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  Linda Piazza   8/11/200,  4:52:20 PM
Swing Trade Recap - OEX/SPX/DJX/DIA/SPY
We did not enter a trade today as the OEX spent the day mired between support and resistance. We want a spectacular entry before entering during opex week and ahead of the FOMC meeting tomorrow, and today did not offer one.

  Linda Piazza   8/11/200,  3:58:03 PM
The OEX ends the day with a small-bodied spinning-top candle at support/resistance.

  Jeff Bailey   8/11/200,  3:53:34 PM
Internet Outage ... I think broadband cable went out just as I uploaded the 01:00 PM EST update. It looks like I missed some choppy trade in between.

  Linda Piazza   8/11/200,  3:48:26 PM
Our applause goes to Jeff B., who managed to get the last Intraday Update out despite having a downed cable connection much of the afternoon.

  Jeff Bailey   8/11/200,  3:46:55 PM
03:15 Update posted at this Link

  Linda Piazza   8/11/200,  3:40:27 PM
I like Jonathan's name better. I think Pring calls them "orthodox broadening formations" or something similar.

  Linda Piazza   8/11/200,  3:38:44 PM
There's a similar broadening formation on the OEX to the ES one Jane showed in her 15:28 post. I'd been watching it a while this afternoon, but the trouble with these formations is, how do you know when they've been broken, since they're broadening? Jane may be able to correct me, but if I'm remembering my Pring correctly, they're indicative of emotional-based trading (hence the big swings) and so it becomes difficult to predict the outcome (downside or upside break).

  Linda Piazza   8/11/200,  3:31:54 PM
Broad volume patterns continued to favor the bulls as of a few minutes ago although adv/dec lines can change quickly. That's about all I can say that's definitive or that might not change before the post appears on the Monitor.

  Linda Piazza   8/11/200,  3:19:09 PM
For the first time since this morning's precipitous drop, the OEX has retraced more than 50% of that drop, climbing now above the 494.75-495 level that marked that 50% retracement.

  Linda Piazza   8/11/200,  3:13:06 PM
An OEX move above 496-496.25 might negative the possibility of a H&S forming on the OEX 30-minute chart.

  Linda Piazza   8/11/200,  3:11:57 PM
One problem for me today is the appearance of the 60-minute oscillators. This kind of range-bound trading flattens them as has happened with 60-minute RSI and MACD, for example. I like stochastics, but they're much more fickle, and so don't like to rely on them alone. We OEX Swing Traders need to have a pretty good idea of what's happening on that 60-minute chart as a good Swing Trade might take place while oscillators cycle from one extreme to another, for example. We need those shorter-interval charts to fine-tune our entries and exits and the longer time-frame ones to make sure we have a sound overview of the markets, but it's those 30-minute and 60-minute charts that provide us with the best information for Swing Trades. Of course, if markets move big this afternoon, that might reset some of those oscillators.

  Linda Piazza   8/11/200,  3:03:11 PM
Good point, Jonathan. That's a good exercise for all of us. Yes, it does feel like opex week, doesn't it?

  Linda Piazza   8/11/200,  2:58:04 PM
One reader mentions seeing an inverse H&S on the NDX 30-minute chart. I can see it, perhaps with a neckline at 1228 or so. If it's valid, the decline might stop near 1210-1212. Perhaps Jonathan and Jane have mentioned possibility this already. As I mentioned, however, it's possible to see formations everywhere once a market has squiggled around enough within a trading range. That's the danger.

  Linda Piazza   8/11/200,  2:49:11 PM
You know those games in which you scramble the letters that compose a certain word and see how many different word combinations you can make out of those letters? I feel that way when I'm studying the charts today. I can see a possible H&S on the OEX five-minute chart, but on the 60-minute chart, I see the OEX finding support at the 60-minute 21-pma, perhaps predicting that it will head back up again toward the upper Bollinger band, with the 5(3)3 stochastics having made a bullish kiss. Those are about the only bullish chart characteristics I can find, however, as the OEX turned down today from the test of the 21- and 50-dma's and from the midline of the 60-minute regression channel depicted in an early post this morning.

