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  Jeff Bailey   10/3/200,  6:20:10 PM
Past 3-weeks Pivot Matrix ... Link

  Jeff Bailey   10/3/200,  5:42:40 PM
Pivot Matrix for next week at this Link

What I think happened late this afternoon, short of the market knowing somethng about a nuclear test by North Korea that I'm not aware of, is that we may have seen the decline into the close being created by this "short-term mutual fund trade," where fund managers may indeed be in a mode of trying to pad yearly results on a short-term basis, but not willing to commit larger amount of capital to any type of trending move. I can almost here it.... "Sell me some strength at 1,030." Traders let the markets rally, feed some stock out short on the move higher, then place the sell orders at around 02:45 PM EDT, with a mark to close right back near 1,030.

The reason I think this is that it is just too suspicious to me that we see the SPX close right at this 1,029 (see PINK boxes at MONTHLY R1, and DAILY Pivot)area discussed in last night's wrap. I probably should have been more alert to this, especially when making comments about the QQQ at 14:51:11.

Support should be strong back at the monthly pivot, but I think shorter-term bulls want to see some strength early Monday back above the DAILY pivots of SPX/OEX. WEEKLY R1's look to be in play for bulls with near-term support at the WEEKLY Pivots.

  Linda Piazza   10/3/200,  4:04:32 PM
Swing Trade Summary: OEX/SPX/DJX/DIA/SPY
I picked turning points really well this week. Twice we entered plays at those turning points--unfortunately in the wrong direction. Once we entered a play the right direction, but I snugged up the stop too tight, stopping us out--by $0.07--of a play that turned out to be profitable.
9/29: Entered a bullish OEX trade at OEX 504.31.
9/29: Exited at 504.11.
9/30: Entered a bearish OEX trade at OEX 502.42
10/1: Stopped at OEX 502.50. 10/2: Entered a bullish OEX trade at OEX 510.71.
10/2: Stopped at OEX 508.50.
10/3: Entered a bullish OEX trade at OEX 520.
10/3: Stopped at 518.50.
Result for the day: 1.50 OEX points against us.
Results for the week: 5.99 OEX points against us.

  Jeff Bailey   10/3/200,  4:02:46 PM
S&P futures (s03z) 1,028.00 +0.82% (10-min delayed quote) .... just noting this here. Per second chart in last night's Index Trader Wrap, these late afternoon sell programs may now have the futures closing at that 80.9% retracement.

As crazy as it may seem, yestersay's bias was bullish above 1,019.20, and a settlement below 1,028.90 would carry a bit of a bearish tone, with risk back down to 1,019.20.

Here's that chart from last night's wrap. Link

  Jeff Bailey   10/3/200,  3:55:44 PM
SPY 103.22 +0.82% .... can't call today a negative day, but would want to at least see the SPX/SPY hold a close above their MONTHLY R1's to carry some bullish thoughts into Monday. That was a heck of a sell program just prior to the bond market's close.

  James Brown   10/3/200,  3:46:43 PM
Bullish traders in the OI call play on AMZN will note that shares are not only at new highs but up about 10% from our picked price. It's never a bad idea to take some profits off the table. The highs today pierced its upper trendline (just connect the highs from early June). While we think AMZN still looks great traders could take some profits here and look for a bounce from the 50-51 level on a dip.

  Jeff Bailey   10/3/200,  3:45:46 PM
03:15 Update posted at this Link

  Linda Piazza   10/3/200,  3:42:06 PM
The fall was so fast that the OEX 30-minute 21-pma was being tested as I completed the post. The OEX now drops slightly below that. The top of this morning's gap is next possible support, and then the middle of that gap.

  James Brown   10/3/200,  3:41:04 PM
Late this afternoon Fluor Corp (FLR) released news that they had won a $102 million order to help the U.S. Army Corp of Engineers repair Iraq's electrical infrastructure. The stock is powering to new yearly highs but remains under the $40 level, which could be resistance.

  Linda Piazza   10/3/200,  3:40:31 PM
That latest "b" distribution pattern has now been broken to the downside. You can tell the pattern is valid when the break precipitates a fast fall, and this one is doing that, complete with a small gap on the OEX 3-minute chart. That might set up the possibility that its target near the 30-minute 21-pma will be tested, perhaps this afternoon, depending on MOC orders.

  Jeff Bailey   10/3/200,  3:25:18 PM
Buy Program SPX 1,032.84

  Linda Piazza   10/3/200,  3:22:24 PM
The OEX is once again finding support, at least temporarily, at the first two-minute high, as it did earlier today. That's also near the 516.45 horizontal S/R trendline I'd placed on my chart some time back for some reason.

  Linda Piazza   10/3/200,  3:13:02 PM
The current five-minute pattern looks like another "b" distribution pattern, a bigger one. If it is, and if this one is occurring midway in the drop, as they sometimes do, then a failure here might predict a move down to that 30-minute 21-pma. That doesn't mean that the downside target would be met and especially doesn't mean that it would be met today, but I'm pointing out the possible chart formation.

