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  Jeff Bailey   12/10/20,  4:56:05 PM
Good bullish trade set ups for tomorrow, which may well line up for Santa Claus rally.

 
 
  Jeff Bailey   12/10/20,  4:22:19 PM
04:00 Internals at this Link

Please note that QQQ closed at 04:15 PM EST, where I have placed the QQQ closing price of $34.56 in "Closing Session Trade." At 04:00 PM EST, the QQQ was trading $34.53, up 10 cents from yesterday's close.

 
 
  Linda Piazza   12/10/20,  3:56:44 PM
To benchmark what's happening with the hypothetical OEX 535/540 bear call credit spread I priced Thursday afternoon, that position now has an unrealized gain of $0.25, and has never been in jeopardy since I priced it.

 
 
  Linda Piazza   12/10/20,  3:53:06 PM
It appears that the 60-minute versions of the OEX 100/130-pma's still retain at least as much importance as the 30-minute versions. The OEX saw an immediate bounce after hitting those 60-minute versions, and it's now all the way back up above the 30-minute 100-pma. A test of 525.50-526 seems all but guaranteed now.

 
 
  Linda Piazza   12/10/20,  3:30:33 PM
The OEX attempts a bounce from the 60-minute 130-pma and the 100-pma at 523.18. As I've mentioned in the past, I usually prefer to watch the OEX with reference to the 60-minute versions of these moving averages, as the OEX behavior with respect to these averages has seemed more important over the last few months. During that period, for example, the OEX would often overrun the 30-minute versions, but when I turned to a 60-minute chart, I would see that they were actually being stopped by the 60-minute versions. Since early December, however, it's been the 30-minute versions that have been guiding the OEX action, so I'm trying to watch both today. Sometimes some things work and sometimes others do. If the 30-minute versions have resumed their importance, then this bounce from the 60-minute ones will only be a bounce before a quick rollover. If the 60-minute versions retain their importance, then we could see a bounce up to the 60-minute 21-pma at 525.50, if not higher.

 
 
  Jeff Bailey   12/10/20,  3:22:37 PM
Duke Energy (DUK) $19.01 +2.2% .... building on yesterday's bullish observations for a buy, run, write.

 
 
  Jeff Bailey   12/10/20,  3:21:37 PM
December S&P futures (sp03z) with fitted, where I carry this over to March. (Please copy above link to view the table)

 
 
  Ray Cummins   12/10/20,  3:18:03 PM
Spreads/Combos & Premium-Selling -- E-Mail Replies

Regarding strategies other than covered-calls in a 401K or IRA:

You mentioned the (margin) limitation of IRAs and unless you have one those unique brokers that will let you trade options in your retirement account, I don't see how you could do much beyond covered-calls and collars. However, we can use the covered-write strategy (an approach you are currently utilizing in an IRA) as an example of the differences between the two types of analysis: a conservative investor that utilizes trend and/or sentiment indicators might sell short-term, in-the-money options on technically favorable companies to achieve small gains. In contrast, an investor that focuses on fundamental or valuation analysis to make portfolio decisions would likely buy historically profitable issues and write monthly out-of-the-money options to reduce the overall cost basis of the position. Since most of the positions we offer in the newsletter are of a short-term nature, we favor technical analysis as the primary means for stock selection. Our research bases its forecasts for the future on past prices, directional trends or moving averages, and volume considerations. All of these components are valuable tools in play selection and it is important to understand how to use them correctly in analyzing potential portfolio positions.

 
 
  Linda Piazza   12/10/20,  3:12:57 PM
It looks pretty significant to me that the OEX broke below the 523.50-524 support, but it's at its 60-minute 130-pma and if I were in a bearish play, I'd want to see it break soundly below that before I felt comfortable. The 520.80-521.25 zone is next support.

 
 
  Jonathan Levinson   12/10/20,  3:11:55 PM
GE and INTC to new session lows here.

 
 
  Jeff Bailey   12/10/20,  3:06:18 PM
03:00 Internals at this Link

 
 
  James Brown   12/10/20,  3:05:53 PM
I mentioned SINA earlier as a possible short under $30.00. Check out Netease.com (NTES)....the stock has broken support at $40.00 and is just barely holding on to its 200-dma near $38.40. MACD has rolled over again.

 
 
  Linda Piazza   12/10/20,  2:54:20 PM
The OEX now tests the 60-minute 100-pma at 523.18, with the 130-pma just below at 522.44. The December 5 low was at 522.66. Both the SOX and the BIX turned down again, sliding down the 1.35% envelopes on their charts. Watching these other indices warned us today that the OEX would not likely make much progress when it bounced, but since those other two indices are now very oversold on a short-term basis, they may also be warning us to be prepared in case there's not that much downside, either.

 
 
  Jeff Bailey   12/10/20,  2:52:56 PM
futures rollover we had quick converstion this morning regarding futures rollover. Last night I was doing the same thing with my fitted retracement, and taking my fitted retracement from December, and "rolling them over" to the March futures contract. Here's that chart. Bias shifting to bearish here. Link

What I did was go back to the dates that I had "fit" from in the December contract, write down those dates, then fit the same levels, but at different March contract value, to honor or keep the integrity for the March contract.

It's scary how that resulting PINK (0%) has been resistance, while today, the blue 1,057.10 held support until about the last hour.

While I'm 10-minute delayed futures, I think I can make the tie between the cash SPX WEEKLY S2 (1,050.49) and the March futures (sp04h) chart above at 1,044.70-1,046.40.

I really like, and have some strong thoughts that bulk of futures traders/market are trading these PINK and BLUE levels.

 
 
  Jonathan Levinson   12/10/20,  2:52:29 PM
GE is printing a session low here.