  Mark Phillips   8/11/200,  2:44:54 PM
NEM $38.93 (+0.61) Following along with my prior comment about strength in the XAU, traders following our bullish PremierInvestor play on shares of NEM should be thinking about their exit strategy. When we initiated the play following the break above the $34 resistance level, we set a target for the $39-40 area, expecting that strong historical resistance (albeit 5-6 years old) would likely put the kibosh on any further upside until after some healthy consolidation at this higher level took place. NEM is trading near its high of the day and looks like it wants to trade above $39 before the closing bell. Conservative traders that took advantage of any of the numerous entry opportunities in the past couple weeks should be giving serious consideration to harvesting some gains up here.

  Jeff Bailey   8/11/200,  2:40:52 PM
Jeff is having cable connection problems and has not been able to post for about an hour. As soon as the connection is re-established, he will begin posting again. His regular 3:15 update might also be delayed today as a result, and he has not been able to check email. (Linda)

  Linda Piazza   8/11/200,  2:38:39 PM
The OEX is right back to the possible right-shoulder level, and once again finding resistance there.

  Mark Phillips   8/11/200,  2:34:38 PM
Following the first hour ramp and the second hour plunge, I've been squinting and contorting, trying to discern a viable trend in today's tape. I don't have much to show for the effort though, with some sectors relatively strong and others weak. James hit the highlights in an earlier post, but here's what caught my attention -- the strongest sectors that I track are Biotechs (BTK.X) +1.43%, Software (GSO.X) +1.61% and Semiconductors (SOX.X) +2.00%. What do each of these sectors have in common? They all exhibited notable weakness last week, so this looks like nothing more than an oversold rebound ahead of tomorrow's FOMC meeting. The GSO index showed less weakness than the other two last week, but adding to the lift in the group is the positive action in shares of ORCL following the Merrill Lynch upgrade this morning.

There is one more sector that is showing solid gains today, and that is the Gold & Silver index (XAU.X), currently up 1.90%. That strength is certainly no great surprise with the dollar weak again today and bond yields showing solid gains again. As dollar-denominated assets swoon, hard assets like gold and silver will more than likely continue to shine.

  Linda Piazza   8/11/200,  2:23:53 PM
Swing Trade Signals
That OEX H&S on the five-minute chart is certainly looking more plausible now although it's far from being confirmed and may never be. Whenever I see a market climb to a higher high and then fall all the way back to the support from the previous high, I always start thinking of a H&S as a possibility, just in case. A fall through the neckline (somewhere around OEX 491.50-492) would confirm the H&S and a push above 498 would negate the possibility of one forming. It's also appearing that the test of the 50-dma this morning might have made a good short/put entry on the OEX, but since the Dow had managed a climb back above its 50-dma on Friday and remains above it currently, that was far from a foregone conclusion. For traders interested in the H&S possibility, a fall through the neckline gives a downside target of about 486, but the OEX will encounter several layers of support between here and there. I'm not going to issue an official Swing Trade entry for this possible and iffy trade ahead of the FOMC meeting during opex week, however.

  Linda Piazza   8/11/200,  2:11:56 PM
The OEX five-minute chart may be setting up bearish divergence, with lower price highs and equal 21(3)3 stochastics highs. It's tentative as yet because the rollover is tentative as yet.

  Linda Piazza   8/11/200,  2:01:10 PM
No push this afternoon? Or is it just late? Like the ES contract Jonathan mentioned, the OEX hovers between support and resistance. It did find resistance at the top of the five-minute gap from this morning and at the possible right-shoulder level, but it hasn't fallen beneath support yet, either, and could go either direction. Currently, the OEX tests the support offered at the bottom of the regression channel that may or may not be a bear flag.

  James Brown   8/11/200,  1:58:27 PM
Sector winners and losers

Approaching 2:00 PM on Wall Street and suddenly everything is turning green except for the financials, homebuilders, insurance and utilities.

