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  Linda Piazza   8/27/200,  4:00:00 PM
The OEX does look as if it will end the day with that tiny doji resting just above the 50-dma but below the 10-dma. Is that bullish or bearish? Neither, as far as I can tell. It's also ending the day with candles jammed just under the descending top trendline of the 120-minute regression channel shown in my 15:07 post. Is it bullish or bearish that it couldn't break through, but yet maintained highs right underneath that resistance? I guess it depends on your outlook. It also depends on the outcome, and for that, we may have to wait until tomorrow. I hope we don't have to wait until next week!

  Linda Piazza   8/27/200,  3:43:07 PM
Reader Question: I have been following your commentary of the OEX for two weeks now, I assume you are trading the index via options. Some of your calls(long or short)has a spread of 5-7 pts.(intra-day trades) from entry to exit...i would like to know how you manage slippage with tight targets. Thanks.

Response: Great question, and encapsulated in that question lies the reason that I've decided that we won't be trading the OEX this week, on the low volume and with the tight moves we've been having. Fortunately, this week the spreads have been smaller on the OEX than they sometimes are due to the low volatility. As I type, for example, many of the September calls and puts near the money have spreads of only $0.20, and that's extremely low for the OEX. I've traded it at times when spreads were more than a dollar. These current small spreads help traders to manage the slippages.

In my personal trades, I usually choose an ITM option when I expect the move to be small so that the option has a high delta and moves more in concert with the OEX. Still, I'm aware that those trading the Swing Trades might choose ITM, ATM, or OTM options. If they're choosing OTM options, delta will be low and they're going to need a three to four-point OEX move just to recapture the spread and the commissions. Lately, that's all we've been getting, so that trades have to entered and exited at exactly the right point just to break even. There's no room for capturing a chunk of the middle for those with OTM options.

Some traders manage the slippage by getting in between the bid and ask, an absolute necessity when the OEX had spreads more than a dollar wide, but that's not really possible with a $0.20-point spread. The Swing Trades weren't designed to be intraday trades, either, but to trade a longer trend, and require wider stops so that we're not stopped out on a small countermove that will be reversed in a few hours while we're following a trade for two to five days. There just hasn't been a two-to-five day trend to follow lately.

  Jeff Bailey   8/27/200,  3:41:58 PM
03:15 Update posted at this Link

  Jane Fox   8/27/200,  3:38:06 PM
On August 13 I showed an image of a bearish McDonald's (MCD) chart. I would now like to do an update with my thoughts on the formation. Link

  Linda Piazza   8/27/200,  3:28:08 PM
The TRAN has dropped back below this trendline, one I've had on my daily chart since the end of October, building the ascending trendline off the higher lows that were being printed then. As I mentioned yesterday, although it seemed a rather minor trendline at the time, I've kept it on my chart because the TRAN keeps trading in relationship to the trendline. Here's what it's doing now: Link

  Linda Piazza   8/27/200,  3:17:53 PM
So far, today's daily OEX candle is the smallest doji I think I've ever seen on a daily chart. Because it's being produced in the middle of a consolidation zone, I wouldn't necessarily say it has either bearish (evening star) or bullish implications, but it certainly is indicative of a stalemate between bulls and bears today.

  Linda Piazza   8/27/200,  3:07:56 PM
Remember this OEX 120-minute regression channel? Look how the OEX trades in relationship to that channel. Link

  Linda Piazza   8/27/200,  2:59:56 PM
I've got an alert set on Q-charts for OEX 499, among other prices. The alarm has sounded all day, with the OEX crossing 499 both directions. I have learned one thing, though. The alert sounds before the candle prints the new price.

  Jeff Bailey   8/27/200,  2:52:46 PM
Bearish Profile in the shorter-dated (1-3 year maturity) Lehman Treasury iShares (AMEX:SHY) $81.91 -0.13%.

5-year YIELD ($FVX.X) making a session high of 3.554% into the close.