  Linda Piazza   10/3/200,  3:09:05 PM
Despite the fact that we've been stopped out of our bullish play, the OEX has not yet retraced more than 50% of the first 30-minute candle, a larger-than-normal candle. According to candlestick theory, the midpoint of that candle should provide support now, and as long as the OEX stays above that level, the tenor remains bullish. (Tell that to those who just lost money on the OEX play, right?) The 30-minute 21-pma now rises to 514.92, above today's open. As I've mentioned, I've often found that when the OEX moves up so strongly that it retreats only to the central average before springing up again, so that the strategy should probably switch to buying the dips to that support rather than selling the rallies. That's definitely not a given--sometimes the OEX plunges right through that central average. It's possible it could do so today. If it does, think I could have my first, risky bearish play back?

  Jeff Bailey   10/3/200,  2:57:25 PM
Sell Program SPX = 1,033.28

  Jeff Bailey   10/3/200,  2:56:51 PM
Biovail Corp. (BVF) $32.00 -15% Link .... ouch! If that's not a perfect example of the classic "bull trap" pattern from a PnF chart at $43 and reversal back lower at $38. Stock smashed lower today after Morgan Stanley cut to "underweight" from "equal-weight." (Any questions on who the seller was in this column of O?) saying BVF's business is deteriorating worse than they thought and that earnings estimates have to come down significantly.

  Linda Piazza   10/3/200,  2:54:00 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We were just stopped out of our OEX bullish position. We entered at OEX 520, about as close to the high of the day as it was possible to get, and were stopped at 518.50, for a 1.50 point move against us. I think I have the distinction of doing this twice this week, if memory serves me correctly.

  Jim Brown   10/3/200,  2:52:47 PM
Austin received an email in March/April of 2001 saying that in September all stock markets the world over would be over valued. The guy was warning us to plan on a massive drop due to an undisclosed event that was coming. We tried to conjure up every possibility we could imagine and finally wrote it off as another crack pot. Once the 9/11 attack occurred we scoured every single email record in the business trying to find it again to no avail. We had both deleted it months earlier.

  Jeff Bailey   10/3/200,  2:51:11 PM
10-minutes to bond market's close. Treasuries got crushed today with 10-year YIELD ($TNX.X) jumping 19 basis points to 4.199% here.

  Jim Brown   10/3/200,  2:49:13 PM
I researched that "nuclear test" email earlier in the week and I give zero credence to it. The best guess for Iran having nuclear capability was Dec-2005. After reading about 20 articles on the subject I am convinced it is just a marketing ploy to sell their special "report". Trust me, if I thought there was even a remote possibility I would be backing up the truck.

  Linda Piazza   10/3/200,  2:47:38 PM
I was about to type that the OEX had moved outside its rising channel, when it dropped quickly. I guess that newest one-minute channel had some relevance. Looks as if our stop will be hit soon.

  Jeff Bailey   10/3/200,  2:45:33 PM
I thought about that too Jonathan, but then it wouldn't make sense to sell your precious metals stocks the day before Yom Kippur does it?

  Jeff Bailey   10/3/200,  2:41:04 PM
I shouldn't try for humor, but does anyone know how to profit from a nuclear test? Maybe the dollar?

  Jeff Bailey   10/3/200,  2:39:04 PM
QQQ 34.41 +3.48% ... not quite a 5-minute close above $34.44 at this point. Here's a chart, but should find support at $34.32 based on volume observation. Link

  Linda Piazza   10/3/200,  2:30:17 PM
We're approaching the make-it-or-break-it levels for our OEX long play, both in terms of the price levels being tested and in terms of the amount of trading time left in the day. We need to see the OEX push above the current day's high. The OEX has now established an ascending pattern on the three-minute chart. We need to see it climb up within that pattern. Either the bears or the bulls are going to become emboldened here pretty soon--the bulls if they can drive the indices back to new highs, and the bears if they can keep the indices below those levels. I'm thinking about raising the stop again, but if I did, I'd raise it to 519, and the extra $0.50 is not going to change our losses much if we're stopped out.

  Jane Fox   10/3/200,  2:29:29 PM
Jeff - i just love your humor (14:16 post).

  Jeff Bailey   10/3/200,  2:24:53 PM
QQQ $34.43 +3.51% .... testing BLUE #4 here, hasn't been able to hold a 5-minute close. If it does, all he.. double toothpicks could break out.

  Jeff Bailey   10/3/200,  2:16:44 PM
Subscriber note... Jeff: I received an EMAIL yesterday from 21st century saying they have information that both Iran and N Korea are planning tests Oct 6th. Yom Kippur

As a sidebar for $129 I could buy 2 books and they will tell me how to profit from the test

Hmmmm.... not sure how to profit from a nuclear test. OO $10.46 +0.86% Link maybe?

  Linda Piazza   10/3/200,  2:15:58 PM
While the OEX five-minute 21(3)3 stochastics have been declining, since about 1:10, the OEX has been holding in a tight range from about 519.20-519.60. On the surface, it's bullish action to see price holding steady while the oscillator declines. We'll just have to see if that predicts more upside when the oscillator reaches oversold level and turns up, though. If it turns up.

  Jeff Bailey   10/3/200,  2:09:01 PM
02:00 Internals ... compare to 13:45:47 post of 01:00

NYSE ... A/D 2231:958 NH/NL 380:4 (slight fall in A/D, build on NH/NL)

NASDAQ ... A/D 2216:891 NH/NL 232:0 (slight build in A/D, build on NH/NL)

  Linda Piazza   10/3/200,  1:59:26 PM
If the current OEX three-minute pattern has been a bull flag, the OEX appears to be breaking out of that flag now, but in today's trading, I would not consider that fact confirmed unless the OEX breaks to a new day's high.