 
 
  Ray Cummins   12/10/20,  2:42:20 PM
Spreads/Combos & Premium-Selling -- E-Mail Replies: Part III

Regarding Research/Analysis Techniques:

Although some extreme fundamentalists dismiss technical analysis as investment voodoo, simple charting techniques are proven tools that stand up to the test of time. A stock chart does nothing more than reveal buying and selling patterns that would be almost impossible to discern by reading daily quotes in the newspaper. Charting clearly reflects the repeated accumulation that occurs at periodic lows and the climax selling (or distribution) that develops whenever a stock reaches a historic top. Various systems have been developed to help investors form an opinion based on the past price activity and predict future direction (and potential turning points) in the underlying issue. Most analysis begins by determining the strength and direction of the primary trend and the foundation for future predictions is predicated on the premise that once a trend is in motion, it will continue in that direction until a change in character occurs.

 
 
  Linda Piazza   12/10/20,  2:35:37 PM
The OEX is once again sitting on the 30-minute 130-pma. This is the third period of time in which that average has been tested since December 5. The SOX and BIX sliced through their corresponding averages on a single 30-minute candle, but so far, the OEX has bounced each time it's hit it. I wouldn't be surprised to see the OEX slip through this time, falling to the 60-minute versions, now at 523.20 and 522.45.

 
 
  Jeff Bailey   12/10/20,  2:32:55 PM
QQQ $34.31 -0.30% ... I've been busy with AZO/AAP earlier this morning, and WEEKLY MBA table. On intra-day basis, QQQ sure seems to mark some intra-day action where it seems to bounce from a session low, but at each hour, the internals continue to weaken, and QQQ has headed lower from the top of each hour. It's mid-way through the hour here, and QQQ testing 11:00 AM low and RED #5.

 
 
  Linda Piazza   12/10/20,  2:31:27 PM
I agree, Jeff, I wouldn't have wanted to be buying a house during a holiday season, either, but apparently there are enough people who must (like us, because our house had sold and my husband had already been transferred).

 
 
  Linda Piazza   12/10/20,  2:29:32 PM
On the OEX five-minute chart, I'm watching a symmetrical triangle that must be similar to the one Keene mentions watching (on the futures side of the Monitor.) The OEX is just now breaking below that triangle. The market has taught me this last year to be leery of such breakdowns, however, as they sometimes signal nothing more than a break down to next support (535.50-524 in this case) and then a zoom up.

 
 
  Jeff Bailey   12/10/20,  2:28:28 PM
Goodness me... is my housing/holiday logic off today. Linda's (14:16:42) comment.

I thought about the "don't want people in my house during holiday" too. Maybe my life is too complicated during holiday season, and simply has me thinking I've got enough things going on at the end of the year, to wait until after holiday's to actually buy a house. However... I'm not like the majority as it turns out.

Just like the stock market I guess, there's two sides to everything.

 
 
  Ray Cummins   12/10/20,  2:28:08 PM
Spreads/Combos & Premium-Selling -- E-Mail Replies: Part II

Regarding Research Techniques:

Fundamental analysis is the process where one attempts to predict the potential earnings of a company by evaluating their market share, product revenues, pricing structure, and operating margins, as well as various other financial components of the company's business. Fundamental analysis will also provide a more accurate picture of the long-range outlook for a stock, but it is generally very inefficient for predicting the near-term movement of share values. However, analyzing the value of a company can help to forecast potential profits (or losses) and since earnings significantly affect share values, it is important to have complete and accurate knowledge of of a company's financial condition. We have all witnessed how a quarterly reports can affect the short-term trading activity of a stock and the catastrophic losses that can occur when a company announces earnings that are different from the current consensus estimates. A worse-than-expected profit outlook will also cause stock prices to fall and when the news becomes public, analysts are quick to change their opinions on the company, downgrading the issue and causing further damage to its share value. This is one of the few times when fundamental analysis might be helpful in a short-term trading scenario.

 
 
  Ray Cummins   12/10/20,  2:23:56 PM
Spreads/Combos & Premium-Selling -- E-Mail Replies

Hello Ray, How should I research your picks? I want to achieve a 20% return on my investments a year. I know with proper training and technique this goal should be achievable. For a 401K or IRA, since I can't trade credit spreads, I trade covered calls. I do not trade the picks in your column for the covered calls, as the commissions are to high in Fidelity. Any suggestions for trades in an IRA other than covered calls? BN

Most market professionals use a combination of technical and fundamental analysis to evaluate issues for portfolio positions. As you know, technical analysis is a method of stock market research using indicators, charts, and computer programs to track price trends of stocks, bonds, commodities, and market indexes. A technician understands the fundamental values of securities but focuses on the historical behavior of the market, industry groups or sectors, and individual stocks. The goal is to use their price movements, trends and chart patterns to predict future direction and changes in character. Most of this analysis is based on the fact that the values of stocks reflect what people think they are worth, not what they are really worth.

 
 
  Linda Piazza   12/10/20,  2:16:42 PM
Jeff, we bought our current home during the Christmas holidays after having received two contracts on our previous home on Christmas Eve, three days after it was listed. The market was a little hotter then, two years ago, but our realtor told us we had an advantage in listing over that time period because fewer homes were for sale. Buyers still looked, he said, but no one wanted buyers trooping through their houses over the holidays, so fewer homes were for sale. This involves existing and not new homes, and was two years ago, so it may not relate to your question about holiday home sales.

Here's more anecdotal evidence. I drove past one of the malls here in Dallas this weekend (didn't stop--hate shopping) and the parking lot was jammed full. Retail sales might be down in other parts of the country, but we're seeing more people at the mall than at any time since we've lived here. When I did have occasion to shop in the last three weeks, we've actually stood in line to check out, as people were not only shopping but actually buying.

 
 
  Jeff Bailey   12/10/20,  2:10:15 PM
Another Realtor Comment! ... I'm a realtor in _____, and can say there seems to be no limit to the number of people lining up to buy new homes. Existing sales are off somewhat, but not new ones....at least here.

However, I don't believe you can go through a business cycle as deep as this one and have one sector (home sales) not touched at all. The rates will eventually have to go up, and when they do, there should be a significant pause in new home sales (IMO). I believe this to the extent that I am putting my own home on the market, and will rent till after this slump occurs. If I'm wrong, I don't think I will have lost much. We'll see.

"All will become clear in the fullness of time!" HA!