  Linda Piazza   8/27/200,  2:50:44 PM
Now that the OEX broke the ascending trendline depicted in my 12:59 post, it heads up to test it from the underside. At the same time, it's testing the 50-dma, now down at 498.21. Below that lies the 21-dma, at 496.95 and in the midst of the 496-497 congestion. Don't you wish it would just do something? After all the false breakouts and breakdowns, would you trust it if it did?

  Jeff Bailey   8/27/200,  2:47:09 PM
5-year YIELD ($FVX.X) higher by 7.1 basis points. Just seeing this now. 5-minute interval chart of this bond's YIELD shows reverse head/shoulder pattern developing. Head at 3.459%, shoulders at 3.50% and neckline right at yesterday and today's high yields of 3.544%.

15-minue left in today's bond trade, and a quick bout of selling into its close, move above the neckline, could be a bond market tip to tomorrows economic data. Thinking here would be a quick round of selling into close is for higher GDP data, but also chain deflator.

Quick objective for YIELD on this pattern would be 3.631%.

  Linda Piazza   8/27/200,  2:42:41 PM
If the OEX fails to hold 498 and then the day's low at 497.64, selling could accelerate quickly just as the buying did yesterday. The 30- and 60-minute MACD's are showing a tendency to roll now, with the 30-minute having already made a bearish cross and begun turning down toward zero, and with the 60-minute having begun to hook over just as it tried to push back above zero. So far, those levels have held and we all know that oscillators can redraw themselves, but watch stops whether in a bullish or a bearish play. People have been reminding us of the "never short a dull market" adage, but as Jane mentioned earlier this week, the better adage might be "don't trade a dull market" because bulls can get burned in low-volume markets as quickly as bears.

  Jeff Bailey   8/27/200,  2:37:55 PM
Dow Industrials (INDU) 5-minute bar chart Link , which could serve as comparison chart to QQQ ( see 14:25:36 post) into tomorrow's trade.

Citigroup (C) $43.02 -0.7% Link and JP Morgan (JPM) $33.22 -0.47% Link give a little bank/financial exposure.

  Jeff Bailey   8/27/200,  2:25:36 PM
QQQ 5-minute bar chart with our WEEKLY/MONTHLY pivot retracement levels at this Link

Bears don't look overly nervous, but QQQ trading somewhat similar to discussion in last night's Index Trader Wrap.

I would think technology/qqq (as it relates to index composition) stocks are less vulnerable to inflation type fears should we see a pop in chain deflator. Recent economic data may suggest a slight upward surprise to Q2 GDP, and if so, then potential gap open into our "zone of resistance."

  Linda Piazza   8/27/200,  2:23:18 PM
I get the feeling that the markets are finally on the verge of doing something, but what? The OEX keeps tightening its range as I keep redrawing that upper trendline to make sense of today's trading. Is that a symmetrical triangle, broken to the upside and with support successfully traded? Is it a bearish rising wedge in the making?

  Ray Cummins   8/27/200,  2:07:04 PM
Spreads/Combos -- Readers Write E-mail Replies

Hello Ray, How are you doing? I am completely baffled at something that I would like to ask your opinion on...

1. On 08/20 @ 12:30pm CST, Netflix (NFLX) was trading at 28.18 when my Bull Call spread was filled as follows:

Long March 2004 27.5 Call / Short March 2004 30 Call for a net debit of 1.5 per contract.

2. A week later, NFLX is trading at 31 and I thought a 10% rise would increase my spread value marginally. Instead it is still less than what I paid for: 0.80 to close the spread.

Does this sound about right? Or [was it] a bad fill or [was] my strategy flawed?. I am clueless. Cheers, PA

You have encountered one of the primary problems with distant-expiration spreads: the underlying issue has to move substantially to produce a profit in the near-term. The most obvious reasons are: the time-value premium in the options, the relative price/leverage of the option strike prices (buying ATM/selling OTM), and slippage (the difference between the bid/ask prices). The first two concepts are fundamental components of option pricing (read Sheldon Natenburg's book, Options Volatility & Pricing Strategies), while the problem of slippage is simply an inherent part of trading financial instruments and it is more pronounced in long-term, ATM/OTM and illiquid options.