  Jeff Bailey   10/3/200,  1:51:28 PM
Netflix (NFLX) $40.87 -0.24% ... have been monitoring stock intra-day. Mentioned this one late last night as potential short-squeeze candidate.

Stock's morning decline was $41.42, a penny above RED #2 using 5-minute retracement technique. Looking for a volume build above BLUE #1 of $41.38 to signal another wave of short-covering.

  Linda Piazza   10/3/200,  1:51:22 PM
So far, the OEX retraced to 518.92, just above the 518.70 minimum downside target. It's now headed up and is now back above the neckline of that one-minute H&S, but it has also now established a descending regression channel. A bull flag? Possibly, but bullish traders now need to see it break above the top of that channel, with the top currently at about 519.60, just above the bullish #2 on the 3MRT.

  Jeff Bailey   10/3/200,  1:45:31 PM
01:00 Internals ... compare to 12:09:01 post.

NYSE ... A/D 2237:913 NH/NL 351:4

NASDAQ ... A/D 2193:831 NH/NL 211:0

  Jeff Bailey   10/3/200,  1:38:08 PM
01:00 Update posted at this Link

  Linda Piazza   10/3/200,  1:38:08 PM
Speaking of stops, we're entering the stop-running time of day, with the biggest push often coming about 1:45 ET.

  Linda Piazza   10/3/200,  1:36:21 PM
The one-minute OEX H&S confirmed. We're now looking for a minimum downside target of 518.70. The descending trendline of the symmetrical triangle now crosses at about 518.50, so it's possible that we could get stopped as that trendline is tested. I hope I don't repeat my performance yesterday of getting stopped by a few cents when the position would have gone on to be profitable, but we need stops.

  Linda Piazza   10/3/200,  1:31:44 PM
That one-minute OEX H&S appears on the verge of confirming. If it does confirm, it has a minimum downside target of about 518.70, which is going to put our stop in jeopardy.

  Linda Piazza   10/3/200,  1:24:59 PM
That OEX bounce came almost exactly on the blue #2 on the 3MRT. Now we need to see a new day's high, though. That one-minute chart sets up the possibility of a very lopsided H&S with a neckline that slants down. A move above the day's high would negate that possibility.

  Linda Piazza   10/3/200,  1:20:36 PM
We just had the first one-minute low that descended below the previous one-minute low since 11:23 this morning. That's a first sign of weakness, although a very short-term one. We're now going to be watching the 519.53 level that marks the blue #2 using a 3MRT rather than a 5MRT for the OEX, and just below that, the 519.30 level that marks an ascending trendline.

  Linda Piazza   10/3/200,  1:11:24 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Now let's raise the stop to a level just below the top of the symmetrical triangle upon which we based the trade. Raise the stop to 518.50. Turning to the one-minute chart, I noticed that the OEX has not had a one-minute low that's lower than the previous low since 11:23 this morning. I'll be watching those one-minute lows, too.

  Linda Piazza   10/3/200,  12:59:10 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Raise the stop to 517.50. Since our entry was based on a break above a symmetrical triangle, as well as on a break above the bullish #2 on the 3MRT, let's move our stop so that it's just below the bottom of that symmetrical triangle. I'll soon be raising it again, to just below the top of the triangle, but let's get the initial volatility out of the way.

  Linda Piazza   10/3/200,  12:56:16 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were just triggered in a bullish play with an OEX move above 520. Our initial stop is 516.50, although I'm thinking about changing that in a few minutes. Stay tuned. Our initial target is 522.90.

  Jeff Bailey   10/3/200,  12:52:43 PM
SPY 104.18 +1.69% ... hear you go.

  Linda Piazza   10/3/200,  12:52:19 PM
The OEX has been testing the top of symmetrical triangle that it broke above earlier and now looks to be headed toward a new high of the day. Traders not averse to entering a bullish trade ahead of round-number resistance at 520 could enter a bullish trade now.

  Jeff Bailey   10/3/200,  12:47:47 PM
Buy Program Prem. Alert SPX 1,036.80

  Linda Piazza   10/3/200,  12:42:05 PM
You're better than I was yesterday, Jim. Instead, I was stopped by $0.07.

  Linda Piazza   10/3/200,  12:40:14 PM
I would expect a retreat now toward the 518.60-518.80 level, the level at which the OEX broke above the neutral triangle. That triangle should be tested to see if the descending top line now serves as support. A failure to retreat that low would be bullish.

  Jeff Bailey   10/3/200,  12:40:11 PM
SPY 104.07 +1.57% .... intra-day 5-minute chart shows some volume build of 587,300 as SPY gets a 5-minute close above BLUE #2. DAY TRADE BULLS should be looking to pound the SPY higher and look for SPY to close at highs of session. Stop just under 103.55.

  Linda Piazza   10/3/200,  12:37:39 PM
On a move above the previous day's high, I'm now out of my bearish OEX position. Perhaps that will be proof positive that the move above the high was a fake and that the OEX will now zoom down. We'll see, but I'm set up now to join whatever trade triggers.

