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  Linda Piazza   8/6/2003,  4:01:28 PM
Swing Trade Signals
We closed the day with a minimal $0.65 cushion on our OEX short/put play. Today's trading showed the OEX closing well below the midpoint of yesterday's range, although the daily candle did pierce that midpoint before turning down again.

 
 
  Linda Piazza   8/6/2003,  3:53:43 PM
Do you wonder what happened with the stochastics H&S depicted in my 13:52 post? The stochastics broke through the neckline, then rose to test the neckline level again, just as price might do, before dropping again. The retest came right at 2:45 when the OEX was testing the OEX high of the day again. The failure of that stochastics neckline test confirmed the failure of the retest of the day's high.

 
 
  Jeff Bailey   8/6/2003,  3:52:50 PM
Tomorrow's Economic Data ... before the bell, Q2 Productivity (consensus +4%) and weekly jobless claims (consensus 395K). Then at 10:00 June Wholesale Inventories (consensus 0.0% vs. May's -0.3%) and June Consumer Credit (forecasted at $6.0 billion, vs. May's $7.3 billion).

Observation is that economists' are expecting improving economic data... we shall see.

WEEKLY jobless claims will get bulk of the attention after two-week below 400,000 level. Attiontion will be given especially after yesterday's Challenger report that showed rise in company announced plan layoffs.

 
 
  Linda Piazza   8/6/2003,  3:44:51 PM
We saw our first bounce attempt at 488, right where we would have expected it.

 
 
  Jeff Bailey   8/6/2003,  3:39:04 PM
Pension Funds .... its always something, but expect this to grab some headlines in coming months, if it hasn't already. Good article in Forbes regarding pension funds and potential impacts on companies that offer them. Link

 
 
  Linda Piazza   8/6/2003,  3:38:15 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were just triggered on an OEX trade of 489, with a stop at 493. We will again target 484 as our first target and then 477 as the next target.

 
 
  Jeff Bailey   8/6/2003,  3:32:56 PM
03:15 Update posted at this Link

 
 
  Linda Piazza   8/6/2003,  3:32:40 PM
Swing Trade Signals
We missed an entry on the OEX short/put by $0.12 a few minutes ago. If there's no entry within a few minutes, I'll be pulling the signal, as I don't want to trigger an entry right at the close.

 
 
  Linda Piazza   8/6/2003,  3:16:07 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Let's try it again, and again this is an aggressive trade. Let's enter short/put on an OEX trade below 489, if that should happen today. The OEX has now dropped below the ascending trendline that has been supporting prices all day. Stop at 493.

 
 
  Linda Piazza   8/6/2003,  3:08:12 PM
The OEX five-minute chart now has a left-shoulder and head-ish look to it with a neckline at about 489.90. If it is a potential H&S, I would expect another bounce up to the 491.50 shoulder level.

 
 
  James Brown   8/6/2003,  3:07:46 PM
Procter & Gamble - PG - PG did it again. Thus far the recent move under its 200-dma and the $88 level was yet another bear trap. However, while shorts may be frustrated the stock does appear to be in a slowly descending channel from its late June highs. If this is the case, then we should see a rollover soon.

 
 
  Linda Piazza   8/6/2003,  3:03:04 PM
Swing Trade Signals
We have to set stops and this morning's was set what appeared to be a safe distance from the OEX 491.50 level that I'd hoped would cap any upward movements today after I saw the tepid trading early this morning. Obviously, we now have potential support below us at the 490 and 488 levels. Hourly oscillators approach overbought levels, but haven't yet turned down with the exception of 60-minute RSI. It's late in the day, too, and I'm reluctant to pull traders into a trade this late. Of course, this guarantees a big gap down tomorrow morning. I'm going to watch a few minutes, but my inclination is to wait and see what develops tomorrow morning.

 
 
  James Brown   8/6/2003,  3:02:36 PM
Sector Indices - Heading into our final hour of trading and we have a definite trend between sector winners and losers. Technology groups have been the weakest this session but most have significantly pared their losses.

Sector Winners:
XBD - broker/dealer index: +2.95%
OSX - oil service index: +2.19%
XNG - natural gas index: +1.95%
BKX - banking index: + 1.42%

Sector Losers:
DDX - disk drive index: -2.37%
NWX - networking index: -1.02%
INX - internet index: -0.76%

 
 
  Jim Brown   8/6/2003,  2:49:07 PM
Market Monitor Disconnects - If you are seeing a double time entry like this then your monitor version is out of date and may not function correctly with the new server upgrade:

2003-08-06 14:40:39
14:40:39
Swing Trade Signals

Picture: Link

Download the current standard version here. Link

 
 
  Linda Piazza   8/6/2003,  2:40:39 PM
Swing Trade Signals
Did I set our stop a few cents too low? I'm not sure, but 492.25 should have given us enough cushion unless the OEX was going to attempt a climb up to next resistance between 493-494.