At least you can take solace in the fact that you are picking good stocks...just make sure that you are choosing the appropriate strategy to meet your profit goals/time-frame in each position. Good Luck!

  Linda Piazza   8/27/200,  2:01:50 PM
That wasn't much of an upward push on the OEX, not even getting so far as yesterday's high, much less the 500.30-501 resistance. Now the OEX tests the bottom of the symmetrical triangle after having broken through the top earlier. It's getting smacked down pretty quickly now, but will the downside carry it any further than the upside did a few minutes ago?

  Linda Piazza   8/27/200,  1:50:22 PM
Here comes the push and the test of next resistance, perhaps. If the OEX can push through 500.30-501, then we can't rule out of a test of 504. If it gets smacked back down again, as it was yesterday, then I would expect stronger selling than we saw yesterday after it retreated. That's all just a guess, of course.

  Linda Piazza   8/27/200,  1:39:46 PM
With the OEX holding so near the highs after yesterday afternoon's spike, and holding now just above its 50-dma, my thinking is that the push that usually comes about this time of day might be a push to the upside, toward that 500.30-501 next strong resistance. I've been wrong before about the direction of the push, however. I've even been wrong about whether there is a push this time of day, but that's rarer.

  Linda Piazza   8/27/200,  1:33:38 PM
As I've been scanning stock charts this morning, I'm finding a lot of stocks (mostly tech) that appear on the verge of an upside breakout, and a lot of stocks (some tech, some financial, some cyclical) that appear on the verge of a breakdown. It's hard for the market to get much traction either direction when some stocks seem to want to go one way and others another way. I see a lot of stocks that appear to be forming right shoulders of H&S formations (GE, C, SOHU, JPM come to mind), but instead may be just on their way toward a new relative high.

  Linda Piazza   8/27/200,  1:29:09 PM
The OEX now comes down to test the top of the symmetrical triangle. It's often on these retests when we learn whether the breakout was real or not. Be careful, as we'll soon be entering the 1:35-1:55 period when we often see a strong stop-running push one direction or the other.

  Linda Piazza   8/27/200,  1:24:59 PM
If the OEX should turn down from here along with those five-minute 21(3)3 stochs, which are now pointing straight up but are deep in territory indicating overbought conditions, that would probably just mean that I'd drawn my upper trendline wrong, although it had three touchpoints. So far, though, neither the OEX nor the five-minute stochs are showing any propensity to turn down.

  Linda Piazza   8/27/200,  1:19:53 PM
The OEX now tests the top of the symmetrical triangle pictured in my 12:59 post. As it does, the five-minute 21(3)3 stochastics have cycled all the way back up toward overbought levels, but they haven't yet begun to turn down. There doesn't appear to be a lot of "oomph" left on this cycle round, but tell that to the price, as it's just popped above the triangle as I typed.

  Linda Piazza   8/27/200,  12:59:53 PM
Here's what I'm watching on the OEX five-minute chart: Link

  Jeff Bailey   8/27/200,  12:44:17 PM
12:00 NH/NL readings for NYSE and NASDAQ at this Link

Was monitoring 5 day and 10-day averages into yesterday's close, which at the time showed ratios even. Despite some today's NH having large upper-hand, see 5-day averages on both NYSE and NASDAQ slightly below 10-day. Partial observation of why I think we might see some "sell the news" on Thursday's economic data. Still.... rather difficult to read TOO MUCH into things when the lights are on, but not too many traders are at work.

  Linda Piazza   8/27/200,  12:31:58 PM
Since the five-minute 21(3)3 stochastics made its last bearish kiss and started down, the OEX has traversed a 1.24-point span. The current OEX five-minute pattern appears to be a symmetrical triangle formed at the top of the climb from yesterday afternoon. Currently, the stochs make a lower low while price (so far) holds at a higher lower. If the OEX turns up from here, that's signaling bullish divergence, but it could still continue to fall and make a lower low. As I mentioned earlier, I'm noting these patterns, but certainly not granting them great relevance. The light volume means that a single buy or sell program can undo everything being signaled on the charts, especially the five-minute chart.