Sector gainers:
DDX - disk drive index: +2.45%
SOX - semiconductors: +2.02%
XAL - airline index: +1.99%

Sector losers:
DJUSHB - homebuilders: -1.28%
XBD - broker/dealers: -0.95%
BIX - banking index: -0.33%

  Linda Piazza   8/11/200,  1:46:03 PM
That push that's typical of this time period should be arriving any moment now. Of course, now that we're expecting it . . .

  James Brown   8/11/200,  1:45:57 PM
Oil prices - Currently oil is hovering around $32 a barrel. This is bad news for any prolonged economic recovery. Looking over a Lehman Brothers research note out this morning their oil analyst expect oil prices to average $21 a barrel in 2004. This would be a very positive development but they (LEH) didn't offer any details on what would cause oil prices to drop.

  Linda Piazza   8/11/200,  1:42:49 PM
Here's what I'm watching on the OEX five-minute chart: Link

  James Brown   8/11/200,  1:37:16 PM
Boston Scientific - BSX - One stock we've had on and off the watch list the last two weeks is BSX. Shares broke out of a bull flag consolidation in late July. Since then the stock has consolidated sideways unable to break above resistance at $65. BSX does have a stock split coming but it's not payable until October. While it has a catalyst to spark a new rally it may not occur for a couple of more weeks. We'd put this one on our watch list for a close over $65.

  Linda Piazza   8/11/200,  1:30:45 PM
Volume patterns are still positive, but not nearly as rosy as they appeared earlier this morning, with adv:dec ratios at 17:15 for the NYSE and 17:12 for the Nasdaq, and with up volume only 1.5 times down volume on the NYSE. Up volume is still a hefty 3.5 times down volume on the Nasdaq, however. Total volume as of a few moments ago was 573 million on the NYSE and 732 million on the Nasdaq.

  Linda Piazza   8/11/200,  1:26:35 PM
If the OEX successfully clears the 494.60-495.25 zone, then that 496.50-498 resistance zone comes next. In that case, the possibility of a H&S pattern would be negated. The usual 1:35-1:55 push toward either resistance or support and the resultant behavior of the OEX may be the deciding factor. Rather, it may be the resultant behavior of the Dow on a push toward 9200 or down toward support that decides things for us.

  James Brown   8/11/200,  1:18:26 PM
DRG - drug index - The DRG continues to deteriorate in its descending channel that began in mid-June. While the sector should be near support we caution against trying to pick a bottom here. We would keep an eye on it as many of its technical oscillators might suggest a reversal is in the works. See chart: Link

  Linda Piazza   8/11/200,  1:16:46 PM
If the OEX should continue rising, be watchful now in the OEX 494.60-495.25 zone, as that could be the right shoulder level if the OEX is going to round over to form one. (See the 30-minute OEX chart.) OEX 494.60 is also near the top of that five-minute gap from this morning that I mentioned in my 13:12 post.

  Linda Piazza   8/11/200,  1:12:37 PM
Did you notice that the OEX advance at 12:40 stopped right at the bottom of that five-minute gap produced earlier this morning? That gap appears inconsequential, but it hasn't been in trading today. First, the OEX tumbled down from its high with the fall stopping at the bottom of that gap. The arrest was only temporary, however, as the OEX rose only minimally before rolling over again and ultimately falling through the gap. Yet even that temporary arresting of the decline, as well as the later arresting of the OEX's climb, shows that it's impacting today's trading. Now the OEX comes up to test that gap again.

  James Brown   8/11/200,  1:04:53 PM
BTK - Biotech index - The BTK got hammered from July 31 through August 6, falling from 470 to 420. Since then we've not seen much of a bounce in the group. New resistance at 431-432 appears to be holding it back but if you squint really hard it looks like it's producing higher lows the last three days.

We've had our eye on the largest component of the BTK, AMGN, for a while. The breakdown under the simple 50-dma was bad news but support at the psychological $65 level held. Shares of AMGN bounced back but have now encountered selling pressure at its declining 10-dma. The stock has failed at the 10-dma twice in two days. A move back under $65 could have this stock making our new put list.

