support trend of 344.

I'd have to turn a little more bullish toward gold on a pullback to 352-354, where this futures contract triggered the recent double-top buy signal at 352. A trade at 342 would be bearish as that would be a triple bottom sell signal.

For stocks.... Dorsey's precious metals bullish % (BPPREC) is "bear correction" status at 62%. A reading of 68% would be "bull confirmed" while a reading of 54% would be "bear confirmed" from here.

  Linda Piazza   7/30/200,  9:49:09 AM
The 498.84 level that represents a 50% retracement of the first five-minute OEX range obviously did not hold, but the OEX perhaps now attempts a retest of that level from the underside. A fall beneath that 50% retracement theoretically promises a test of the day's low and that occurred, with the OEX stopping just pennies below the day's low before attempting a climb during the current five-minute candle.

  Linda Piazza   7/30/200,  9:43:39 AM
The OEX 50-dma lies at 494.60 currently. Although the OEX tested this average several times last week, dipping beneath it one day, it has not closed beneath this average since March, so a close beneath it would be significant. There's no guarantee it will dip beneath it or close beneath it, of course. In the meantime, however, it's likely to provide support on any dips, at least momentarily.

  Jeff Bailey   7/30/200,  9:40:50 AM
Cree Inc. (CREE) $13.98 -15.7% Link ... This one could get ugly. I wasn't aware of this, but the $3 billion lawsuit filed last month by its former chief executive and co-founder, Eric Hunter, against the company and its current chairman Nealth Hunter, has Neal Hunter being Eric Hunter's brother.

This morning's trade at $14.00 has the bearish vertical count now growing to $8.50.

  Linda Piazza   7/30/200,  9:37:23 AM
The 50% retracement of the OEX first five-minute range lies at 498.84. The first five-minute candle closed barely above that level. Bulls want to see that level hold, while bears want to sustain levels below that number in early trading.

  Jeff Bailey   7/30/200,  9:35:26 AM
Forest Labs (FRX) $48.80 +0.22% ..... yesterday there was rumor that JNJ was about to make cash bid for FRX. I called my brother last night and evidently he has caller ID. He answered the phone "Johnson and Johnson" and laughed. Evidently at sales meeting, there was also talk among managers and doctors during the day regarding this rumor. There were some comments made that JNJ did indeed make a $60 cash offer, however when I asked for a reliable source, none could be given.

  Jeff Bailey   7/30/200,  9:23:03 AM
Interview on CNBC with Dallas Fed Bob McTeer ..... Mr. McTeer was quoting comments from a previous speech from Steve Forbes (guest anchor today on CNBC) that if Gold was trading below $300, then Fed was too tight with rates. If Gold was above $400, then Fed was too loose.

Just right? August Gold futures (gc03q) falling $2.70 to 359.00 this morning.

  Jeff Bailey   7/30/200,  9:16:37 AM
09:00 Update posted at this Link

  Linda Piazza   7/30/200,  9:15:13 AM
Swing Trade Signals
The Swing Trade Model is still flat, still waiting for a definitive break out of the consolidation zone that's narrowed down to 491-506 for the OEX. As that zone has narrowed, prices have been chopping back and forth, with indicators chopped up, too. The tradable range has narrowed, too, so that our risk/reward parameters don't look favorable for official trades just now. Two possibilities exist. One is that the OEX breaks out of that consolidation zone. Another is that that the OEX makes a false upside breakout, turning down again somewhere short of June highs, reconfirming the validity of the trading range and perhaps widening it to its former 513 to 491 range. Either way, we'll have something that's more tradable. For now, though, we're looking for a break above the June high to signal an official long play or a break below 491 as a signal for a short/put play.

The current candlestick formation on the daily chart hints that we should see a test of 491 before we see an upside breakout of the consolidation zone. However, despite the drop in the Nikkei overnight, the U.S. futures rose to test 994 again, showing a degree of resiliency that runs counter to the downside test hinted at by the candlestick formation. Futures were not able to break over that number, however.

Some might be engaged in an unofficial Swing Trade play, entered short/put when the OEX dropped through 498 yesterday, with hopes of a test of 493 or perhaps 491. The daily candlestick configuration supports this play. In addition, hourly oscillators still show the possibility of more downside, but this has been a risky play all along because of the degree of chop seen in the market lately. That risk is highlighted by the higher futures this morning. As has become usual of late, we're getting mixed messages.

  Jonathan Levinson   7/30/200,  8:52:54 AM
For some reason, CBS Marketwatch reported the data irregularly and I couldn't find this week's results. Go figure. CNNfn reports that mortgage activity slid 24.3% this week, and the refi index was down 32.9% this week. We've been pounding the table over the yield rally for weeks on this issue.

  Jonathan Levinson   7/30/200,  8:52:47 AM
Here's a quote worth printing and framing for posterity:

"I'm pretty optimistic. It is not that every thing is perfect," [Executive Officer Jeff] Immelt told CNBC, the financial news channel owned by GE, in an interview. "I still see the U.S. on a slow economic growth trend. I don't see anything negative as I look at the economy today," Immelt said.

Here's the Link to the full story.

  Linda Piazza   7/30/200,  8:52:38 AM
Good morning. After a spate of upside economic surprises earlier in the week, Japanese investors learned that June industrial production fell an unexpected 1.2%. Expectations had been for a rise of 0.4%. The second quarter's industrial production also fell in comparison with the first quarter's, by 0.6%. When the Nikkei rallied earlier this month on news that Japan's trade gap had widened, the rally appeared counterintuitive in a country that depends so heavily on exports. I read testimony theorizing that the favoring of imports over exports showed that Japanese manufacturers were gearing up for increased demand. Apparently not.

The Nikkei opened underwater in Wednesday's trading and closed even further underwater, closing down 201.65 points or 2.05%, at 9632.66. Already weakened by the worse-than-expected industrial production number, the market reeled under disappointing earnings by tech companies Toshiba and Matsushita. Toshiba mentioned weak sales of personal computers. Other tech stocks suffered. Automakers declined, with Honda saying late Tuesday that Q1 profits dropped.

Jitters over earnings infected other Asian companies, too, with other Asian bourses flat or down as a result. Taiwan's Weighted fell 0.66%, and South Korea's Kospi dropped 1.13%. Singapore's Straits Times fell only 0.17%, while Hong Kong's Hang Seng fell 0.76%. China's Shanghai Composite rose a modest 0.16%.

In Europe, many markets trade flat to slightly higher. In France, the government statistics office released figures showing that the July French Manufacturing Index rose to 91 from June's 90. Bloomberg notes that June's number had been a 20-month low. In Germany, a market research company released its index of German consumer optimism, with the index showing August's number rising to 4.5 points, ahead of July's 4.2 points. Business confidence was also seen rising in Belgium.

While some economists hold out hope that European economies are recovering, that recovery is tentative. Much depends on tax cuts expected in France and Germany. The ECB meets tomorrow, but is not expected to lower rates. As of this writing, the FTSE 100 trades up 1.10 points or 0.03%, to 4138.10. The CAC 40 trades up 23.17 points or 0.74%, to 3165.56. The DAX trades up 9.59 points or 0.28%, to 3437.71.


Market Monitor Archives