 
 
  Jeff Bailey   8/6/2003,  2:34:56 PM
Per Jim's 14:22:57 ... I'd be shocked, and BEARISH if the Fed were to cut rates. Will make note here that December Fed Funds Futures (ff03z) 98.965% actuall hint that if anything, slight chance of Fed rate hike. Fed Funds Rate is 1.0%, but calculation of December Fed funds futures (100 - 98.965 = 1.03%).

Not saying that retail traders might not think there's a chance of rate cut and why stocks might bid today, but if so, then retail bulls are most likely way off base, and I would think a retail trader looking for a Fed rate cut would be more bearish, not bullish. Why does the Fed cut rates? To stimulate the economy. If the Fed feels the economy is in trouble and needs to further stimulate, then watch out below with a Texas Two-Step of 2-steps backward for every 1 step forward.

 
 
  Linda Piazza   8/6/2003,  2:32:55 PM
Look for next OEX resistance at 493-494, then 496.50 and 497.50-498.

 
 
  Linda Piazza   8/6/2003,  2:30:33 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We were just stopped out of our OEX short/put play at 492.25, with the OEX having moved 3.02 points since the signal was entered with the OEX trading at 489.23.

 
 
  Linda Piazza   8/6/2003,  2:28:27 PM
The OEX has now retraced half of yesterday's rise and achieved a new day's high.

 
 
  Jeff Bailey   8/6/2003,  2:23:53 PM
10-year YIELD ($TNX.X) 4.313% .... lower by 13.3 basis points, but YIELD edging up from lows of 4.278%. Tomorrow we'll get an $18 billion auction of 10-year.

 
 
  Linda Piazza   8/6/2003,  2:20:33 PM
Today's tepid OEX climb has done much to relieve oversold pressure, with 30-minute and 60-minute stochastics and RSI having climbed out of territory indicating oversold conditions. The faster 5(3)3 stochastics have already reached or nearly reached levels indicating overbought conditions across both time frames, with the 30-minute ones flattening. The 21(3)3 stochastics show that there could still be more upside, which has taken the form of a rise into resistance today, but RSI shows a tendency to flatten again across both time frames. It's possible we'll get a bump above 491.50 today, but it's also possible that we'll see sideways consolidation or a downturn from here.

 
 
  James Brown   8/6/2003,  2:18:21 PM
Lennar Corp - LEN - Previous put play LEN is starting to show some strength with the positive comments from the homebuilders saying there's been no slow down in demand despite the pop in mortgage rates. We had closed the play when shares broke down below the $65.00 level (after picking it at $71). Now we see LEN back above the $65 level and currently above its simple 10-dma. Its MACD is very oversold and hinting at a coming bullish reversal while stochastics, momentum and RSI are already pointing to a bullish change in trend.

We're not suggesting new plays on the stock at this time but speculative players might want to watch it for a move to the $70.00 mark and its 50-dma. The whole group does have a very low P/E ratio compared to the S&P 500.

 
 
  Jeff Bailey   8/6/2003,  2:17:16 PM
Pivot Matrix notes I wanted to quickly look at the DAILY pivot retracement levels having been traded so far today. While this is DAILY observation, it is the mindset I am in as it relates to WEEKLY and more of a swing-trade thinking for our Index Trader Wraps. Link

A special note might be, the yesterday... BIX.X did hold near WEEKLY S1, while other indexes neared or traded WEEKLY S2's. I make not now, because if I see the BIX find resistance in coming sessions at a key level, but see other indexes exceed some levels to upside, then that might just be the signal that next say sees the range move back lower.

I've got to figure out how to treat the Dollar Index (dx00y) in the matrix, as this index basically trades 24-hours. I've flagged the (dx00y) with an "*" to denote that high/low/close is not necessarily accurate, and I would not want a currency futures trader to rely on these levels on daily basis.

Within the DAILY, the main observation is BIX.X reaching DAILY R1, while 10-year YIELD falls to DAILY S1. This is divergence so to speak and will be a main relationship to follow in coming sessions.

Now... a lot of questions from DIA, SPY and QQQ traders as it relates to INDU, SPX and NDX percentage gain today.

This may have been addressed in Market Monitor already, but traders need only to remember that cash markets (INDU, SPX, NDX) close at 04:00 PM EST, while the trackers (DIA, SPY, QQQ) trade until 04:15 PM EST. The disparity today comes after CSCO reported earnings before 04:15, and DIA, SPY, QQQ were still trading.