Again... thank you. Noting comment regarding NEW HOME SALES (this is DJUSHB, or homebuilder related) vs. existing (demand, or lack of it can impact pricing of new home)

Location of Realtor left blank to protect identity. (grin)

 
 
  Jeff Bailey   12/10/20,  2:05:44 PM
02:00 Internals at this Link

 
 
  Jeff Bailey   12/10/20,  1:58:57 PM
Comment from Realtor! ... Many buyers buy in time to have their children be able to start school after the holiday season is over. Therefore there should be buying going on now. With the quick mortgage financing now, it is still possible to be looking and be closed prior to the restarting of school. Holidays are a big sale time as that is when people are not having to work. I have sold on every holiday but Christmas Day.

Thank you very much for sending me (Jeff Bailey) this comment. I stand corrected, and perhaps need to re-think prior logic?

 
 
  Linda Piazza   12/10/20,  1:51:42 PM
There's just not much happening on the OEX to report right now. As Jim mentioned on the futures side of the Monitor, I'm trying to avoid micromanaging. The BIX still does not show much strength, although the BIX 30-minute MACD does make a bullish cross from below signal. The SOX.X consolidates with MACD turning up from below signal, too.

 
 
  James Brown   12/10/20,  1:51:01 PM
A reader asked about the homebuilders and if traders should be looking at new long plays now that they have all pulled back some. Looking at the charts this group has really been hit hard the last two sessions with heavy profit taking. Of course they were way overdue for this kind of move so it's not too much of a surprise and bears have been trying to get some kind of drop in the sector for months (painfully to no avail).

With the sharp losses in the last two sessions I would be hesitant to chase them with puts right here and would instead choose to be patient and wait for the next short-term bottom. Most of the group peaked in June and spent the next month or two consolidating, with many breaking their 50-dma's. Eventually, they bottomed and reversed course. Now if we're expecting another 4-to-8 week consolidation then maybe a put play is appropriate if we can get a bounce/failed rally to make an entry. If you're not a fond of buying puts then the plan would be to wait and watch for the next reversal.

If you've been following the homebuilders a number of them said business looks good through 2005, even with a future up tick in mortgage rates. Plus, the sector still trades at a low P/E relative to the S&P 500 and many expect them to continue their price appreciation as they catch up.

Is there a short-term bearish opportunity in this group? Probably, especially if we get the right entry point. Do I think they may (eventually) produce another run higher? Probably, but the trick is to be patient and wait for it. Don't try and pick the next bottom.

 
 
  Ray Cummins   12/10/20,  1:48:39 PM
Spreads/Combos & Premium-Selling -- Portfolio Activity: Hovnanian (NYSE:HOV)

Another day of selling pressure for the Materials & Construction Sector and housing stocks are leading the retreat. I mentioned our concern with HOV yesterday and that anxiety apparently had merit as James J Cramer saw fit to comment on the situation as well. He mentioned that stocks in the group had "toppled on their own accord" and that he was "looking for what caused it." From my viewpoint, it's simply a matter of gravity and timing; these stocks have been among the best performing issues in 2003 and the recent market climax simply provided an opportunity to lock-in gains for the year. In any case, HOV is down $4.74 at $84.26 and our bullish position (DEC-$80P/$85P) in the stock has been closed to limit potential losses.

 
 
  Jeff Bailey   12/10/20,  1:45:51 PM
Homebuilder thought ... I wonder what you folks think of the home building sector today.It seems like there has been a pull back and stocks like D.H. Horton seem like they are holding at the 50 day moving average which is supported by the .50 Pnf chart also. What's you're take on a low risk long in time for the Christmas Rally ?

Good question. Some thought... not a lot of home buying taking place DURING holiday season. While I'm not a realtor (would love to hear from some realtors on this thought) I would think most BUYERS would have bought by now, get the house set up, then have distant family members fly in for the holidays and see the new house! Right now, potential home buyers most likely looking, with intentions to buy AFTER the holiday.

I saw this trader/investor's e-mail after writing the 01:00 Update and mentioning of the 50-day SMA. My thoughts here are that a bull doesn't have to be in a hurry to buy this dip right now, but a table I've been working on today and the MBA survey, does show the DJUSHB putting in one of its BIGGEST weekly declines in percentage term, dating back to currently compiled 04/30/03. One thing that has become more obvious to me, is that the homebuilders aren't necessarily tied to the MBA data, has mortgage application data has not tied in overly well, and homebuilders have really been able to pack the earnings to their bottom lines. As such, I think GREATER emphasis has to be placed on the technicals, but I do think I'm picking up on some correlation in the Purchases Index with the homebuilders price action.

 
 
  Jonathan Levinson   12/10/20,  1:41:03 PM
The market feels heavy here, with the daily and weekly cycles so far keeping the 30 minute upphase under pressure. Link

 
 
  James Brown   12/10/20,  1:29:58 PM
Ouch! A reader just sent an email about J2 Global (JCOM) breaking down. The stock broke psychological support at $25.00 and its 200-dma yesterday. Today's move confirms the break and the stock looks headed for the $20.00 mark.

A stock in a similar niche is Sina Corp (SINA). Shares of this Chinese Internet look ready to break support at $30.00. Should this occur the natural target is its 200-dma near $25.00.

 
 
  Linda Piazza   12/10/20,  1:29:52 PM
A few weeks ago when I would run one of Q-charts volume-rate scans, all the stocks seeing big volume were stocks that were gaining, even on down days for the markets. Today, many of the stocks showing up on that scan are moving down today, another anecdotal indicator of a possible change in tenor.

I feel it necessary, though, to add that going into the end of the year, I expect a whole lot more of what we've been getting today. I don't think the markets will be allowed to slip too far unless something gets out of hand and declines start to snowball. That's why I've been following the 535/540 bear call credit spread to let you see how it would have been progressing, so you can see that it can be possible for OEX options traders to remain calm and let money accrue while markets chop around. When the OEX is trending, then we want to consider directional plays. When it's chopping around, we want to consider this type of play. Right now, we'd have $0.20 of unrealized gains in our pockets, far above the sure losses we would have sustained holding onto a December ATM put through all the choppiness since Thursday afternoon.