  Jeff Bailey   8/27/200,  12:24:35 PM
OEX top % gainers at this Link here's PnF chart of OEX on conventional 5-point box scale. Link

Bullish theme develops in semiconductor with NSM Link and TXN Link at the top. Semiconductor Index (SOX.X) 444.15 +1.64% is tech winner today.

Not a gold stock in the bunch.... AMEX Gold Bugs Index (HUI.X) 191.27 +4.6%. Link

Aren't too many "financial" at the top either. Cigna is "insurance" Link

Here's a sorted list of OEX percentage losers. Making note to financials. Link

  Jeff Bailey   8/27/200,  12:16:12 PM
February 04 Gold Futures (gc04g) $375 +2.04% .... here's the chart of this gold futures contract discussed in last night's Market Monitor. Link

  Linda Piazza   8/27/200,  12:09:12 PM
Great analysis of the OEX, Jeff.

  Jeff Bailey   8/27/200,  12:04:30 PM
S&P 100 Index (OEX.X) ... here's daily interval chart. Link OEX really not doing much of anything. Have eye on MACD/Signal, which threatens bearish crossover. Break below 21-day SMA would be a level to perhaps see more notable weakness take place. Stochastics look to rebound from oversold area. While I can't read too much into a light volume session/weak, lack of bullishness at this point on a Stochastics turn higher has me thinking 503 resistance firm, vulnerable to 491 area.

Getting gut feel traders want to sell Thursday's economic data. While I would certianly think some inflation gains are good sign in a longer-term perspective, it will not surprise me in the least if Q2 GDP price deflator is stronger than economists' forecast, and that becomes the "excuse" for equities to sell off.

  Linda Piazza   8/27/200,  11:49:54 AM
With nothing much happening, there's a tendency to study the charts in great depth and try to discern the next direction. As I look at the OEX five-minute chart, I see a miniature reverse or inverse H&S forming at the day's high. Since these formations are generally formations found at market bottoms, it's important to know, before we assign it any relevance, whether they also form as continuation patterns. Why, yes, they do, according to my TA texts. That's another good thing about not trading actively on a low-volume day. We have time to look up the answers to our questions. With all that said, though, the volume is so low this week that I'm not personally going to assign a five-minute pattern much relevance. In any case, a move much below 498.50 would deepen the right shoulder too much and negate the pattern's potential. The neckline appears to be slanting down steeply, so a move much above 499.50 would seem to confirm the neckline break.

  Jeff Bailey   8/27/200,  11:38:23 AM
11:00 Update posted at this Link

  Linda Piazza   8/27/200,  11:33:54 AM
Reader Question: What might be your "thoughts" on EBAY here, in light of a move up from around 100 to 112 ish w/in 2 weeks. Made an 80% return on a 2 day option trade last week. I'm interested in holding calls through the split Thursday night. Stock "appears" to be behaving well. After hitting a high of 114 and change, pulled back to 100 and held during the recent downphase.

Response:First, congratulations on your gains. Second, it's my policy and that of many traders I know to sell ahead of a split, earnings announcement, or other happening that might have a "sell the event" potential. For that reason alone, I'd be somewhat wary of holding over the split. I'm also wary in general of the Internet-related stocks, because of the gains they've made recently. Here's what I notice on Ebay's daily chart, however: P&F first: Ebay is on a P&F buy signal, above the bullish support line, and in an "X" column. If I'm reading the P&F chart correctly, however, it's not so far from reversing back into an "O" column, which would indicate some short-term weakness. I see some P&F support down around 102 and of course we would consider the round-number support at 100 even if it didn't show up on any chart.