  Linda Piazza   8/11/200,  1:00:29 PM
Swing Trade Signals
What Jim had to say about the Momentum Model on Futures trading goes double for the OEX trades ahead of the FOMC meeting tomorrow. With OEX trades, we often don't have the ability to get in and out quickly, as it sometimes takes days for a trade to work. With the OEX currently in this DMZ zone and with that meeting tomorrow, I'll be reluctant to take any trades in the Swing Trade Model unless the setup is spectacular. I haven't seen any like that yet, although this morning's climb into resistance and rollover there might have been a decent one that will ultimately prove lucrative to traders who took it on their own.

  James Brown   8/11/200,  12:55:48 PM
Gold - As Jon mentioned on the Futures monitor about 30 minutes ago, gold futures are up strongly today. The December contracts are up about $4.20 to $362 an ounce. Oddly we're not seeing much of move in the XAU gold & silver index. The XAU is positive but today's candle looks like a doji, which normally indicates indecision. It will be interesting to see if gold can move above its late July highs of $370.

  James Brown   8/11/200,  12:51:29 PM
We're seeing lots of green in the tech sectors today. All of these indices: DDX, GHA, GSO, INX, SOX, NWX are in the green today. We're witnessing a bounce after Friday's decline (in the same sectors) but the bounce is rather small.

  Linda Piazza   8/11/200,  12:46:14 PM
The OEX pushes up, but the bullish case isn't made yet, either. On the OEX 30-minute chart, we now see the possibility of a H&S top forming, with a left shoulder at 494.50-495.50, a head at 497.66, a neckline at 491-492, and now the possibility of a right shoulder forming near 495 or even slightly lower. I'm full of warnings today, but maybe warnings are needed with the OEX swooping around in tight ranges that wouldn't prove profitable unless the absolute turning points were caught each time.

  Jeff Bailey   8/11/200,  12:45:19 PM
S&P Banks Index (BIX.X) 301.82 -0.33% .... session low of 300.09 not too far from correlative DAILY S2 and WEEKLY Pivot of 300.58 and 300.80 respectively. Move below these levels most likely signals weakness for SPX/OEX and range-trade type move back lower.

10-year YIELD ($TNX.X) higher by 8.6 basis points at 4.375%, and challenges our WEEKLY 38.2% retracement of 4.376% again. Certainly looks as if bond market trading this level as YIELD resistance right now.

  James Brown   8/11/200,  12:44:40 PM
Fifth Third Bancorp - FITB - Current put play FITB is holding up pretty well. Shares produced another rollover this morning and are seeing much more weakness than the BIX or BKX, both down about 1/3 of one percent.

  Linda Piazza   8/11/200,  12:34:43 PM
Is this a bear-flag climb into resistance on the OEX, doomed to break to the downside, or a bounce from support? That question isn't answered yet, but it should soon be as the OEX now climbs toward the 493.50-594 levels that were previously support.

  Jeff Bailey   8/11/200,  12:32:21 PM
Broker/Dealer Index (XBD.X) 550 -1.1% ... Aside from homebuilders, is sector loser today. No news that I can find, but overall NYSE and NASDAQ volumes have been lighter in recent session and may have some traders investors looking for lower revenues on looking-forward basis after stronger volume levels in recent months.

  Linda Piazza   8/11/200,  12:14:31 PM
We saw an OEX five-minute "p" accumulation pattern break to the upside this morning. Now the OEX appears to be forming either a bear flag or a "b" distribution pattern at the bottom of the quick fall from just below 498 to current levels. Are we going to see a downside break now? The formation looks like a classic bearish distribution pattern after a quick fall, but I just find myself reluctant to believe the OEX will necessarily fall below 491.50 and then 488 with strong support underneath, as long as volume patterns don't deteriorate much further.

  Linda Piazza   8/11/200,  12:03:13 PM
Which way does the OEX go now? Below 491.60 or above 493.50? I'm having trouble deciding today, but that quick drop had to have shaken up those in bullish plays. Still, the OEX stopped right on support from the last couple of weeks, with that stronger 488-491 support just below buoying up any bulls.