 
 
  Ray Cummins   12/10/20,  1:23:55 PM
Straddles & Strangles -- Portfolio Activity: Macromedia (NASDAQ:MACR)

The Straddles portfolio enjoyed a new winner this week as MACR dipped below the downside break-even point in our speculative (DEC-$20C/$20P) position. The stock is trading near $17.50 with an overall credit of $2.75 in the straddle, a $0.55 profit on $2.20 invested in only two weeks. Traders who think the bearish trend will continue should expect some "bounce" potential near $17, which is the 6-month low. Those with a conservative bias might consider taking partial profits or placing a sell order for the $17.50 puts if the stock climbs above the B/E in the position (near the $18 range).

 
 
  James Brown   12/10/20,  1:20:37 PM
CSFB came out with some outlooks for its fellow brokers. BSC received a "neutral". Meanwhile shares of BSC are starting to look like a put candidate if they break the 200-dma. CSFB started MER and LEH with an "out perform". Neither of them look very hot either. Actually, Mark and I have been looking at MER as a possible short play. If MER trades under its late November lows near $54.50 it could drift toward the $50 mark and meet up with its 200-dma.

 
 
  James Brown   12/10/20,  1:15:47 PM
Panera Bread (PNRA) has been drawing a lot of analyst attention lately. Yesterday Goldman Sachs started coverage with an "under perform" while McDonald Investments upgraded it to a "buy" from a "hold". That news was followed up by a "strong buy" this morning from Raymond James. The stock is seeing a reaction from the "strong buy" and is currently up 6.8% but remains below its simple 200-dma.

It sounds like McDonald and Raymond have forgotten how popular the Atkins and South Beach diets (very little bread and carbs) are becoming...*grin*

 
 
  Jane Fox   12/10/20,  1:14:43 PM
Just got another upside alert of the VIX hitting 18 again.

 
 
  Jonathan Levinson   12/10/20,  1:13:48 PM
The 5-yr treasury auction generated 3.375% yield and a 1.92 bid to cover versus 2.36 average. Once again, it appears that the appetite for US debt was not whetted by yesterday's FOMC announcement.

 
 
  Jonathan Levinson   12/10/20,  1:09:12 PM
HUI and XAU are recovering off the intraday panic lows, and it would warm the cockles of my heart to see buyers rush back in to replace the weak hands. HUI -9.73 at 232.49, XAU -2.9 at 104.93. Nevertheless, the bounce feels corrective compared with the strong selling, and I'm still inclined toward patience.

 
 
  Ray Cummins   12/10/20,  1:07:47 PM
Spreads/Combos & Premium-Selling -- Portfolio Activity: Invitrogen (NASDAQ:IVGN)

Shares of the popular biotech firm, which makes tools for genetic research, are down $2.36 at $64.17 in the wake of a mediocre guidance call. On Wednesday, the company unveiled a series of plans aimed at expanding performance and maintaining pro forma earnings growth, which it said will help 2004 revenue to rise 16% to $890 million. The outlook, while seemingly favorable, was lower than analysts had expected and investors quickly sold the issue down to a recent support near the 50-DEMA. Our (bullish) position is not so far below this area at $60, so we will be watching the stock price closely in the coming sessions.

 
 
  Jeff Bailey   12/10/20,  1:07:43 PM
01:00 Internals at this Link

 
 
  James Brown   12/10/20,  1:06:52 PM
Shares of Media General (MEG) are down 2% and breaking support at $65.00 after reiterating their profit outlook and growth expectations for 4%-5% in 2004. There has been a lot of talk about the improving advertising market for 2004 and the 5% estimates from MEG may not be exciting enough for investors. The stock does look weak here but still has a strong rising trendline of support dating back to March of this year. Shares would need to cross $62.50 to break this trendline. Plus we can expect more support in the 59-60 region.

 
 
  Jim Brown   12/10/20,  1:04:42 PM
Dow 9920 is our support level for today and the attempts to break it have been weak. Should we crack that level 9880 is stronger resistance followed by the 50 DMA at 9750. I would love to see 9750 and I would happily go long at that level.

 
 
  James Brown   12/10/20,  1:01:54 PM
Thor Industries Inc (THO), the RV manufacturer, announced a 2-for-1 stock split and doubled its quarterly cash dividend to 3 cents (to be paid post-split).

What we find intriguing is that shares have not reacted to the news. The stock remains below is simple 100-dma. We suspect that THO is building a bear flag pattern but still needs to break support at $52.00.

 
 
  Linda Piazza   12/10/20,  12:59:03 PM
As I'm checking equity charts today, I'm noticing several stocks that have fallen out of the ascending regression channels that had been supporting their prices for months. SONS and LOW come to mind. While this may not exactly be the beginning of the end since those stocks definitely needed to take a breather and regroup, it certainly signals a change in tenor. Not every touch of a trendline is going to result in a bounce from that trendline any longer.

 
 
  James Brown   12/10/20,  12:54:55 PM
Whoops.. forget to add the short-term chart for GLW with the H&S pattern. Link

The long-term support trendline is NOT shown.

 
 
  James Brown   12/10/20,  12:51:44 PM
Corning Inc (GLW) are once again at a pivotal trading point. Short-term the stock continues to look like a short candidate despite the upgrade this morning from JP Morgan from "neutral" to "over weight". Shares have broken down through a head & shoulders pattern and yesterday's session broke the $10 mark. The H&S pattern suggest a target near its 200-dma just above $8.00. However, short-term oscillators like RSI and stochastics are already oversold. Shorts might get another entry point on a failed rally under 10.25. Or traders can just wait for GLW to break yesterday's low.

Despite the short-term picture bulls will quickly point out that the stock has not yet broken its rising trendline from October 2002. If you were going to go long the stock this is where you'd be looking for a bounce. A bounce back over $10.50-10.70 might be worth another look!

 
 
  Jim Brown   12/10/20,  12:50:21 PM
The markets are not gving us any clues for this afternoon. This sideways motion may be all we are going to get until the Santa rebound begins. I was hoping for a dip to 9750 before Friday but we are not moving in that direction. The longer we linger around SP 1060 the better chance we will move up and not down.