One reason for DIA, SPY and QQQ creation was to provide liquity to post-cash close for "hedging" and being able to still control risk to a portfolio when after-cash close news is deemed market moving.

 
 
  Linda Piazza   8/6/2003,  2:15:21 PM
Jim just mentioned the new downloads, and said that unless you have special circumstances that it would be advantageous to use the standard version. Some of the special circumstances listed on the download page include having a firewall and a cable connection. I have both, but at Jim's suggestion, I downloaded the standard version anyway and haven't had a single problem.

 
 
  James Brown   8/6/2003,  2:06:19 PM
Zimmer Holdings - ZMH - We're seeing a lot of action in shares of ZMH today. The stock is rocketing higher on some positive comments from both First Albany and Fulcrum, who both upgraded ZMH to a "buy" after what appears to be progress in ZMH's plan to merge with Centerpulse. The stock is hitting new all time highs and is above resistance at $50.00. Meanwhile, shares of rival Stryker (SYK) continue to slip lower and look ready to retest their 50-dma.

 
 
  Jim Brown   8/6/2003,  2:04:18 PM
Market Monitor Disconnects - I just received an email from a user with monitor problems and after working through the details we found he was still using the Beta version. This is about the 5th conversation like that this week. Many readers missed the upgrade notice last week. If you are currently using any version older than 3.07.23.03 (two weeks old)("help", "about") then you do not have the current version and it is a miracle it is working at all.

Please visit the download page and get the newer faster version with the audible alerts. Link

Unless you have a very special circumstance please download the standard version first. It is the strongest and fastest version.

 
 
  Jeff Bailey   8/6/2003,  1:54:54 PM
01:00 Update posted at this Link

You will note I'm having trouble with html coding.

 
 
  Linda Piazza   8/6/2003,  1:52:13 PM
Here's something interesting on the OEX five-minute chart: Link It's possible to watch chart formations on the oscillators just as you would on the price chart. Breaks in chart formations can sometimes signal imminent breaks in price formations, too. In this case, the fast line has broken through the stochastics H&S neckline, but the slow line hasn't yet. (Note: It did break through as I was typing this note, perhaps signaling weakness to come in the price chart.)

 
 
  James Brown   8/6/2003,  1:49:56 PM
Looking at the tech sectors (DDX disk drives, GHA hardware, GSO software, INX Internets, NWX networking, and SOX semiconductors) only the SOX is in the green today and only by a couple of points. Leading the chips higher are shares of National Semiconductor (NSM) currently up more than four percent and approaching resistance in the $24 area.

 
 
  James Brown   8/6/2003,  1:35:04 PM
Anthem Inc - ATH - Current OI put play ATH is getting hammered today, currently down more than five percent but up off its lows of the day. Shares gapped lower and traded as low as $66.00 before bouncing. Unfortunately for shareholders it looks like the mid-day bounce has failed again under the $70 mark.

There's been plenty of talk about the HMO sector today. Making an impact on ATH could be a Kansas Supreme court decision to prevent ATH from acquiring the state's Blue Cross and Blue Shield insurance plans. ATH claims that this will not impact its long-term growth strategy.

OptionInvestor.com had been targeting a move to $70 with a secondary target at the 200-dma. Shares of ATH passed both of these targets this morning. We would probably not recommend new positions at this time.

 
 
  Mark Phillips   8/6/2003,  1:34:58 PM
KSS $60.15 (+1.35) Here's one for the bulls to watch this afternoon. We've been watching for KSS to break out over resistance in the $60.50 area, and have our bullish trigger set at $60.60. So far, the bulls haven't been able to pull it off and as I type, it looks like the stock is pulling back from its intraday high of $60.35. Wait for the breakout if you're tempted to play, because once it clears our trigger, it should have room to run, initially to $63 and then stronger resistance in the $65-66 area.

 
 
  Linda Piazza   8/6/2003,  1:33:55 PM
Swing Trade Signals
We've had our test of 491.50 now with a trade at 491.40. Will the resistance here hold? If it doesn't, we'll soon be out of our OEX short/put play.

 
 
  Linda Piazza   8/6/2003,  1:32:05 PM
Volume patterns have been improving throughout the morning for the NYSE, with up volume now 1.4 times down volume on the NYSE. Decliners still lead with adv:dec ratios are 15:16 on the NYSE and 12:18 on the Nasdaq. Down volume was still more than double up volume on the Nasdaq as of a few moments ago.