When I study the bar chart, I see that Ebay broke out of a bull flag formation in mid August and headed up again. That's a plus on the bullish side. We've noted a troubling tendency lately, though, for many stocks to create either lower highs or equal highs after breaking out of similar bull flags lately, and Ebay may be doing that, too. I note tentative bearish divergence on the 5(3)3 stochastics, with that divergence confirmed if Ebay's price continues turning down. The 5(3)3's have already turned down. There was bullish divergence on the stochs just before Ebay broke above its bull flag (lower lows on the stochs, higher low on price), so Ebay's stochastics moves do signal price developments, at least sometimes. The upper Bollinger band has turned up, indicating that if price were to turn up again, it could climb the underside of the BB. When price touched the BB last week, it was flat, repelling the price. The upturn in the BB is another plus on the bullish side. Moving averages have either stopped falling or have flattened, so that's a good sign. Volume has been dropping off, but it's been dropping off as Ebay consolidates, so that's as expected and not a particularly negative sign as yet. ADX is at 27.89, indicating a trend in place if you use 20 as a cutoff, but not if you use the stronger 30 as a cutoff. It hasn't been rising as Ebay broke through the top of its bull flag, but +DI did rise, indicating a rise in buying pressure. MACD broke above zero, but may now be showing the slightest hint of flattening. RSI has definitely flattened.

My conclusion? Ebay is currently consolidating, but if I were in a bullish position, I'd be happier if it were consolidating just after breaking through the recent highs rather than just under those recent highs. Oscillators show the slightest tendency to turn down as Ebay reaches that resistance, also a somewhat troubling, but not-yet conclusive development especially as that evidence is balanced by some tentative bullish evidence. Oscillators can and do turn right back up again. If that consolidation continues while they cycle all the way down again, that's actually a bullish development, and Ebay will be right under that resistance as they turn up and momentum carries price upward (hopefully). However, there are a lot of "if" statements here, and nothing that says to me, yes, it's worth the risk to hold over the split. Of course, if you've invested a minimal amount and it's all risk capital, you might want to try it. If you've got a lot of your account leveraged in this trade and can't afford a move down to the grouped averages near 106, the P&F support near 102, or the psychological and historical support near 100, you might not. That's just me, however, and you might reach a completely different decision. I hope the information here helps you make the decision that's right for you and your trading style.

  Linda Piazza   8/27/200,  11:10:18 AM
Since I don't want to call an official Swing Trade today, I obviously agree with Jane's assessment that today might not be a good day for trading, but that traders can nonetheless learn much by watching how the markets perform around key S/R levels.

  Linda Piazza   8/27/200,  11:07:54 AM
Is the current OEX five-minute pattern another bull flag forming after the rise from the day's low to the current level? Time will tell.

  Jeff Bailey   8/27/200,  10:59:26 AM
National Semiconductor (NSM) $28.14 +3.57% Link .... Lehman Brothers upgraded prior to open to "equal-weight" form "underweight." NSM scheduled to report quarterly earnings next Thursday (09/04/03) with consensus estimates of $0.12 per share compared to year-ago $0.01 per share.

  Linda Piazza   8/27/200,  10:43:06 AM
With some more trading under the day's belt, and a few more candles to add to the earlier spikier ones I mentioned, this formation looks more and more like a bull flag forming after yesterday's rise, with the OEX currently testing the top of the formation and perhaps breaking to the upside: Link

  Linda Piazza   8/27/200,  10:24:17 AM
The OEX now rises to test that broken support between 498.25-498.50. Its success or failure to break through that former support may determine the morning's direction.

  Jeff Bailey   8/27/200,  10:23:55 AM
High/Low quotes from my q-charts are not accurate this morning. I'm trying to go back through some earlier comments made here in market monitor and make corrections.

S&P Banks Index (BIX.X) 299.74 5-minute bar chart shows morning tick high at 301.10, not 301.35 as noted earlier and being displayed as today's high.

Problem appears to be specific to S&P indices. Similar error for S&P 100 (OEX.X) 498.12 and S&P 500 (SPX.X) 994.14. I know for fact that both trade below yesterday's close, but q-charts shows fractional gains here.

  Linda Piazza   8/27/200,  10:20:13 AM
As of a few minutes ago, declining issues had moved slightly ahead of advancing issues, but up volume remained slightly ahead of down volume. Volume remained low, at about 103 million shares traded on the NYSE and 190 million on the Nasdaq. This is so low that it would be easy to swing these adv/dec ratios back and forth.