 
 
  Linda Piazza   12/10/20,  12:48:35 PM
It looks as if that observation that the first five-minute's tight range perhaps predicted a tight range for much of today's trading was right. That's an observation that Jeff made when discussing his 5MRT system. Here's what I see on the 30-minute OEX chart: Link

 
 
  Jonathan Levinson   12/10/20,  12:47:07 PM
ok, at what point should someone start to nibble long on xau---around 100?

95 looks like the first confluence zone to me, followed by the 85-87 area. Note that the oscillators are maxxed out, and so we're witnessing the beginning of a trend correction. It's either going to be deep or shallow.

I bought my position in Feb 2002, and have held most of it ever since. I am very bad at buying near tops, and prefer to wait in cash than to get stuck holding the bag. I read that Buffet was complaining about there being nothing priced attractively anymore, and I agree. Only my fear of the fed stops me from just selling everything and waiting for cash to appreciate, and I still have my doubts. The charts on gold, silver, semiconductors, real estate, euros, the Dow, and even bonds all resemble each other, and only cash is truly oversold. I guess that means that I see a deflation, but frankly, the monetary measures of the fed have muddied everything up. My core positions are currently cash and miners, and plenty of doubts.

 
 
  Ray Cummins   12/10/20,  12:43:54 PM
Spreads/Combos & Premium-Selling -- Portfolio Activity: Sears (NYSE:S)

This issue is starting another downward leg today as the retail group continues to feel the ill effects of the recent snowstorm in the Northeast. Over the past week-end, one report noted that customer traffic in the company's 153 regional stores was sluggish, though sales of snow-throwers, shovels and winter wear were brisk. The stock price is down $1.28 at $46.37 and the technicals suggest a continuation of the trend to the low $40 range. Our bearish position (DEC-$55C/$50C) is at maximum profit and appears to be comfortably "out of the danger zone" at this point.

 
 
  Jonathan Levinson   12/10/20,  12:37:22 PM
HUI's getting smoked now, -13.28 at 228.94. XAU -3.55.

 
 
  Jeff Bailey   12/10/20,  12:36:50 PM
12:00 Internals Link

Notable bearish divergence at 12:00... prices higher, but A/D really weak.

 
 
  James Brown   12/10/20,  12:34:34 PM
Entry point? Shares of CDW Corp (CDWC), previously known as CDW Computer Centers and probably best known for their colored catalogs that show up in the mail, have broken down through support at $57.50. Shares have slowly been consolidating into a wedge as sellers hit each new lower high. Currently, the stock is back above the $57.50 mark but now by much. The next level of support should be $55 but I wouldn't be surprised to see it test $52.50.

 
 
  Jonathan Levinson   12/10/20,  12:29:34 PM
Gold has finally turned negative, but the HUI is getting sold aggressively, -10.93 now at 231.19. XAU -3.12 at 104.71. The charts are very extended on the miners I'm watching, and a daily cycle downphase has just kicked off. I'm close to religious about gold, but I prefer to exercise patience even at the risk of missing an entry.

 
 
  Jeff Bailey   12/10/20,  12:24:10 PM
Autozone (AZO) ... old bar chart I had on AZO, but added a retracement for h/s top formation. Link

Still trying to tie in with AAP at this point.

I will not profile a bearish trade in AAP at this point until I at least update in 01:00 PM EST per this weekend's Ask the Analyst column, but preface at this point for AAP is bullish caution advised, based on reaction to AZO.

 
 
  Linda Piazza   12/10/20,  12:21:59 PM
I've been studying the OEX daily chart. I mentioned over the last few days that the OEX had been forming an orthodox broadening formation (megaphone) at the top of a rise. Those are typically bearish formations, but they haven't always resolved in a bearish fashion over the last few months. Sometimes there's a false break to the downside that's followed by more upside. Sometimes, however, those broadening formations have been narrowing into a diamond shape, a shape that's supposedly rather rare. That diamond shape has a bearish connotation, too, but . . . you guessed it. They haven't worked out that way this year. Today's candle, so far an inside candle, could be the beginning of a narrowing into a diamond shape, too, but perhaps I'm just counting my diamonds before they're set.

 
 
  Jim Brown   12/10/20,  12:16:06 PM
So far the bounce has been weak but the internals are slowly improving. The VXO is nearing the low of the day indicating the buyers are easing up on the puts. The TRIN is back down to 0.72 and in bullish territory. The A/D is rising along with the advancing volume. These indications are all very light and we could still go either way but the most likely action is sideways unless some happens to change the picture. Volume is light showing no convction.

 
 
  Jeff Bailey   12/10/20,  12:11:06 PM
Advance Auto Parts (AAP) $77.05 -4.53% ... downside alert here at $76.94, bull is alert, but probably not interested at this point. We will begin monitoring, perhaps Mr. Auriana can take more heat than individual trader at this point, but AZO $80.39 -11.9% really getting smacked lower.

AAP may be near-term bearish trade to $73.09-$72.25, as AZO looks headed into $76.28-$75.23 zone.

 
 
  Linda Piazza   12/10/20,  11:50:09 AM
The SOX and the OEX are finally in synchronization, which might add some oomph to the OEX bounce. The BIX finally shows a couple of white candles in a row on the five-minute chart after having steadied for the last hour. If the SOX and the OEX manage to infuse the BIX with strength, it's about time for it to relieve some oversold pressure, too. I'm still not sure there's enough strength to do more than chop around under resistance, though. We'll have to wait and see.

 
 
  Jonathan Levinson   12/10/20,  11:42:42 AM
The most recent put to call reading is .66, neutral, with the VXO 17.80. Ten year treasuries are up 2.4 bps, gold and silver firm, while the miners correct, HUI -4.98 at 237.24, XAU -.85 at 106.98.

 
 
  Linda Piazza   12/10/20,  11:35:21 AM
The OEX continues its test of the 30-minute 100/130-pma's, with 30-minute oscillators slanting up or slanting down, depending on the current OEX movement. The SOX attempts another rise, with a possible double-bottom building on the five-minute chart, but with the five-minute candles already beginning to show upper shadows and the outcome unclear. The BIX hasn't risen, but it has at least steadied over the last hour.