 
 
  Mark Phillips   8/6/2003,  1:13:35 PM
FRE $49.75 (+1.00) Here's another one to keep a sharp eye on this afternoon, as it is also tied to the housing and bond markets. Following its break below $50 last week, the stock found support near $48 and has been rebounding the past couple sessions. Like our HD play, the 10-dma (currently $49.39) has been critical resistance. With the stock breaking above that level today and bullishness in the Housing sector, our $50.25 stop may be seriously threatened before the close, depending on the reception of today's bond auction. Note that the stock surged as high as $50.11 shortly after the open before pulling back just as quickly. Since then, we've seen rangebound trade between $49.20-49.85. Obviously we would prefer to see a drop and close below $49 again today, but if the bulls manage a close over our stop, we'll know it is time to go.

 
 
  Mark Phillips   8/6/2003,  1:05:41 PM
HD $31.30 (+0.94) Are your stops in place? We've been riding shares of HD lower for the past couple weeks now, using the 10-dma as our line in the sand, keeping our stop just above that level. Today, the 10-dma has fallen to $31.27, and HD is rallying strongly on the back of strength in the housing sector, with the $DJUSHB index up 3.7% right now. Our stop is currently $31.35 and if taken out at the close, we'll be dropping the play tonight.

 
 
  Linda Piazza   8/6/2003,  1:03:44 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We are short/put the OEX at 489.23 (the level of the OEX when the post appeared) with a stop at 492.25.

 
 
  Linda Piazza   8/6/2003,  1:02:05 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Enter short/put at the current level (488.94) with a stop at 492.25. We will target 484 and then 477. We may see 491 to 491.50 before the drop begins.

 
 
  Jeff Bailey   8/6/2003,  12:51:54 PM
S&P Banks Index (BIX.X 300.86 +0.95% .... As I begin the 01:00 Update, primary thought here is that for Indices to have shot at closing in upper-end of today's range, BIX.X should hold support at DAILY pivot of 299.38.

If so, then I could perhaps see tomorrow's DAILY R2 being 307, which might correlate with MONTHLY Pivot of 307.60. Will have to wait and see.

Will note that today's high of 301.42, which we're backing off of here, was a relative intra-day high yesterday in BIX.X at about 12:15 PM EST.

This observation on 5-minute interval chart gives trader a look at potential reverse/head shoulder pattern formatio, where neckline is now built at 301.50, left shoulder is 300, and we might see pullback to DAILY pivot of 299.38 where point of right shoulder would form.

 
 
  Linda Piazza   8/6/2003,  12:51:18 PM
Swing Trade Signals
Here's a heads up that I'm considering a short/put OEX entry at current levels, but watching a few minutes first. I'd wanted 491 if not 493-494, but I'm not sure that will happen. This will be a high-risk play. Choose your option carefully as we could be mired in this high-risk trade over several days and a current-month option will lose time premium quickly over a several-day time period now that options expiration is so close. Participate in this trade only if you have some risk capital.

 
 
  Jeff Bailey   8/6/2003,  12:43:04 PM
HMO Index (HMO.X) 683.68 -3.7% .... here's a bar chart where I've placed conventional retracement on HMO.X. Link

I had previously used "fitted" retracement as HMO continued to break to new highs. One level of 0% retracement from "fitted" was at 699, so I mark it as a near-term level of resistance, within the wider conventional retracement. My thinking is that I still hold OHP Calls and would look to sell them on rebound into HMO 700-734 area.

SPX/OEX traders might try and picture how strong HMO.X has been in relation to SPX trade last 1.5 months, and how lack of leadership will be be missed by bulls near-term. HMO.X broke above June Highs, but SPX matched. Me thinks SPX/OEX might not have even matched June highs if not for HMO's.

 
 
  Linda Piazza   8/6/2003,  12:34:35 PM
Here's what I'm watching on the OEX five-minute chart: Link

 
 
  Jeff Bailey   8/6/2003,  12:16:28 PM
S&P Banks Index (BIX.X) 301.17 +1.05% .... gets above DAILY pivot and moves above DAILY R1 of 300.97. Now we're looking at DAILY R2 of 304.07 and its correlative resistance of WEEKLY Pivot of 304.8.

S&P 500 Index (SPX.X) 969.27 +0.39% trying to follow.

10-year YIELD ($TNX.X) now down 11.3 basis points to 4.328%.

 
 
  Linda Piazza   8/6/2003,  12:16:23 PM
I've been scanning charts this morning, and am noticing how many stocks trade near or just below their 200-dma's. Even GE trades only a little more than a point above its 200-dma, with the chart having a distinctive H&S-ish look. GE appears to be trying to round over that right shoulder now. It appears that the slightly descending H&S trendline will coincide with the 200-dma, currently at 26.61. Handily enough, that level coincides just about exactly with the 50% retracement of the March to June rally, so there's going to be a real battle if GE should decline to that level, with the 200-dma and 50% retracement providing support and working against the bearish outlook forecast by that potential H&S formation.