  Linda Piazza   8/27/200,  10:14:34 AM
The OEX now drops below the 498.25-498.50 S/R zone and also below 498. Those who have elected to enter bearish trades should be especially careful near 496 as that's been a zone of some S/R both recently and in the past. The 60-minute ADX is under 20, indicating that there's no trend in place as yet, and so trading might continue to be range-bound. +DI lies over -DI, so the presumption is that bulls have the upper edge, but the two lines are moving toward each other and that presumption might not hold for long. If this ADX level had been higher, I might have been tempted into an official OEX bearish trade even without strong volume, but with a low ADX and low volume, the risks were too high for an official trade. Disclosure: I am in a bearish OEX trade in my personal account, but one I considered too risky for an official trade for the reasons listed above.

  Jeff Bailey   8/27/200,  10:14:21 AM
S&P Banks Index (BIX.X) 299.73 -0.29% .... session high of 301.10 did test the WEEKLY Pivot of 301.07 in early going.

Mortgage Application decline was steeper than what I thought in this weekend's Ask the Analyst column, despite the average 30-year fixed rate mortgage holding steady at 6.22%.

Dow Jones Home Construction Index (DJUSHB) 437.96 -1.05% is leading sector loser.

  Jeff Bailey   8/27/200,  10:09:56 AM
Dow Industrials (INDU) 9,313 -0.29% .... approaching DAILY pivot of 9,309 here. QQQ $32.41 -0.4% doing the same, with session low of $32.38 just above WEEKLY Pivot.

With SPX/OEX finding early resistance at WEEKLY pivots, will have to find support from INDU and QQQ.

  Jeff Bailey   8/27/200,  10:05:51 AM
Colgate Palmolive (CL) $55.44 +2.85% .... Link is S&P 100/500 winner in early going after Banc of America upgrades to "buy" from "neutral" based on financial consistency and compelling valuation. Raises target to $62. Also raises their view on the cosmetic, household and personal care products group to "overweight" from "underweight" given the group's historical outperformance in Q4.

PnF chart of CL is bullish. Trades above longer-term bullish trend with vertical count of $83. Relative strength vs. OEX Link is longer-term strong, near-term weak. Bulls can play CL long with stop just under the recent low of $53.

  Linda Piazza   8/27/200,  10:02:20 AM
Volume is light, as has been usual lately, and almost equally divided between advancing and declining, and up and down volume, with the exception of up volume on the Nasdaq. That far exceeds down volume. Elsewhere, advancers have a slight advantage over decliners on both exchanges, and up volume has a slight advantage over down on the NYSE. As of a few minutes ago, total volume was under 50 million on the NYSE and under 110 million on the Nasdaq.

  Linda Piazza   8/27/200,  9:58:02 AM
That's a spiky-looking configuration on the OEX five-minute chart--spikier than I'm using to seeing on the OEX. Lots of candle shadows form going both up and down. That probably indicates as much indecision as we're feeling as we watch the early action. If not for all those spikes, I'd say this looks a bit like a bull flag forming after yesterday's steep rise, but those spikes put that conclusion into question.

  James Brown   8/27/200,  9:55:22 AM
Boston Scientific - BSX. Morgan Stanley just downgraded BSX this morning from "overweight" to "equal weight". Analyst comments came across as positive with the broker raising its earnings estimates but MWD essentially suggested that investors take some profits. MWD also lowered its price target on BSX from $75 to $69.

  Linda Piazza   8/27/200,  9:54:25 AM
An OEX move below 498 would appear to be a bearish signal, but since the OEX may also find support at 496, the bottom of a congestion band from intraday trading, that's not going to give much room for a trade to work. I know what I think should happen on a move below 498, but no one trading the OEX components has asked my opinion. A move below 496 would be likely to send the OEX back down to test yesterday's low. Conversely, if the OEX continues to find support at the current level, a test of 500.30-501 should be on the books, with a break through that level perhaps seeing next strong resistance up near 504, with some possible resistance at the intervening level of 502.