 
 
  Jane Fox   12/10/20,  11:19:37 AM
Here is an update of the $RUT.X and $SPX.X spread. Notice how the spread has crossed below the 50MA but the indexes have not. This is a divergence from the last 8 bullish months when the small caps were leading the charge. Link

 
 
  Jonathan Levinson   12/10/20,  11:11:02 AM
The put to call ratio is back to .64, VXO up to 17.89. Those sub 16 prints didn't last for long, did they?

 
 
  Jonathan Levinson   12/10/20,  11:03:27 AM
We're very close to seeing the short cycle upphase on the indices abort here. If so, we should see a selling spree.

 
 
  Jim Brown   12/10/20,  11:02:36 AM
The Nasdaq has dropped below 1900 once again and the internals are weakening across the board. Volume is light so there is no rush to the exits, just weakness. The BETA is setting a new low and the A/D line is ngative -1589. Ticks are very negative at -1045. Link

 
 
  Jane Fox   12/10/20,  11:01:53 AM
TRin just broke above 1.03 and price is free now to fall.

 
 
  Jeff Bailey   12/10/20,  11:01:29 AM
11:00 Internals ... Link

 
 
  Jane Fox   12/10/20,  11:00:53 AM
Here's why I think we will go down: Link And here is why I think we won't: Link

 
 
  Jonathan Levinson   12/10/20,  11:00:24 AM
INTC, S&P futures, WMT all printing session lows here.

 
 
  Linda Piazza   12/10/20,  10:58:45 AM
In reference to Jim's 10:53 comment about the OEX being the only index in the green, I've been a bit puzzled today by the OEX's behavior. Although my first mention of the OEX this morning referred to its situation above a likely bounce point, so the possibility of a bounce attempt didn't surprise me, the way it happened did. Today the OEX seemed determined to lead the SOX higher, when the SOX and BIX often serve as leading indicators for the OEX. Seemed turned around somehow, but the OEX just isn't going to be successful without the cooperation of stocks in those other indices, and the OEX wasn't successful in leading the SOX up. That's too much weakness to overcome.

 
 
  Jane Fox   12/10/20,  10:55:29 AM
Patiently waiting for the TRIN to print above 1.03 and until it does the downside is limited, in my humble opinion.

 
 
  Jim Brown   12/10/20,  10:53:04 AM
I can't complain about the drop but I sure wish I had jumped the gun on that 1063 touch earlier. All the indexes but the OEX are in negative territory.

 
 
  Linda Piazza   12/10/20,  10:46:25 AM
The BIX continues to plummet, and now the SOX and OEX both turn down, too. The OEX is turning down from its test of the 30-minute 18/21-pma's, but is headed right back to a test of the 30-minute 100/130-pma's. This morning's tight first five-minute range, the attempting-to-rise SOX pitted against the plummeting BIX: a lot of evidence spells chop or continued testing of overhead resistance while oversold pressure is relieved, likely in anticipation of another turnover.

 
 
  Jonathan Levinson   12/10/20,  10:46:03 AM
The put to call ratio fell to .58 for the second half hour. VXO is currently 17.65.

 
 
  Jane Fox   12/10/20,  10:44:55 AM
The DOW ratio is also helping hold up the market, which is still a bullish 22:8. This along with the TRIN is showing us the underlying bid in the market.

 
 
  Jane Fox   12/10/20,  10:41:39 AM
It looks like the BETA, which is still falling to new daily lows, is helping this decline but the TRIN refuses to go even neutral so we have this pull one way then the other.

 
 
  Jonathan Levinson   12/10/20,  10:41:10 AM
The wavelet downphase should be just about done, and now the only question is whether the short cycle upphase is going to assert itself or not. I'm hoping that some of that daily cycle rollover spills over to the shorter cycles- hopefully the dippers have gained a bit of timidity.

 
 
  Jeff Bailey   12/10/20,  10:34:19 AM
Forest Labs (FRX) $57.69 +3.23% Link ... on fire!

Disclosure ... I currently hold bullish position in FRX. Closed out the covered calls written in September for small loss, but didn't want to lose the stock on that triple-top buy signal at $53.00.

May have to find another "top 10" stock candidate for year-end renewal.

December MONTHLY Pivots... S2= 46.51, S1 = 50.58, P = 52.79, R1= 56.86, R2 = 59.07

 
 
  Jeff Bailey   12/10/20,  10:32:01 AM
Autozone (AZO) $82.72 -9.43% .... continue to work here. Also note the rather suspicious looking head/shoulder top pattern, where an ascending necline is broken to downside today? May give pattern objective to $75.23, and all be darned if that isn't right back into that base we were bullish from back in July, where bulls traded long from $77.50, with bullish target of $90.00 based on the then bullush vertical count of $90.00.

I'll bet dimes to doughnuts committed bulls were buying yesterday, ahead of earnings, but flush the stock this morning on the light revenues. May look for an AZO short/put entry back near $86.04, as AZO violates its bullish support trend here.

 
 
  Linda Piazza   12/10/20,  10:27:22 AM
Jeff, I have a similar company on my bullish candidate list. Sounds like we're thinking alike, right?

 
 
  Jeff Bailey   12/10/20,  10:20:55 AM
Bullish candidate list ... Jim and James will vouch for this. For the year-end renewal, Autozone (AZO) was one of my initial bullish stock picks. However, after seeing Friday evening Luis Rukeyser show, and mentioning of AAP, I began to think... "hey, you know AZO achieved its bullish vertical count. If you're going to be bullish an auto parts retailer, why not scratch AZO from your bullish list as it exceeded its bullish vertical count and would need to give a PnF sell signal, then give a buy signal, to allow for a new bullish count to better assess upside reward to." So... I scratched AZO from my bullish list, and replaced it with what I think is a better stock. No, it wasn't AAP.

I do know this though.... For the MONTH of December, AZO's MONTHLY Pivot levels are... S2= 87.23, S1= 91.45, P= 94.49, R1= 98.71, R2= 101.75.