  Linda Piazza   8/11/200,  11:59:25 AM
Volume patterns have been changing some, with advancers and up volume still leading, but not by as hefty a proportion. A few more new lows are showing up, too.

  Ray Cummins   8/11/200,  11:54:45 AM
Spreads/Combos & Premium-Selling -- E-mail Replies

Ray, I closely follow your section on OIN and must say that I have learned a lot from you by just simply looking at the tables of spreads, combos, etc. Next to the general market comments, yours is the part of the OIN I go to right after for information. A long time ago, I downloaded from OIN a spreadsheet on ROI, margin reqs, etc., on covered calls, naked puts, and credit/debit spreads. Do you have a similar spreadsheet for evaluating strangles and straddles? If you do, would you please provide the subscribers with it? If not, would you please give me some quick formulas for evaluating those option strategies; margin requirements, ROI, etc? I would really appreciate your help on this. A lot of other subscribers will also be thankful. Best Regards, EZ (London).

Hello EZ, Regarding the spreadsheet, we did not include straddles and strangles in the calculations, however the formulas for margin/collateral are fairly simple:

Debit straddles/strangles -- No margin; full cost of each option paid in advance (equivalent to buying call and put options outright).

Uncovered "naked" options -- For individual options (uncovered equity or index calls or puts), the margin requirement is the greater of the following per contract:

Premium received plus 40% of the underlying issue price, minus the out-of-the-money amount
Premium received plus 20% of the underlying issue price.

Uncovered equity or index straddles/strangles -- For short combinations, the margin is generally equal to the greater collateral requirement of the two positions (uncovered calls or puts), plus the premium amount received from the other position (uncovered calls or puts).

For practical purposes, OTM credit strangles require approximately 25% of the underlying value of the stock as an initial margin requirement and ATM credit straddles require approximately 40% of the underlying value of the stock as an initial margin requirement. For the official OCC margin requirements, go here: Link

  Jeff Bailey   8/11/200,  11:49:06 AM
10-year YIELD ($TNX.X) Chart at this Link with some observations of a range to monitor. Also making note that last week's auction on 10-year was at 4.37% YIELD, and that was tested this morning with YIELD high of 4.385%. I think that trade action put a lid on early equity gains. (showed in BIX.X for sure.)

  Linda Piazza   8/11/200,  11:46:23 AM
Swing Trade Signals
The OEX now tests important support, and some chart characteristics now appear weaker than they did earlier today. I've been expecting a test of this support and another bounce attempt from this level, but I'm not sure how strong the bounce attempt will be or even if we'll get it since support drops so quickly. I'm also not sure we'll get a good entry here, as I see even stronger support near 490, and that doesn't give us enough of a trading range on OEX options. We may get our next entry as a long, then, from that support and may have to pass up this possibly lucrative short/put possibility. I mentioned last week that I often see these possibilities set up on a Thursday, but not follow through until Monday, but we can't hold options easily over a weekend the week before options expiration. The OEX nears the bottom of that support zone from last week now. Let's see what develops.

  Linda Piazza   8/11/200,  11:35:44 AM
Remember this OEX chart from last week, too? Link The OEX is right at the midline of this channel. Is it going to make an attempt to climb to the top of the channel or will it drop to the bottom? Last week, we (I) kept assuming it would drop as it appeared to turn down from the midline, but today it's climbed above it. The outcome is far less certain, I think.

  Jeff Bailey   8/11/200,  11:31:28 AM
Buy/Sell Program Premium Levels ... Our friends at HL Camp & Company have posted today's buy/sell program levels. They are set at $0.12 for buying and $-2.28 for selling.

  Linda Piazza   8/11/200,  11:30:37 AM
The Dow slips back below 9200 now, testing that support.