  James Brown   8/27/200,  9:49:29 AM
Semiconductor upgrades . We're seeing several chip stock upgrades today but the SOX really isn't moving yet. So far RFMD, TQNT, MCHP, BRCM, and NSM all getting upgrades.

  Jeff Bailey   8/27/200,  9:45:50 AM
February 04 Gold futures (gc04g) 372.80 +1.44%

October 03 Gold futures (gc03v) 370.0 +1.12%

In last night's Market Monitor made note that futures contracts would have a triple-top buy signal taking place at $370 in gold futures contracts, with bullish vertical count to $418.00.

Stocks have moved ahead of the futures, which is often the case and futures traders may look to play the commodity long on today's trade. First sign of weakness would be trade below $358.

  Linda Piazza   8/27/200,  9:45:09 AM
I'd say it's a draw so far on the OEX: support has held, but the OEX can't seem to make forward progress, either.

  Linda Piazza   8/27/200,  9:42:43 AM
So far, the OEX maintains the 498.25-498.50 support. The next test of early strength will be the OEX's ability to close the opening gap. If the OEX moves no further than midway into the gap before retreating, that's a sign of early weakness, but if it closes the entire gap, that's a sign of early strength. Although these signs of early strength or weakness can be reversed later in the day, of course, as they were yesterday, they help guide early decisions.

  Jeff Bailey   8/27/200,  9:39:20 AM
Altria (MO) $40.37 +1.1% Link .... raises quarterly dividend to $0.68 per share from $0.64. Annual dividend of $2.72 would put dividend yield at 6.7%.

  Linda Piazza   8/27/200,  9:38:17 AM
The 50% retracement of the first five-minute OEX range lies at 498.44, which happens to be only slightly above the 50-dma at 498.21. Bulls will want to see the OEX maintain that zone from 498.25-498.50 in early trading, especially on the first retracement that usually takes place beginning in a few minutes. A sustained move below it would indicate weakness in early trading. Continued support at that level will indicate strength, but today's gap level may prove even more important to watch in early trading.

  Linda Piazza   8/27/200,  9:34:16 AM
Sure looks like a good spot for an entry here on the OEX, but which direction? As I suspected, the OEX opens right in the midst of that confluence of moving averages and historical S/R. So far, the OEX is finding support here, but I distrust early-morning action, low-volume action, and this-week action, in particular.

  Jeff Bailey   8/27/200,  9:27:42 AM
09:00 Update posted at this Link

  Linda Piazza   8/27/200,  9:25:38 AM
Swing Trade Signals
The Swing Trade Model is flat this morning and it's probably going to stay that way unless volume picks up today. For almost two weeks, we've been trying to trade in a low-volume environment and it's not working. Some might blame the lack of success on the fact that the entries have been bearish ones, but trading has been just as treacherous and unpredictable for bullish trades and some days, I've been just as willing to trade bullish or bearish, depending on the opportunity presented. Although we've mostly kept our losses to a minimum--yesterday's was a $0.15 OEX move against us--I'm aware that paying spreads and commissions can compound even small losses and eat away capital in small trading accounts. We're going to wait until more volume returns to the markets before we enter, either bullish or bearish, but that doesn't mean that I'll refrain from making comments about the OEX to help guide those brave souls who are ready to trade any day, no matter what the conditions. My unwillingness to trade in this low-volume environment doesn't mean that we won't see big trades move past us while we're sitting idle, either. They may, but one of my responsibilities lies in deciding when we should be trading and when we shouldn't.

As I type, futures are slightly down. If markets open where the futures indicate they will, the OEX may be likely to open right in the midst of that 498.50-499 confluence of moving averages and historical support that I talked about yesterday. Traders who want to enter are going to be in a quandary. Should they expect the OEX to find support there after yesterday afternoon's action and then climb, perhaps this time make it past the strong 500.30-501 resistance to challenge 504 again? Was yesterday afternoon's action a fluke, a reasonable-sized buy program that triggered short-covering in a domino fashion, and will the markets subside again today? At this point, it's difficult to tell, but if you're tempted to enter, take profits quickly if they're offered.