November MONTHLY Pivot levels were ... S2= 82.09, S1=89.10, P = 96.31, R1=103.32, R2= 110.53.

 
 
  Linda Piazza   12/10/20,  10:19:25 AM
How's that bear call credit spread that I first priced Thursday afternoon doing now? It could be exited now for a $0.10 gain, even if the bought option (540 call) were now sold at the bid and the sold option (535 call) were bought back at the ask. We wouldn't be exiting the position yet, though, but you can bet that an ATM December put would have been underwater after being in the position almost a week with only a couple of points of net downside since the entry.

 
 
  Linda Piazza   12/10/20,  10:14:45 AM
The OEX is above the trendline that has factored into December trading patterns and now tests the 30-minute 18/21-pma's that I watch. Thirty-minute momentum, RSI, and CCI all hook up, and MACD tries to make a bullish cross, but from below signal. The SOX has finally gotten in gear, too, bouncing a bit, but the BIX heads down further, and I just have difficulty believing that the OEX can make great gains with that kind of dichotomy. That predicts chop to me, so I'm wondering if the OEX might not consolidate near current levels while the indicators burn off some of their oversold pressure.

 
 
  Jeff Bailey   12/10/20,  10:13:56 AM
Advance Auto Parts (AAP) $78.42 -2.83% ... here's update and beginning of thought process and we now gather information from AZO's price action. Note some price ties as it relates to Oscillators (MACD and Stochastics). Link

 
 
  Jonathan Levinson   12/10/20,  10:12:14 AM
The put to call ratio is neutral at .68, VXO 17.30.

 
 
  Jim Brown   12/10/20,  10:09:33 AM
That last little buy program added +500 issues to the A/D line but only about +30 points to the Dow. Wide but not deep.

 
 
  Jonathan Levinson   12/10/20,  10:00:19 AM
The Fed has ponied up a 1.75B overnight repo, no expiries today.

 
 
  Linda Piazza   12/10/20,  9:58:37 AM
The OEX now heads above the 30-minute 100-pma. Normally when the OEX tests the 30-minute 130-pma and then pushes back above the 100-pma, that's a buy signal. The last time that happened, on 12/05, the OEX climbed almost six points. However, this strength is suspect today because the SOX's parallel bounce attempt is tepid at best (although perhaps improving in strength as I type), and the BIX isn't really making any kind of recovery effort as yet. The OEX faces resistance just overhead at a trendline that's factored into recent trading, at 525.60 or so, and at the 30-minute 21-pma at 526.24. The SOX should be bouncing to relieve oversold pressure and may do it, though.

 
 
  Jeff Bailey   12/10/20,  9:56:32 AM
Advance Auto Parts (AAP) $77.87 -3.51% Link ... OK ... AAP most likely down in sympathy with AZO.

Now a trader looking for a bullish entry in AAP (this weekend's Index Wrap) should begin to try and get in the mindset that AAP most likely pulls into the $77.00, as we thought it might in this weekend's Ask the Analyst column.

What I would be doing now is... NOTHING, but begin monitoring AZO to see if it can firm up at its bullish support trend. If so, then this hints that institutions aren't "giving up" on the auto parts retailing sub sector. With that said, then a AAP bull begins to look for AAP firming near $77 (maybe next couple of days) for their bullish entry point.

We might also tie a bullish entry with AAP, in unison with Index Trader Wrap, where it looks like SPX might want to pull into the 1,050-1,056 level. I'm not sure, but AAP and AZP might be SPX components.

 
 
  Jim Brown   12/10/20,  9:54:18 AM
The A/D line has lost about -1500 issues since the open and is now negative -1360. This could bounce soon as the TRIN is moving into bullish territory at 0.67. The SPX bounced off the morning los at 1059.00 and we are seeing an uptick in buying interest. Resistance from yesterday's close is in the 1063-1064 range.

 
 
  Jeff Bailey   12/10/20,  9:50:49 AM
Autozone (AZO) $84.25 -7.5% Link ... After exceeding its bullish vertical count of $90.00, stock getting whacked this mornings (see 09:00 update), and now testing bullish support trend. No new positions here, but looking for firming at the bullish support trend.

 
 
  Jane Fox   12/10/20,  9:50:20 AM
The VIX just traded 18 a level I was hoping it would hit to start putting some premium into my puts.

 
 
  Jonathan Levinson   12/10/20,  9:49:26 AM
Don't mention it, Jeff ;)

 
 
  Jeff Bailey   12/10/20,  9:47:19 AM
Jonathan's 09:39:14 was one answer/observation to a question a trader asked, which I posted in the Futures Monitor. Thanks Jonathan.

 
 
  Linda Piazza   12/10/20,  9:46:55 AM
The OEX is testing its 30-minute 100-pma this morning, but hasn't been able to push above that average, currently at 524.67. It's going to need the cooperation of SOX and BIX stocks if it's going to show any strength, and so far it's not getting that cooperation. The SOX had been trying to move up, but gave up for the time being.

 
 
  Jonathan Levinson   12/10/20,  9:46:42 AM
GE and INTC to session lows here.

 
 
  Jane Fox   12/10/20,  9:43:54 AM
The BETA is falling and the TRIN is rising, which in my book says lower prices.

 
 
  Keene Little   12/10/20,  9:42:31 AM
Jonathan, one of the things that will be interesting to watch today is the spread between the December and March contracts (per your 9:39 comment). As traders sell December to roll into March, we may see downside pressure in December and upside pressure in March.

 
 
  Linda Piazza   12/10/20,  9:41:55 AM
The SOX, however, attempts to move up. Yesterday, the SOX closed outside the wider 1.35% envelope surrounding its 21-pma. It's been sliding down that envelope since 12/03. Oversold pressure must be growing pretty intense, and the SOX has now moved far away from its 30-minute 100/130-pma's, all the way up at 506.90 and 508.87. It may be time soon for the SOX to pop up and retest those averages, although the presumption is now that the SOX will roll down again either after testing those averages or even ahead of a test.