  Ray Cummins   8/11/200,  11:29:40 AM
Spreads/Combos & Premium-Selling -- Portfolio Activity

Bradley Pharmaceuticals (NYSE:BDY), which sells over-the-counter prescription pharmaceutical and health related products, is up over 10% this morning, despite a lack of any "public" news. The issue has been in a steady up-trend since late 2002 and that was the primary basis for our speculative (bullish) calendar spread at $22.50. With the stock trading near the sold (call) strike on the first day after the position was offered, upside potential will be limited for those who did not get in (at the target debit) near the opening bell.

  Linda Piazza   8/11/200,  11:26:08 AM
Remember this trendline from last week? Link If OEX 493.50-494 doesn't hold, this trendline is likely to do so since it crosses near the 490.50-491.50 historical support zone, depending on how it's drawn.

  Linda Piazza   8/11/200,  11:20:38 AM
Swing Trade Signals
I had hoped to see a test of OEX 500, but we may not get that test. We saw last week what results we garnered trying to go short/put within today's range and I wanted a higher entry if a short/put is our next entry. That next entry will probably be a short/put, but is not guaranteed to be, depending on how the OEX handles support and resistance today. Right now, we're in the middle of a DMZ for the OEX, however, with no clear entry either direction. Or at least none that I see as yet. I still suspect that we'll get an attempt to bounce back up to the 21- and 50-dma's, with the outcome still not decided.

  Jeff Bailey   8/11/200,  11:15:16 AM
978.93 ... this is below 979 suggested trailing stop. BIX.X -0.43%, BKX.X -0.34%, XBD.X -0.67% and IUX.X -0.11% all exhibit financial sector weakness here.

  Linda Piazza   8/11/200,  11:14:41 AM
The OEX is arriving at this test of stronger support a bit more quickly than I expected, and so it's likely that it could just drop through. The OEX built such a strong base between 489 and 494 last week, however, that I have expected at least a modest bounce attempt when the OEX hits this level.

  Linda Piazza   8/11/200,  11:11:06 AM
Welcome to options expiration week trading. The OEX drops quickly now through this morning's support, but will 493.50-494 hold? I suspect it will, at least temporarily.

  Linda Piazza   8/11/200,  10:59:07 AM
OEX 496.50 didn't hold, as I suspected it wouldn't. Now the 496 breakout level is being tested. I'm not ready to enter short/put however, as we're still within levels that might guarantee a further testing of overhead dma's, with the outcome of a second test as yet unsure. We may be missing a good opportunity here, but I'm not willing to jump in short/put just yet. There's a strong base just below, and I think it likely that the OEX will at least attempt a bounce from that base if it should decline down to 493.50-494. It's that bounce attempt that might give us the most information.

  Jeff Bailey   8/11/200,  10:56:24 AM
S&P Banks Index (BIX.X 302.70 -0.04% ... edges into negative territory here. I view this action, along with some early weakness in the homebuilders as attention being given to today's higher trade in Treasury YIELDS.

Can begin to weigh on recent gains for INDU/SPX/OEX, while tech may see some brief "dead cat bounce."

  Linda Piazza   8/11/200,  10:50:26 AM
So far, the OEX finds support near 496.50, however tenuous that support may be. I'm not convinced yet that it's going to hold, but still watching.

  Jeff Bailey   8/11/200,  10:45:50 AM
10-year YIELD ($TNX.X) ... higher by 8.1 bp at 4.37%. I think we're getting into "touchy" area here for YIELD. WEEKLY pivot retracement has 38.2 retracement at 4.376% YIELD, and move much above there may bring sellers into stocks. WEEKLY pivot is at 4.313%. Current thought is selling in front of tomorrow's FOMC meeting. Not that market is expecting a rate cut, but probably looking for bullish tone from committee.

Dow Jones Home Construction (DJUSHB) 431.77 -0.71% notable laggard in otherwise broadly positive sector action.

  Linda Piazza   8/11/200,  10:43:15 AM
The OEX comes back to test support, possibly at 496.50, or lower at 496 or even 494.30.

  Linda Piazza   8/11/200,  10:40:41 AM
Volume patterns appear as positive as you would think they would be, with advancers 1.9 times decliners on both the NYSE and the Nasdaq. Up volume is 2.8 times down volume on the NYSE and nearly twice decliners on the NYSE and 5.1 times down volume on the Nasdaq. As of a few minutes ago, however, volume was light at under 200 million on the NYSE and just at 300 million on the Nasdaq.