  Jeff Bailey   10/3/200,  12:35:22 PM
SPY 104.02 +1.53% .... back at BLUE #1 here. If SPY can hold a 5-minute close, could erupt to the upside.

  Jeff Bailey   10/3/200,  12:32:14 PM
Lunchtime crowd looks to be filtering back in. Let's see who is hungrier. Bulls or bears? SPX 1,036.10 just off morning high of 1,036.54.

CYC.X 575.68 +2.24%

  Linda Piazza   10/3/200,  12:27:56 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
I lied yesterday when I said I was done for the week. Due to that neutral triangle setting up on the OEX five-minute chart, and the possibility that the OEX could move big if that triangle is broken, I am going to consider another official position this afternoon if a change occurs quickly enough. Here are two choices, one bearish and one bullish:

Enter a bearish position on an OEX trade below 516, with a stop at 519.60 and a target of 512.50 (the middle of this morning's gap and the location of the rising 30-minute 21-pma).

Enter long on a break above 520. Initial stop at 516.50. Initial target 522.90.

These entries will be withdrawn if the OEX stabilizes throughout the afternoon. I don't want an entry late on a Friday afternoon. Disclosure: I currently have a bearish position, but will be switching sides and taking the bullish side of the trade if that bullish trade is triggered.

  Jeff Bailey   10/3/200,  12:27:25 PM
AMEX Gold Bugs ($HUI.X) 89.85 -3.29% ... sure didn't like that 21-day SMA. Now looks to test a rising 50-day SMA at 89.19 in quick fashion.

  Jeff Bailey   10/3/200,  12:21:09 PM
Cyclical Index (CYC.X) 575 +2.13% .... upside alert here at a triple-top buy signal. Link

Meow? ... Link

  Linda Piazza   10/3/200,  12:16:22 PM
Here's a simple graphic of what I see happening on the OEX three-minute chart: Link

  Jeff Bailey   10/3/200,  12:11:10 PM
QQQ $34.25 +2.94% ... session highs here. Trying to get back into its bullish regression channel.

Now looking for confirmation from the SPX/OEX/INDU

  James Brown   10/3/200,  12:11:10 PM
The XAU gold & silver index (-2.5%) and the DJUSHB homebuilders index (-1.68%) are the only two major sector indices in the red today.

  James Brown   10/3/200,  12:10:15 PM
Tech stocks are on fire. check out these gains:

GHA hardware index: +3.86%
GSO software index: +3.56%
INX Internet index: +3.36%
SOX semiconductors: +5.18%
DDX disk drives: +5.22%
NWX networking index: +5.75%

  Jeff Bailey   10/3/200,  12:09:01 PM
Market Internals Intraday ... 11:00 to 12:00 comparisons

11:00 NYSE A/D 2107:801 12:00 A/D 2138:937 .... NH/NL 283:4 320:4

11:00 NASDAQ A/D 2080:729 12:00 A/D 2170:799 ... NH/NL 161:0 187:0

  James Brown   10/3/200,  12:07:19 PM
The Wilshire 5000 Total Market Index has rallied more than 400 points off Tuesday's low and is currently back above the 10K mark.

  Linda Piazza   10/3/200,  11:57:22 AM
Good point, Jane, about the MACD divergence. Yes, I've been aware of that divergence, too. As Jane has pointed out in the past, the MACD is particularly helpful in this instance because the stochs and RSI can after all only measure 100, so they're naturally going to show divergence if price keeps making new highs and they get pinned at levels indicating overbought conditions. That divergence warns us that all may not be as bullish as it seems, but like trying to trade the COT information or the block trades or any of many of these indicators, you can get killed jumping in on the bearish side based on that information alone. How I've decided to treat this is to be warned and be nervous about playing the upside. However, when upside plays continue to work better than downside ones, when price patterns remain bullish, and upside targets often get beat while downside ones aren't fulfilled, it's better to play the bullish side, but be forewarned and ready.

This morning is one example. The OEX should have retested the top of the morning gap. That's only natural behavior, and retesting only the top of the gap or only to the middle of the gap is still bullish behavior. The OEX hasn't even done that yet. While the similarities to trading in late '99 and early 2000 are eerie and scary, it's scarier to bet the OEX is going to turn around at 508 a few days ago and still be holding onto puts entered then. (That's just an example. I'm not doing that.)

  Jeff Bailey   10/3/200,  11:55:58 AM
Excellent note James (11:21:52) .... I've wanted to cover that very observation in recent Index Trader Wraps, as 10-year YIELD was nearing what might have been an inflection point, where the "mortgage hedge" really unraveled.

  Jeff Bailey   10/3/200,  11:53:55 AM
Cyclical Index (CYC.X) 574.17 +1.97% Link ... yesterday we were noting the CYC.X edging above its 21-day SMA and potential sign for bullisness for the major indices. Will do the same today, but this time at 52-week high resistance right here. Thinking becomes if CYC.X moves to 52-week high, then could pull major indices higher too. Here's the bar chart we were commenting on yesterday Link

  Linda Piazza   10/3/200,  11:46:00 AM
More support for using the 3MRT today for the OEX rather than a 5MRT comes from the fact that the OEX keeps finding support near the top of the three-minute candle. There's an even closer correspondence with the top of the first two-minute candle, however, with that top at 516.21 and with the OEX 10:26 low at 516.35.