 
 
  Jonathan Levinson   12/10/20,  9:40:12 AM
From Andrew Aronson:

March S&P becomes lead on Thursday. If you are trading the e-mini, the Dec should still be ok (spreads may be wider) to trade. We used to only trade the lead when trading the Big S&P because the fills took hours to come back if you traded the old month. After today most of the big traders will be trading the March contract. Andrew

 
 
  Jonathan Levinson   12/10/20,  9:39:14 AM
Jeff, I'm watching the March 04 YM contract trading approx 20 points below the Dec 03, and my thought is that traders are closing Dec shorts and reinitiating them in the March- I believe that this explains the "backwardation" effect in progress.

 
 
  Linda Piazza   12/10/20,  9:38:25 AM
No strength in the BIX today. It's sliding down the 0.675% envelope surrounding its 30-minute 21-pma.

 
 
  Jim Brown   12/10/20,  9:38:23 AM
A very small sell program knocked -250 issues off the A/D line and pushed the Dow into negative territory. So far there has not been any follow on to that dip.

 
 
  Linda Piazza   12/10/20,  9:36:35 AM
Yes, I heard John Snow reiterating his belief in a strong dollar again this week. (This post is in reference to Jonathan's 9:31 post.)

 
 
  Jim Brown   12/10/20,  9:35:42 AM
Definitely not any excitement this morning. The TICKS are flat and the TRIN opened in neutral territory. Volume is very light and there appears to be no dead cat bounce in progress. The drop at the close yesterday has not continued but there is no bounce either. We will probably wander here for a few minutes until the first real program trade kicks off to give us direction.

 
 
  Linda Piazza   12/10/20,  9:34:48 AM
The OEX first five minutes included a high of 524.79 and a low of 524.32, with a midpoint at 524.56. Currently, the OEX is testing that midpoint, not indicating either particular strength nor weakness in earliest trading. That first five-minute range is smaller than the typical range we've seen lately, so is it perhaps suggesting a tight-range trading day today? Maybe. We'll see.

 
 
  Jonathan Levinson   12/10/20,  9:31:04 AM
I haven't been following it lately, as politicians are even more inconsistent than Central Bankers. But I don't believe for a second that China intends to do any favors for anyone but China, and our own politicians are woefully outgunned in dealing with them. To China, a 6,000 year old culture, we in the west are the greenest of Johnny-Come-Latelies. To consider John Snow, a man incapable of sticking with what he said the previous day, negotiating macroeconomic policies with the Chinese... terrifying.

 
 
  Linda Piazza   12/10/20,  9:27:38 AM
Jonathan, one of the articles I was reading yesterday talked about the speculation that China was repatriating its funds, and that those funds were no longer as available to finance other governments' deficits. I think I remember both you and Jim talking about this possibility and how it might impact our markets in some of your wraps. Are you hearing the same thing? Think that was a topic of President Bush's talk with the Chinese prime minister yesterday?

 
 
  Linda Piazza   12/10/20,  9:20:43 AM
The OEX ended the day cents above its 10-dma, an average it hasn't closed below since 11/24. It closed near the top of the 523.50-524 S/R zone that has figured so heavily in trading over the last month, and actually was important several years ago, too. It also ended the day resting on its 30-minute 130-pma. It's above the 60-minute versions of the 100/130-pma's at 522.96 and 522.22, respectively. Neither the 30-minute nor 60-minute oscillators show the least inclination to turn up yet, but this is a key level for the OEX and one from which bears should normally be watchful for a potential bounce.

Tired of hearing about the OEX bear call credit spread? It's boring, isn't it? Boring and relatively safe as markets whipsaw back and forth. I'll be looking forward to checking the quotes this morning and seeing how it's performing, benchmarking it for you. There are times when unhedged directional trades are most appropriate (and actually yesterday might have been one of those times, but I knew I wouldn't be here for the close of trading to monitor the trade) and times when we all sleep better with hedged trades.

 
 
  Jeff Bailey   12/10/20,  9:12:11 AM
09:00 Update at this Link

 
 
  Linda Piazza   12/10/20,  7:20:08 AM
Good morning. The number 10,000 figured in U.S. trading yesterday, and it also figured in overnight trading in Asia. Last night, the Nikkei opened above 10,000 but soon fell below that powerful round number, falling to an afternoon low. It closed down 213.72 points or 2.11%, at 9910.56. Banks, autos, and tech stocks declined. Market watchers cited weakness in U.S. markets and the U.S. dollar, and disappointment in November sales figures by Asian semi-related companies as reasons behind the Nikkei's weakness. NPR radio last night featured a piece on the protests being held after the decision to send Japanese troops to Iraq, a major decision since Japan's constitution has in the past been interpreted as allowing forces only for the purpose of domestic protection. In addition, nervousness grows ahead of Friday's release of the tankan survey. Wednesday saw the release of economic data, too, showing that October's current-account surplus grew 38.9% and wholesale costs fell 0.5%.

Other Asian bourses were mixed. The Taiwan Weighted fell 0.96%, hit by tech weakness and also by a statement Bush made yesterday that was interpreted as not being supportive of Taiwan's interests. South Korea's Kospi gained 0.93%. Singapore's Straits Times was flat, down 0.01% and Hong Kong's Hang Seng was also essentially flat, up 0.04%. China's Shanghai Composite gained 1.81%. November's factory output rose 17.9% over the year-ago period in China, with cars and cell phones driving the growth.

While Asian bourses were mixed, almost all European bourses trade lower. Techs and banks were weaker, as they had been in Asia, despite the fact that Morgan Stanley raised its rating on the European chip sector. Perhaps that was because the upgrade was only to an in-line rating.. In Germany, the trade surplus fell, with exports falling. The European Banking Federation spoke out, saying that fears about the strengthening euro against the dollar were exaggerated.

Currently, the FTSE 100 has fallen 60.40 points or 1.38%, to 4319.20. The CAC 40 has fallen 34.01 points or 0.98%, to 3422.11. The DAX has fallen 41.78 points or 1.09%, to 3804.40.

 
 
  Jeff Bailey   12/9/200,  9:02:52 PM
Pivot Matrix for tomorrow at this Link

 
 
  OI Technical Staff   12/9/200,  9:02:40 PM
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