  Linda Piazza   8/11/200,  10:34:59 AM
The OEX now tests its 50-dma.

  Linda Piazza   8/11/200,  10:32:04 AM
On the breakout above the "p" accumulation pattern, the OEX produced a larger-than-normal five-minute candle. The 50% retracement of that candle lies at 496.59, and that area might now provide some support on OEX pullbacks. That area's support is backed up now, too, by the 21-dma's support, with the 21-dma now at 496.87 and below the OEX's current level. With the OEX above the midpoint of the regression channel I showed in the chart linked to this morning's 9:08 post and above the 21-dma, the last short-term hurdle for the bulls now is a move above the 50-dma at 497.76 currently. Then the OEX might be expected to test 500 and then 504-506, the top of the regression channel, depending on when it's hit.

  Jeff Bailey   8/11/200,  10:20:16 AM
S&P 500 Index (SPX.X) 984.54 +0.71% .... for Index Trader Wrap, would be looking to sell long 988 from 965 bullish profile, raise stop to 979.00

  Linda Piazza   8/11/200,  10:19:08 AM
Now that's a breakout! It's also bringing the OEX right up into resistance. It's time to start watching now for a short/put entry, but I'm still not sure we'll get it today.

  Linda Piazza   8/11/200,  10:17:26 AM
We talk a lot about "b" distribution patterns we see on the OEX five-minute charts, but not often lately about "p" accumulation patterns, but that may be what we're seeing today. The OEX climbed, and now consolidates between 495.25 and 496, with the predicted breakout to the upside. Just as with "b" distribution patterns, though, there's no guarantee that the breakout will be in the expected direction, especially as the OEX approaches those 21- and 50-dma's, now at 496.80 and 497.73. (Note: the breakout happened as I was posting this.)

  Jeff Bailey   8/11/200,  10:15:20 AM
QQQ $30.29 +0.77% .... here's an updated QQQ chart with new WEEKLY pivot retracmenet overlaid. Link

  Jeff Bailey   8/11/200,  10:06:22 AM
S&P 500 Index (SPX.X) 982.41 +0.47% ... per this weekend's "Ask the Analyst" column. SPX would be moving into quarterly zone of resistance here.

  Linda Piazza   8/11/200,  10:06:20 AM
I still have a couple of regression channels on my five-minute OEX chart that were carried over from last week's trading. One is an ascending channel that began forming Thursday morning. The OEX fell out of that channel on Friday. It's intriguing that in the last twenty minutes, two five-minute candles stopped exactly at the bottom of that regression channel. Then the third candle climbed above the line. The fourth candle's lower shadow rested exactly on the bottom line, as if it found support there.

  Linda Piazza   8/11/200,  10:02:02 AM
Earliest volume patterns show strength, but those early volume patterns can be distorted, too. However, it still looks as if OEX 496.50-498 will be tested, if not higher levels. It's a good thing we closed the Swing Trade short/put Friday afternoon, but it still looks as if a short/put position may be the next signal we receive. That may not happen today and that outlook could change, however, depending on whether the OEX climbs above and maintains important resistance.

  Linda Piazza   8/11/200,  9:55:52 AM
I wouldn't be surprised to see the OEX test that gap on the five-minute chart during this first reversal that comes about this time. That gap lies from 494.17 to 494.57. A continued move up without testing at least the top of that gap would show strength, if that occurs. The OEX looks to be headed up to test those linked 21- and 50-dma's near 497, if not the 499-500 resistance, but it's early and early patterns can be distorted.

  Jeff Bailey   8/11/200,  9:51:02 AM
Dow Industrials (INDU) 9,201 +0.11% ... Here's quick look at Dow's chart with new WEEKLY pivot retracement overlaid. With Stochastics now approaching "overbought" on Daily chart, looking for WEEKLY R1 to provide resistance.Link

  Linda Piazza   8/11/200,  9:47:11 AM
The OEX handily jumped above that midpoint of the first five-minute range and above the day's high. It's zooming up to test that 496.50-498 resistance.