 
 
  Mark Phillips   8/6/2003,  12:13:26 PM
See the difference? Now we've got price breaking out above resistance from all morning and breadth is confirming, with ADVDECV.NY breaking above the zero line. Link

 
 
  Jeff Bailey   8/6/2003,  12:13:09 PM
Disk Drive Index (DDX.X) 107.58 -3.3% .... weighed lower by SanDisk (SNDK) $51.99 -8.4% Link on news that Samsung and Sony announced today that Samsung is licenced by Sony to manufacture and sell Memory Stick media, where Samsung will begin in-house manufacturing and sales of Memory Stick media beginning in Q3 of this year.

News also negatively impacting Lexar Media (NASDAQ:LEXR) $12.37 -11% Link , which is manufacturer of memory media similar to SanDisk.

WR Hambrecht saying new more negative for LEXR than SNDK as SNDK is well-diversified into other card formats, like Secure Digital, 2) SNDK still set to gain share through mini-SD, USB flash drives, xD-Picture, and Mermory Stick, and has dedicated supply through its FlashVision joint venture with Toshiba.

 
 
  Linda Piazza   8/6/2003,  12:06:52 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Let's withdraw our "just in case" entry now that the OEX is over 488. I'll now be watching for the next short/put entry on a rollover, but that may not come today.

 
 
  Linda Piazza   8/6/2003,  12:05:32 PM
Maybe we're going to get our test of OEX 490.50-491.50 after all. We're watching to see whether upside goals are being met as one gauge of strength or weakness. If those goals aren't met, weakness is confirmed. If upside goals are met or exceeded, we know there's some short-term strength at least and that we should watch next resistance near 493-494 and perhaps look at the possibility that the OEX will attempt a return to its former trading range. I don't think the OEX will exceed recent highs or even get near testing them, but watching how these small tests resolve helps us refine the scenario we're building. So far, today's scenario is unfolding as I expected, but that could change.

 
 
  Linda Piazza   8/6/2003,  11:48:46 AM
The OEX again tests 487.52, the confirmation for the double-bottom formation on the five-minute chart. The 488 level remains problematic, however. In a too-obvious statement, the OEX has to make it over 488 before it can test 490.50-491.50. This kind of small-range and choppy trading was perhaps predicted by yesterday's big range, with that prediction being one reason for my hesitancy to initiate Swing Trades today, especially longs.

 
 
  Jeff Bailey   8/6/2003,  11:30:40 AM
11:00 Update posted at this Link

Added a chart of the S&P Banks Index (BIX.X) with WEEKLY/MONTHLY pivot retracmenent.

 
 
  Linda Piazza   8/6/2003,  11:24:04 AM
Here's another view of a possible formation on the OEX as seen on the OEX daily chart: Link This view supports the idea that it's possible for the OEX to move toward the resistance offered by the midline of the regression channel, now at 495 but descending each day. I suspect that resistance might stop the OEX closer to 493-494 than to 495 if not at 491, however.

 
 
  Mark Phillips   8/6/2003,  11:01:10 AM
I often mention the use of the ADVDECV indicator as a measure of market breadth, as I find it useful for helping to keep me from fighting the trend in the market. That is certainly the case this morning, as any signs of a bottom in price are definitely not being confirmed by any strength in the ADVDECV indicator.

From the chart Link

As I've mentioned before, this indicator isn't so much used to enter trades, as to keep me from trading against the dominant flow in the market. The application of ADVDECV is equally applicable to trading futures or index options.

 
 
  Linda Piazza   8/6/2003,  10:57:52 AM
Swing Trade Signals
The formation on the OEX 30-minute chart looks a lot like a "b" distribution pattern, which has bearish implications. Link The OEX needs to climb above 488 to negate that pattern. If not, our "just in case" entry is positioned just right to capture a fall through the bottom and confirming level of that formation.

 
 
  Linda Piazza   8/6/2003,  10:52:40 AM
Swing Trade Signals
The OEX had another 5-minute close over 487.52, so we'll begin watching to see whether the 490.50-491.50 upside target zone is met, as predicted by the double-bottom on the five-minute chart. So far, the OEX struggles with the 488 level that was so important during the last year, however. After the OEX has cleared this level convincingly, if it does, I'll be removing the "just in case" entry on a drop through 484, but I don't want to do it yet.

 
 
  Linda Piazza   8/6/2003,  10:45:55 AM
The OEX now exceeds the 487.52 confirmation level of the double-bottom formation on the five-minute chart. If that is sustained through another five-minute candle, we'll start watching for 490.50-491.50 next, to see whether that resistance holds. We've got multiple layers of resistance coming together near 491: the 50% retracement of yesterday's range, historical resistance, and the descending trendline that began forming off Monday afternoon's high. I'm not sure whether that will hold or whether the OEX might test 493-494.