  Linda Piazza   10/3/200,  11:36:18 AM
The five-minute 21(3)3 stochastics just completed a bullish kiss, with price moving up from a higher low. That's bullish divergence.

We may be considering a bullish play soon, if the OEX bumps above the blue #2 on the 3MRT I'm using today. That hasn't happened yet and may not, but stay tuned.

  Jeff Bailey   10/3/200,  11:36:00 AM
11:00 Update at this Link

Mention of potential nuclear test by North Korea

  James Brown   10/3/200,  11:31:11 AM
Interesting move in shares of Broadcom (BRCM). The stock is up almost 7 percent and leading the semiconductors higher (SOX +4.44%). We don't see any news to attribute to the move but the stock is breaking out of its recent sideways channel. There is overhead resistance at $30. Above that it's a clear shot to $35.

  Linda Piazza   10/3/200,  11:30:30 AM
OEX 516.61 marks the 50% retracement of the first 30-minute candle. A thirty-minute close below that level would mark a change in tenor, as there has not yet been a 30-minute close below that 50% retracement. I still think a bearish play today would have to be considered a countertrend and risky play, however. Disclosure: I'm still in my bearish OEX single-contract put play, waiting to see if the double top confirms. Despite this play, I maintain a neutral stance on the day, ready to switch sides if the OEX climbs above 519.53, or perhaps waiting until 520.

  James Brown   10/3/200,  11:21:52 AM
The team on the FuturesMonitor side probably pointed this out already but the 10-year bond appears to be breaking down through its recent ascending channel.

In contrast, the yield is spiking up through the top of its descending channel after bouncing from its simple 200-dma two days ago.

The September rebound in bonds was not quite a 50% retracement of the June to mid-August drop but it may be close enough.

  Linda Piazza   10/3/200,  11:21:13 AM
Reader Request: Any thoughts on Starbucks?

Response: First, as readers who correspond with me often know, I personally stay away from trading stocks that have gapped. I would expect a test of gap support, but will that support be found at the top of the gap, the middle, the bottom, or will the gap fail to hold as support? That's particularly true this morning, since SBUX tested the recent high and fell back. This morning's gap and move up pierced the upper Bollinger band, with the candle so far falling back inside the BB's again. ADX shows a strongly trending market and OBV turns up slightly again, showing that there is perhaps some renewed accumulation of SBUX. The P&F chart shows an ascending triple top breakout, as I'm sure this well-informed reader already knows. Daily oscillators look strong, supporting the idea that there's more upside. Daily MACD lines appear to be making a bullish cross again from above signal. The 60-minute chart shows that SBUX once gapped down from $30.00, so the gap above that level again doesn't seem surprising, and I tend to put some faith in round-number support and resistance. The 60-minute chart shows indicators pointing to overbought conditions, but again this is a strongly trending market, so those overbought conditions cannot be trusted.

One troubling sign shows up in the 5(3)3 stochastics. There's been a pattern of lower highs there while SBUX is generally climbing--bearish divergence. Although that bearish divergence shows up, I personally would not be considering a bearish play at this time. If a trader is interested in a bullish play, that trader could wait for a deeper pullback into the gap, although that might not occur. Bullish traders considering entries at this level should assess their comfort levels with a possible close-the-gap descent to the 10 or 21-dma's. That might be an appropriate place for a stop if bullish traders wanted a tight stop. Nearby support would not be violated until a drop below $28.50, however, so traders might also need to assess whether they could hold on that long before they knew whether that short-term bullish bias is preserved or not.

  James Brown   10/3/200,  11:15:45 AM
Current OI call play, Ryland Group (RYL) gapped slightly higher today after announcing a record Q3 new home orders of 3749 units, up 5.4% from last year. Traders are using the news to take profits and the stock pulled back to the $76 level before bouncing.

The profit taking seems to be hitting the entire group with the DJUSHB index down 1.77%.

I checked the news on several homebuilders and couldn't find anything that might spark the profit taking except the MASSIVE jump in interest rates today as the bond market craters again. The yield on the 10-year note is up about 170 basis points today.

  Linda Piazza   10/3/200,  11:15:05 AM
We now have a couple of possibilities setting up as the OEX trades near the high of the day. One possibility is a double-top on the five-minute chart, confirmed if the OEX should move below 516.35, and setting up a 513.50 or so downside target, although it's not clear today whether the OEX would meet downside targets. The other is a move above 519.53, which would give a bullish bias to the day. Stay tuned.

  James Brown   10/3/200,  11:04:04 AM
MedTronic (MDT)...is failing to rally with the markets after Prudential downgraded the stock to "under weight" from "neutral-weight" early this morning. Prudential is concerned about MDT's valuation and revenue/EPS growth. The brokerage lowered its price target from $55 to $48. Shares of MDT had closed at $48.25 yesterday. Currently, they are down 3 percent to $46.80 and back under their simple 200-dma.

  James Brown   10/3/200,  10:56:08 AM
If you are listening to CNBC then you just heard Bob talking about truck stocks. We're still watching shares of PCAR for a breakout from its current consolidation pattern. More aggressive bulls could try buying the dip from $74 but we'd rather see it trade back above $80 and its simple 50-dma. PCAR's MACD is suggesting it could turn bullish in another day or two.

If you're bearish, watch and see if PCAR rolls over again in the $79-80 range.