  Linda Piazza   8/11/200,  9:40:22 AM
Stronger support for the OEX lies just below at 492.50 and then near 491.60, but so far there's no guess as to whether that stronger support will be tested or whether stronger resistance overhead will be tested.

  Linda Piazza   8/11/200,  9:36:36 AM
The 50% retracement of the first five-minute OEX range lies at 494.12 and has already been breached. Bears want to keep the OEX below that 494.12 level, while bulls want to see this first test of support succeed and the OEX move back above 494.12.

  Jeff Bailey   8/11/200,  9:19:27 AM
09:00 Update posted at this Link

  Linda Piazza   8/11/200,  9:08:49 AM
Swing Trade Signals
The Swing Trade Model is flat this morning. For the last week or two, I've been wondering out loud if the OEX could be setting up a regression channel--a potential bull flag--instead of the rectangular or triangular consolidation patterns we've been watching. Last week's dip and rebound makes that an even stronger possibility, and I've marked the possible regression channel on the OEX's chart. Link This is just one possibility, however, and right now I don't give it stronger weight than other possibilities, particularly with the Nasdaq breaking down out of a similar chart formation. If it's a valid formation, the OEX is just now poised at the midline resistance, with other horizontal resistance layered just overhead. The 496.50-498 resistance might be particularly strong, especially as the 21 and 50-dma's are linked just overhead at 497.11 and 497.48. Sometimes weak markets are turned back at midline resistance, while strong ones move to the top of the channel. When the OEX ended the week last week, it appeared poised to move through that next resistance. Let's see if it does. This is option expiration week, so we'll want to be especially careful with our entries. I don't want to enter long just ahead of that strong resistance and then the closely layered resistance overhead. This is especially true when the Nasdaq and Dow can't seem to cooperate on both moving up at the same time over the last few weeks. We may miss some entries that turn out to be good, but that's better than catching too many that turn out to be bad.

  Linda Piazza   8/11/200,  9:08:19 AM
Good morning. With the week-long Japanese holiday underway, the Nikkei could be in for some volatile trading this week. Monday, the Nikkei opened up by about 20 points, reached down to test the Friday's closing level and then climbed the rest of the day, closing near its high. The Nikkei closed up 160.27 points or 1.72%, at 9487.80. Most other Asian bourses climbed, too, although the Taiwan Weighted closed down 0.34%. South Korea's Kospi closed slightly up, by 0.6%, and Singapore's Straits Times climbed a more substantial 1.24%. Hong Kong's Hang Seng gained 1.49%, and China's Shanghai Composite gained 0.21%.

Although most Japanese are on a traditional holiday this week, a government office will be releasing GDP numbers tomorrow that many hope will show economic growth. Expectations are for a 0.7% growth in GDP. In Singapore, the impact of SARS resulted in an 11.4% GDP decline in Q2.

Expected GDP numbers are in the news in Europe, too, with Germany's GDP to be released Thursday, and with many fearing that the world's third-largest economy will show a contraction in its economy. Perhaps that was one reason the DAX appeared to be underperforming other some other European bourses this morning, with the DAX trading down 0.53 points or 0.02%, to 3331.71 as of this writing. The FTSE 100 trades up 23.20 points or 0.56%, to 4171.00; and the CAC trades up 19.28 points or 0.61%, to 3184.77.

CNBC Europe was also announcing a greater-than-expected European PPI number during the middle of the night last night, but the print sources are not carrying the information today, so I can't confirm the actual numbers. European gainers today included many oil companies and banks, with Goldman Sachs raising embattled Deutsche Bank for an in-line rating from an underperform one. The GS analyst felt that the market had discounted Deutsche Bank's problems and thought its recent underperformance would stop. Many automakers declined.

  Jeff Bailey   8/11/200,  9:07:49 AM
Yesterday's Market Monitor has been archived. You may view it and any previous days here: Link

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