 
 
  Jeff Bailey   8/6/2003,  10:43:07 AM
QQQ $30.29 +0.26% ... here's similar 60-minute interval chart of QQQ as shown in SPX earlier at 10:14 Link

 
 
  Jeff Bailey   8/6/2003,  10:36:32 AM
Buy Program Premium Alert ... INDU = 9,019, SPX = 962.8, OEX = 486, NDX = 1,215, QQQ = $30.22, .... $TNX.X = 4.363%

 
 
  Linda Piazza   8/6/2003,  10:33:57 AM
A watchful reader notices that the VIX has now climbed above 25, at 25.67 as I type. The dip below 20 a few days ago and then this climb above 25 is something bears have been anticipating for a long time and is a bad sign for those hoping for more upside.

The VIX level also influences options prices, as this reader reminds me. That's relevant to my inability to predict how much OEX traders might benefit from a certain climb or drop in the markets, as options pricing includes a calculation of the volatility levels. Rising volatility is going to increase options prices.

 
 
  Jeff Bailey   8/6/2003,  10:31:12 AM
S&P Banks Index (BIX.X) 298.32 +0.10% ... fractional gain now after morning high of 300.21.

Looking for the lower 10-year YIELD ($TNX.X) being lower by 8.8 bp at 4.352% to have the major indexes firming. My negative observation of HMO.X -5.3% doesn't necessarily help the SPX/OEX though. Lots of HMO's are in the SPX. Broader healthcare as depicted by the RXH.X 300.88 -1.41% also weak.

 
 
  Linda Piazza   8/6/2003,  10:28:13 AM
Despite my 10:25 post, I would not enter long myself today and will not suggest a long Swing Trade, either. It's just too risky to trade countertrend today when we don't know which resistance level will hold. It could be 488 instead of 491. Futures traders could benefit from small moves like that: we OEX traders can't.

 
 
  Jeff Bailey   8/6/2003,  10:26:03 AM
Deutsche Bank (DB) $60.00 -3.45% .... Link Stock lower today, but most likely it's 3.5% decline related to overseas trade and reason it is weaker versus KBW Bank Index (BKX.X) 858.39 +0.09%. Still, DB breaking lower after that triple-bottom and looking weak. Continue to hold partial bearish, but resistance should be firm back near $64.

 
 
  Linda Piazza   8/6/2003,  10:25:30 AM
It was a bearish action for the OEX to test the top of this morning's gap and then roll down again, but I'm still not yet convinced that today will be a major down day. We're ready with a just-in-case entry on the Swing Trade model, but instead I halfway anticipate and would like to see a climb toward 491 or even 494 today or over the next couple of days.

 
 
  Linda Piazza   8/6/2003,  10:21:37 AM
An OEX move above 487.52 will now confirm a double bottom on the five-minute chart with a predicted upside minimal target of about 490.52, bringing the OEX right up underneath that important 491 resistance. During the beginning of the March rally, we kept noticing bearish patterns that would set up but not fulfill their downside targets. That was a first clue that the markets were stronger than we anticipated. To gauge the strength or weakness of the OEX, watch whether these upside targets are met or exceeded or whether the OEX fails to meet them. Of course, before we can begin watching that upside target, the OEX first has to climb above the double-bottom confirmation level at 487.52, and that may not happen.

 
 
  Jeff Bailey   8/6/2003,  10:14:19 AM
S&P 500 Index (SPX.X) 60-minute interval chart. Link

 
 
  Linda Piazza   8/6/2003,  10:11:18 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Here's our "just in case" entry. Enter short/put on an OEX trade of 484 with a stop at 488.25 and a target of 477. This is high risk after yesterday's big drop.

 
 
  Linda Piazza   8/6/2003,  10:08:54 AM
The OEX has climbed to the top of this morning's gap and hovers there, perhaps building a base before it attempts another climb. I would like to see that climb as oscillators reset and we get a new and higher entry into a put/short OEX trade, but I'm worriedly studying the volume patterns and seeing them look rather negative. As Jim just mentioned on the Futures side, this early retracement could set the tone for the rest of the day. I would rather see a climb, but am considering entering a "just in case" entry level in case the OEX drops instead.

 
 
  Linda Piazza   8/6/2003,  10:03:13 AM
Reader Question: I have not traded the OEX before and am curious what the profit per point for the trade yesterday. Would you be kind to provide the info.