  Jeff Bailey   10/3/200,  10:50:16 AM
S&P Dep. Receipts (SPY) ... here's intra-day chart of SPY on 5-minute bars. On a BIG gap day like today, SPY may give better levels, where SPX a bit skewed by its first 5-minute bar. Similar trade scenario for SPY should it break to new high however. Link

  James Brown   10/3/200,  10:50:14 AM
H J Heinz Co (HNZ)... Shares of HNZ gapped up above resistance at $34.50 yesterday on an upgrade from Deutsche to a "buy" from a "hold". The analyst raised their price target to $38. The stock isn't the fastest mover and could be challenging to play with directional option strategies. However, it is interesting to hear that the company is coming out with a new "low-carb" ketchup in addition to three extra-crispy version for its Golden Crinkles, Fast Fries and Tater Tots. Mmmmmm... you just don't get enough tater tots these days.

  Linda Piazza   10/3/200,  10:47:38 AM
The OEX breaks above the pattern of descending highs that it had been building on the three-minute chart, a first sign of renewed strength.

  Linda Piazza   10/3/200,  10:42:37 AM
On an OEX three-minute close above 519.53, I will be switching to a bullish bias.

  James Brown   10/3/200,  10:40:11 AM
AMR up 5.6%...shares of A M R Corp (American Airlines) are gapping higher on an upgrade from Bear Stearns. BSC raised their outlook to "out perform". The stock is gapping up above short-term support/resistance level at $12.00 but is off its earlier highs.

  Linda Piazza   10/3/200,  10:39:33 AM
I'm battling myself here, wanting to call an official Swing Trade bearish play for a potential reversal down to 514. It's just too risky a play. Disclosure: I have a bearish OEX position myself, but I'll be exiting soon if the OEX doesn't drop below 516. It's a single put contract entered with risk money only, entered when the OEX broke below the 517.50 early congestion. I still have an overall neutral outlook on the day, but thought this was worth a shot.

  Jeff Bailey   10/3/200,  10:35:36 AM
AMEX Gold Bugs Index ($HUI.X) 93.10 +0.18% .... reverses earlier fractional losses and now back to test its 21-day SMA of 93.38. With selling in Treasuies today, would view a move higher in gold stocks as ECONOMIC GROWTH move.

There is still caution being expressed for the September nonfarm payroll number as a potential one time event, and not a trend. I would agree, but if Treasuries continue to sell off, dollar strengthens, and gold moves higher, this is inflation type of move, which would come from economic growth.

  James Brown   10/3/200,  10:33:25 AM
Biovail Warns!... Shares of BVF are halted after the company issued an earnings warning for the third quarter this morning. Estimates were for 63 cents a share. Company new expects 35 to 45 cents per share.

The stock closed at $37.77 yesterday and there is some support in the $35-37 region. A breakdown under $35 could easily lead to a retest of support at $30.

  Linda Piazza   10/3/200,  10:31:41 AM
Congratulations, Jane, on the Morning Reversal trade.

  Jeff Bailey   10/3/200,  10:31:07 AM
SPX this may help explain this morning high and some of the sell program premium alerts at the highs. Link

  Linda Piazza   10/3/200,  10:30:36 AM
My OEX three-minute chart has an old S/R line drawn at 516.45. I don't remember when I put the line there or how long it's been there, but it must have been from an intraday period when the OEX kept finding S/R at that level. This morning, a couple of three-minute candles have descended to that level and then popped back up again, so it apparently still holds some significance. I have another just above it at 516.80, and a couple of three-minute candles have touched that line, too. That just points up the significance of the current level. The current OEX pattern could be a bull flag. If so, it should break to the upside before retracing more than 50% of the move that preceded it. I'm actually uncertain here whether we should include the gap values in that flagpole rise. If so, the flag should break to the upside before falling below this morning's opening value. If we don't include the gap values, the flag should break to the upside before retracing below 516.65, which puts that 516.45-516.80 range back into play again.

  Jeff Bailey   10/3/200,  10:27:24 AM
Buy Program Prem. Alert SPX 1,033.00

  James Brown   10/3/200,  10:26:09 AM
MMM is gapping higher...shares of 3M shooting higher on an upgrade from Lehman Brothers from "equal weight" to "over weight". LEH raises their price target from $70 to $85. The big move today is painting a fresh triple top buy signal on MMM's point-and-figure chart.

  Jeff Bailey   10/3/200,  10:24:09 AM
QQQ $33.96 +2.13% ... hovering sideways after hot open right around WEEKLY R1 of $33.92.

Strength in the pivot has me noting BIX.X 314.14 session high of 315.54, didn't see a test of MONTHLY R2 at this point, and looks to test WEEKLY R2 of 313.2 on current pullback. SPX/OEX/INDU bulls would want to see this WEEKLY R2 find support intra-day, for thoughts of new session highs for major indices to be in play.

  Linda Piazza   10/3/200,  10:22:14 AM
Those OEX 520 calls I monitored at the open are now 5.90 x 6.00, down from the 6.10 x 6.50 near the open, although the OEX still remains above the opening level.

  Jeff Bailey   10/3/200,  10:18:57 AM
Redback Networks (RBAK) $0.46 -25% ... today's most active and big loser after company offers to exchange shares of its common stock for all of its outstanding 5% convertible subordinated notes due 2007 in connection with RBAK's proposed out-of-court financial restructuring.