  Linda Piazza   8/27/200,  7:23:44 AM
The Mortgage Bankers Association of America is reporting this morning that mortgage loans and refinance applications decreased by 13.3% in the last week, with the average interest rate for a 30-year fixed-rate mortgage remaining at 6.22%.

  Linda Piazza   8/27/200,  7:14:17 AM
Good morning. Within the first forty-five minutes of trading, the Nikkei had traded almost twenty points in the red, more than 50 points in the green, and returned to its starting place, near 10,350. The rest of the day was no less volatile, with the range widening from 10,416 down to 10, 273. If not for a last-minute rise, the Nikkei would have closed on the low of the day, but instead closed down 23.58 points or 0.23%, at 10,308.99. U.S. economic numbers reported yesterday sent some exporters and banks higher, but steel makers declined after Morgan Stanley cut the industry rating to in line from attractive. One stock, Yahoo Japan, had so many buy orders that the stock did not open with the rest of the market. The stock plans a stock split in late November, and it's been on fire, as have many of the Asian Internet-related stocks.

Other Asian markets were mixed, but with more closing in the red than not. The Taiwan Weighted fell 0.09%, and Singapore's Straits Times fell 0.34%. Hong Kong's Hang Seng dropped 0.70%. South Korea's Kospi gained 0.79%, however, and China's Shanghai Composite closed flat, up 0.01%.

In a discussion titled "Is Europe Heading into Recession?" on CNBC Europe this morning, commentators mentioned that the French PM to likely to tell the EU that France's budget deficit is higher than expected. As part of that discussion and perhaps of interest to some on this monitor was the conclusion that our Fed lost credibility when it seemed to promise that it would do whatever necessary to keep interest rates low and then did not take steps to do so, and added insult to injury by saying that their statements had been misconstrued.

As of this writing, most European markets are positive, although markets in Portugal and Greece are not open today. Nokia and semiconductor maker Infineon were gaining in early trading. Hannover Re, a reinsurer, reported Q2 earnings that beat the forecast and it, too, was gaining in early trading. The FTSE currently trades up 12.50 points or 0.30%, at 4189.90, but that's near its low of the day. The CAC also trades nearer its low of the day than its high of the day, trading up 15.55 points or 0.48%, at 3272.24. As happened yesterday while I was preparing this report, the DAX dove during its preparation and now trades just off its low of the day, up 5.63 points or 0.16%, at 3461.11.

  Jeff Bailey   8/26/200,  11:41:05 PM
Gold bugs! was looking at some PnF charts at Dorsey/Wright this evening and noted all of the Gold futures charts (on 4-point box scale) all show potential triple-top buy signals if $370 were traded. BIG wedges forming on the bar charts. Current bullish counts are $418, which would currently be negated with a trade at $358.

For grins, I place a retracement on the Feb. 04 futures contract from the April low of 322.90 and took the top of this retracement bracket to 418.00, which is the current bullish vertical count.

Retracement levels have 19.1% at 341.0, 38.2% at 359.20 (not too far from the 358 level mentioned above) 50% at 370.40 (darned close to 370 mentioned above) then 61.8% at 381.60 (two high contract closes in February were either side at 383.50 and 380.90, then 80.9% at 399.80 (Steve Forbes says Fed doing good job if gold stays between 300 and 400) and my 100% at the bullish vertical count of 418, which might equate to a "blow off top" type of trade months from now.

Potential economic catalyst for inflation is Thursday's preliminary Q2 GDP price deflator, which is forecasted at 1%. I see notes from Briefing.com economist that "Fall off from Q1 energy price spike eases the GDP price deflator to 1%."

Quick glance at the December crude oil futures (gl03z) $31.08 +0.12% has contract right at its 52-week highs, where contract was trading $24.50 to $28.00 during second-quarter. In essence, gold bug might look for "inflation surprise" for Q3 if Q2 chain deflator much above 1% and economists' forecast.

$370 on the gold futures contract may be the trigger.

  Jeff Bailey   8/26/200,  11:40:55 PM
Pivot Matrix for tomorrow posted at this Link

  OI Technical Staff   8/26/200,  11:40:48 PM
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