Response: Great question and one many readers might have. Unfortunately, I don't know because that would vary greatly depending on the option purchased. A trader who had purchased an ITM (in the money) 540 put would have purchased a put with a high delta, which meant it would have moved nearly dollar for dollar with the OEX as it dropped. Even then, I wouldn't know whether that person was able to buy between the bid and the ask or paid the ask. If someone instead bought a 480 OTM put yesterday, the delta would have been much lower, although I can't give you an exact percentage for the delta as we entered the trade and it would have changed anyway as the OEX dropped. That trader would not have gained dollar for dollar, of course. Then, once we're beyond the ITM, ATM, and OTM considerations, August options might have moved differently than September or October options. Unfortunately, all I can give you is the number of points the OEX dropped while we were in the short/put trade.

Someone asked a couple of days ago how I decide the best option to buy. I have a rather off-the-cuff decision-making process that I wouldn't necessarily recommend for other traders. If I believe a movement is going to be quick but limited, say an afternoon drop of $4.00, I buy a deep ITM option so I can benefit quickly from a small move. If I believe there's a chance that the OEX will move against me before it moves my direction, I might buy an OTM option because it will drop less (proportionately) in a move against me. If I study the OEX and believe it will climb to or drop to a certain point during the month and I intend a position trade (held for a couple of weeks, perhaps), then I determine my purchase on the option that will allow me to profit if that level is achieved and I don't worry so much about the Greeks. I do have a basic understanding of the Greeks, but just find it too difficult to study each of those elements before making an instantaneous decision. I suggest that anyone wanting to know more about option choice read McMillan's OPTIONS AS A STRATEGIC INVESTMENT and check our archives for information on options choices. Lots of our writers have written many articles about the subject.

 
 
  Jeff Bailey   8/6/2003,  10:00:49 AM
S&P Banks Index (BIX.X) 299.63 +0.54% .... trade here is at the DAILY pivot. SPX 966.14 daily pivot is at 971.09. (Just some notes to get feel for where things are at)

 
 
  Jeff Bailey   8/6/2003,  9:57:23 AM
HMO Index (HMO.X) 688.57 -3% ... hit hard again early and breaking below its 50-day. I don't currently have a list of short/put candidates at this point, but thinking that group most likely finds pressure from here until some type of stronger job growth trends are found. This seems to be the overriding theme of why the group has suddenly turned weak. No hiring means more limited enrollments.

 
 
  Jeff Bailey   8/6/2003,  9:52:07 AM
QQQ $30.41 +0.66% ... session high has been $30.42. First test for resistance from pivot matrix is DAILY pivot and WEEKLY S2 of $30.58. Also noting QQQ testing its MONTHLY 61.8% pivot retracement of $30.45.

 
 
  Jeff Bailey   8/6/2003,  9:50:28 AM
S&P 500 Index (SPX.X) 965.83 +0.03% .... above the 985 level. 10-year YIELD lower by 4.3 bp at 4.398%, BIX.X 300.21 +0.73%. Looking for bounce higher per Index Trader Wrap.

 
 
  Jeff Bailey   8/6/2003,  9:43:12 AM
Dow Jones Home Construction (DJUSHB) 411.42 +0.85% .... 10-year YIELD lower by 4.7 bp to 4.394%.

Toll Brothers (TOL) $27.02 +2.07% making comments regarding Q3 trends.

 
 
  Linda Piazza   8/6/2003,  9:37:05 AM
The 50% retracement of the first OEX five-minute range lies at 485.31. Bulls want to see this level exceeded and sustained in early trading. Probably more important, however, is the gap level. Bulls want to see the OEX climb above the top of that gap.

 
 
  Jeff Bailey   8/6/2003,  9:34:10 AM
S&P Banks Index (BIX.X) 298.25 +0.07% .... fractional gains, but holding yesterday's low early.

S&P 500 Index (SPX.X) 961.95 -0.36% ... moving just below WEEKLY S2 here.

Per Index Trader Wrap, at this point, I would look to trade bullish the SPX on move back above the MONTHLY S1 with a trade at 965.

 
 
  Linda Piazza   8/6/2003,  9:33:54 AM
The OEX drops toward the 25% retracement of the March to June rally.

 
 
  Jeff Bailey   8/6/2003,  9:28:59 AM
Sirius Satellite Radio (SIRI) $1.95 ... lower at $1.81 after reporting Q2 (June) loss of $0.12, which was a penny worse than consensus estimates. SIRI said revenues rose 2,857.1% year-over-year to $2.1 million, well below consensus of $3.1 million.

 
 
  Jeff Bailey   8/6/2003,  9:25:58 AM
U.S. Dollar Index (dx00y) my q-charts quotes (net gain/loss and % change) are not working. However, I show close of 95.85, whith dollar gaining at 96.09 here and working higher to MONTHLY pivot of 96.12.

 
 
  Jeff Bailey   8/6/2003,  9:22:17 AM
10-year YIELD ($TNX.X) lower by 5.6 basis points at 4.385%. Trade here should qualm near-term fears of rising consumer interest rates. Fractionally so based on yesterday's 01:00 PM EST update and chart shown there, but finds stock futures building gains from their overnight lows.