  Linda Piazza   10/3/200,  10:16:15 AM
The downside test appears to be beginning now. There's still a neutral bias on the OEX according to the 3MRT. That will remain true until a move below 511.32, just above yesterday's closing level. I like the way this corresponds with other information we know from technical analysis. A test of the gap is normal, with a test that stops at the 50% retracement of the gap a bullish development, and with a test that descends below that 50% retracement a bearish development. Therefore, from both these methods, we would not develop a true bearish bias on the day until the gap is violated to the downside. There's good correlation there. That doesn't mean that it might not have been a good scalp trade to enter a bearish position when the OEX failed to move above the blue #2, expecting a test of the gap, but be careful with that trade if you entered such a trade. Watch your stops carefully.

  Jeff Bailey   10/3/200,  10:11:09 AM
Sell Program Prem. Alert SPX 1,033.23.

  Linda Piazza   10/3/200,  10:08:11 AM
We should see a downside test of the 50% retracement of the first five-minute range and even the gap. I hope we do see tests of those levels as they would give us a better entry if we intend to enter long, but so far, the OEX hasn't shown a propensity to fall. There's a test going on as funds distribute stock, taking profit, and bears try to cover their shorts. Either supply or demand is going to win out, and we don't know which yet.

  Jeff Bailey   10/3/200,  10:01:05 AM
SPX 1,035.61 +1.5% ... here's my intra-day chart of SPX and thinking for a bullish target by day's end on break to new session high.Link

  Linda Piazza   10/3/200,  9:59:53 AM
Swing Trade Signals
Because I feel fairly comfortable with the 3MRT system instead of a 5MRT for today, we may consider a bullish OEX play on an OEX move above 519.60, with an upside target of 522.90 and a stop at 515. This points up one of my concerns about this system, however, because it doesn't give a good risk/reward parameter for the initial target and stop. Since 523 is a known resistance level, we might raise stops more aggressively than that if we do enter such a play.

  Linda Piazza   10/3/200,  9:55:02 AM
Because using the first 3-minute range on the OEX for Jeff's system provides so many correlations with important OEX S/R zones, I feel fairly comfortable using that tighter range today. I don't know how Jeff would feel about that, but since he mentioned using the first ten minutes on a tight-range day, maybe he agrees with altering the range from time to time, too? What do you say, Jeff? Downside correlations include the following: a red #2 at 511.32, a known historical S/R zone. A red #3 at 509.63 which is just cents below the 30-minute 21-pma at 509.69. A red #4 at 507.94, just above the 30-minute 130-pma at 507.76 and near known historical S/R at 508.

  Jeff Bailey   10/3/200,  9:48:52 AM
SPX 1,034.58 +1.4% .... OK, I've got my 5-minute retracement in place and see SPX just pulled into BLUE #1. If SPX trades new session high of 1,036.54, would play long (if not long already) and look for SPX to close a session high. Will follow with a chart in a moment.

  Linda Piazza   10/3/200,  9:48:48 AM
I noted the price of an OEX 520 call this morning at the open, with a bid at about 6.10 and an ask at 6.50, if I'm remembering correctly. Although the OEX is now higher than that opening price, the bid and ask are now 6.20 x 6.50. It's sometimes a good idea if you've got a highly profitable position, especially if it's profitable because of a big gap up (or down, if it's a bearish position) to sell into that early inflated price and then buy it back later. Of course, if you're in one of those days when the index jumps one direction or another and just keeps zooming, that's not going to be a great tactic, but this happens often. It's also a reason to be very careful about buying options at the open, especially after a big gap. If you'd bought at the open, the OEX would have moved up, but you'd actually be under water because of the spread.

  Jeff Bailey   10/3/200,  9:45:15 AM
Sector action is broadly positive. Only AMEX Gold Bugs ($HUI.X) 197.08 -0.86% and Dow Jones Home Construction (DJUSHB) 498.34 -0.52% showing fractional losses.

10-year YIELD ($TNX.X) higher by 13.7 bp at 4.148%.

  Linda Piazza   10/3/200,  9:44:00 AM
I just noticed that altering Jeff's 5MRT to a 3MRT for today provides a bearish #2 at 511.32, a likely historical S/R, also near the bottom of the daily gap. That means that a test of the gap would still keep the OEX within the neutral zone. Interesting.

  Linda Piazza   10/3/200,  9:42:10 AM
Because the first OEX five-minute range was so large, I'm taking a little artistic license with Jeff's 5MRT system, and instead basing it on the first three-minute range. For those without access to three-minute charts, the first three minute range was from 514.05 to 516.82. The OEX now approaches the bullish #2 on that system, which would be at about 519.54, but appears to be turning back from that level. I would expect a retest of the morning gap, possibly down to the middle of that gap, which would be at 512.78, but perhaps more likely just down to the 514 level. I wouldn't be entirely surprised if the 516 level held, but usually we get a gap test. Let's see. We may use Jeff's 5MRT, or 3MRT in this case, to monitor an unofficial bearish play.

  Linda Piazza   10/3/200,  9:35:16 AM
The first five-minute OEX range was from a high of 518.28 and a low of 514.05. The 50% retracement of that first five-minute range lies at 516.17, a possible support level, and we can watch this figure for signs of early strength or weakness, but the gap was so large that we should probably watch that level, too. We can probably expect at least a test of gap support. This is a helpful tool in watching the earliest trading patterns, but is not a daytrader's guide, as is Jeff's 5MRT system.

  Jeff Bailey   10/3/200,  9:33:14 AM
QQQ $33.94 +2.04% .... trades right at WEEKLY R1 and one of our "cloned" downward trends. Bulls that traded long from WEEKLY/MONTHLY pivot upside breaks yesterday can snug a stop up under $33.70 here.

  Linda Piazza   10/3/200,  9:31:15 AM
The OEX now bumps up against the 516 likely resistance.

  Linda Piazza   10/3/200,  9:29:51 AM
Option prices are often inflated on the opening, a warning for those wanting to buy options and those who want to sell them, too.

  Jeff Bailey   10/3/200,  9:21:42 AM
09:00 Update posted at this Link

  Linda Piazza   10/3/200,  9:04:01 AM
Swing Trade Signals
Unfortunately, the official Swing Trade model is flat today after having been stopped out of our bullish play by a few cents yesterday. I would sure like to be telling people to take profit on the open this morning, raking in some handsome gains. Some kept bullish positions open, not taking the official exit. Even if we hadn't been stopped, I would not have held the official position open overnight, based on the recent experiences with holding overnight ahead of important economic numbers. It just would have been too risky, and yesterday's close would have left us with no cushion. The OEX ended with the daily chart printing the second of a possible three-candle formation known as an evening-star formation, but indicators didn't support the potential formation and intraday charts displayed more bullish formations. If futures are accurately predicting the open this morning, that open will be above yesterday's close, likely refuting the possible reversal signal. To be a classic signal, today's open should be below yesterday's.

What next? Is there an entry for us today? Daily indicators still show the potential for much more upside, but we can also expect some battles between those selling into the rally and shorts trying to cover, and some with still-open positions might consider taking at least partial profit on the open in case sellers gain the upper footing. The OEX faces closely layered resistance from 513.50-514, 515-518, and then again begins seeing resistance at about 522. The 30-minute and 60-minute oscillators show extreme overbought conditions, but we know they can trend at levels indicating overbought conditions for a long while if the market is trending. With 30-minute ADX at 31.77, we can certainly say this market is trending, and so can somewhat discount that oscillator evidence.

With a strong upward trend in place and with daily oscillators indicating much more possible upside, bearish trades would now be considered countertrend, and we're not going to take those today even though a highly profitable bearish trade might be possible. A study of 30-minute and 60-minute 1.35% envelopes surrounding a 21-pma also show that those envelope boundaries are soon going to be pierced--by 516 on the 30-minute indicators. That sometimes happens, though, and when it does, the move sometimes carries above the channel for a while. When the mood turns this positive and a pullback from the upper envelope does occur, that pullback typically reverses only to the central 21-pma before the markets head up again. That's not a given, but it's a typical pattern.

As difficult as it's going to be to sit and watch, our only entry may be on a pullback to support, and we may not get that. Support now would have to be deemed the 508-509, 511, and 513.50-514 levels, depending on where the OEX opens. What we might do is enter a daytrade based on Jeff's 5MRT system. Stay tuned. What I will not want to do, however, is hold a position overnight.

  Linda Piazza   10/3/200,  7:11:23 AM
Good morning. The Nikkei opened slightly higher, dipped to test support, and then began climbing. It closed up 115.76 points or 1.09%, at 10,709.29. This week, as the Nikkei declined, it found support at its 50-dma and then began climbing again from there.

Many exporters gained in early trading as the dollar firmed against the yen, but the dollar slipped slightly in late-day trading. By the end of the day, some techs, including some exporters, had posted big gains, but the auto sector was mixed. Industrials and metals rose. Many retailers declined, however, perhaps reacting to disappointing first half results from Aeon, Japan's second-largest retailer. The company blamed cool summer weather. Banks rose. Stocks in the property sector mostly declined, with the declines attributed to profit taking after a recent strong performance in the sector.

South Korea's Kospi was closed for a holiday, but other Asian bourses mostly traded higher. The Taiwan Weighted climbed 0.84%, and Singapore's Straits Times gained 1.60%. Hong Kong's Hang Seng Index climbed 0.54%. China's markets may also have been closed for a holiday, as I was not getting an updated quote, but I couldn't find information on a holiday.

Most European markets currently trade higher, too. This morning, a Reuters Group PMI index measuring the services industry for the Eurozone saw a rise to 53.6 in September, up from 52 in August. The business expectations component rose to its highest measurement in 16 months, according to a Bloomberg article. This result beat expectations. Germany's PMI rose to a 32-month high.

As of this writing, the FTSE 100 trades up 17.60 points or 0.42%, at 4226.70. The CAC 40 trades higher by 36.30 points or 1.14%, to 3229.24. The DAX has climbed 29.53 points or 0.90%, to trade at 3306.17.

  Jeff Bailey   10/2/200,  1:39:15 AM
Nikkei-225 (NIKK) 10.637.71 +0.42% .... Opened 10,618.08 and L/H so far has been 10,583/10,674.

  Jeff Bailey   10/2/200,  1:39:05 AM
Pivot Matrix for tomorrow at this Link

  OI Technical Staff   10/2/200,  1:38:58 AM
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