 
 
  Linda Piazza   8/6/2003,  9:19:11 AM
Swing Trade Signals
The Swing Trade model is flat this morning after hopping on for a 9-point two-day drop in the OEX. Yesterday was a big-range day for the OEX, and small-range days sometimes follow big-range days. Big drops are sometimes followed by consolidation in the form of bear flags or "b" distribution patterns. This close to options expiration, we want to be especially cautious about getting caught in a series of small-range trading days. That extra caution may mean that we'll miss a trade or two, but we're not going to catch every trade and we'll catch some we wish we hadn't. I'd rather avoid too many of the latter case.

It appears that the OEX will open close to major support as will many other indices. The 484-485 level represents a 25% retracement of the March to June rally and was a stopping point for the July 1 decline. That would be a logical place for a bounce or sideways consolidation while the oversold indicators reset themselves. I won't be giving an official Swing Trade signal to play the bounce if one occurs, however, as that's a countertrend trade that appears too risky for OEX traders right now. Instead I'll be watching for a rollover or a drop through 484 for a potential short/put play. A drop through the 25% retracement at 484 suggests a drop toward 478 and perhaps even toward the 38.2% retracement level near 470. The first place to watch for a potential rollover will be 491, the bottom of the recent consolidation range. That also happens to be near the 50% retracement of yesterday's range, at 491.28. However, if the OEX manages a climb today, I wouldn't be surprised to see it test 493-494 or higher this week before succumbing. To me, it appears impossible to judge before the open whether we're more likely to see an early rollover and drop through 484 or a bounce.

 
 
  Jeff Bailey   8/6/2003,  9:17:28 AM
09:00 Update posted at this Link

 
 
  Linda Piazza   8/6/2003,  7:23:36 AM
Good morning. After Tuesday's performance in the U.S. markets and CSCO's earnings after the close, the Nikkei opened down almost 86 points. Immediately, the Nikkei began trying to scramble out of negative territory, but it never quite made it before subsiding again into the close. Volume continues to weaken ahead of next week's summer holiday period, so that we are seeing the volatile trading this week that was predicted last week. The Nikkei closed down 58.67 points or 0.63%, at 9323.91. Somewhat similar to the U.S.'s pattern yesterday, the Nikkei lost ground despite encouraging economic news. The index of coincident economic indicators climbed to 66.7% in June, well above the 50% that measures growth or contraction.

Exporters dropped across Asia on fears that the Challenger layoff report might indicate that U.S. sales would weaken as more people lost jobs. Despite the losses in exporters in general, investors focused more on Toyota's upbeat outlook than on its 9.7% drop in Q1 profit, sending the carmaker up 1.7%. Another carmaker, Hyundai Motor, sank again Wednesday after reaching a labor deal to end a strike that has continued for a month. Investors apparently didn't like the deal as the stock lost 5.1%, just a day after recovering some of the losses incurred after a chief executive committed suicide. South Korea's Kospi dropped 1.93%, and most other Asian markets dropped, too. The Taiwan Weighted lost 0.64%, but Singapore's Straits Times was one of the few gainers, adding 0.10%. Hong Kong's Hang Seng dropped 1.87%, and China's Shanghai Composite dropped 0.54%.

Most European bourses currently trade down, too. They're being impacted by the performance of U.S. and Asian markets, but also by earnings disappointments by Commerzbank and Bayer. German chemical and pharmaceutical group Bayer reported Q2 net income of 128 million euros against expectations of 168 million euros, also providing an economic outlook some deemed dour. Still, the company said conditions for recovery were in place. German bank Commerzbank reported Q2 earnings that disappointed because of bad debt provisions, according to one article. Analysts expect that unemployment and corporate bankruptcies will increase debt problems. French engineering group Alstom is one of those companies experiencing problems, scrambling to obtain needed financing. The company had been halted earlier in the week as it sought financing, and dropped 1.6% today as it opened again.

As of this writing, the FTSE 100 dropped 56 points or 1.36%, to 4065.00, now only 65 points above the key 4000 level. The CAC 40 dropped 46.16 points or 1.45%, to 3141.45; and the DAX dropped 75.42 points or 2.19%, to 3362.94.

Perhaps of even more interest is another development in Europe today. The EU today said that it will likely fine Microsoft (MSFT) and require the company to offer a version of Windows without Media Player or sell music and video-playing software from rivals in the same package with Windows. MSFT will likely also be required to release interface information needed by vendors of low-end servers to compete. The EU sent off the list of final charges to MSFT and the company now has two months to reply.

 
 
  Jim Brown   8/5/2003,  11:47:24 PM
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