Option Investor
Printer friendly version
  Jeff Bailey   12/17/20,  6:00:28 PM
Did you just hear that little blurb from James Cramer regarding a lot of stocks above their quarterly expiration strikes? This is exactly what we need to be on the alert for tomorrow, and 14:29:00 comments.

Today's internals really didn't reflect what went on in the options markets, where either call buying or put selling was taking place. In tonight's Index Wrap, I'm going to try and lay out what could be a very volatile session tomorrow, as it looks like institutions may be scrambling ahead of option expiration.

  Jeff Bailey   12/17/20,  4:33:25 PM
Closing internals/values at this Link

  Linda Piazza   12/17/20,  3:55:32 PM
Here are the Donchian channels I watch. Link Notice how few closes there are above the channels? The OEX may manage one today. It's going to be close. The channels are based on the highest high and lowest low over a time period you specify, so they're just a simple way to watch that form of resistance and support. They're surprisingly effective, however, and easy to watch. I've offset mine by two periods, so that there are more breakouts, but without the offset, you'd see even fewer closes outside the channels than you do on this chart.

  Jim Brown   12/17/20,  3:50:33 PM
The A/D line took a serious spike on that late buy program and finally broke into positive territory. The buying in the OEX pushed the VXO to another 7 year low at 15.22. We are right back at Monday's highs and no where to go. Link

  Linda Piazza   12/17/20,  3:50:22 PM
Although the SOX now tests its 30-minute 21-pma, the BIX and OEX have both sailed above that average. That suggests a move up to at least test the 0.675% envelope surrounding the 21-pma. Or does it? Earlier today, both fell below that average, suggesting a test of the lower 0.675% envelope, and that certainly didn't happen.

  Linda Piazza   12/17/20,  3:44:19 PM
The OEX turned around in mid-fall and then broke above the descending trendline that had marked the top of its symmetrical triangle. Donchian channel resistance (30-minute chart; 20,2 setting), is at 535.17, so the OEX is likely to close below that level. As I've mentioned, the OEX often pierces that channel but doesn't often close above it. That's not a given, but just a generality.

  Ray Cummins   12/17/20,  3:32:41 PM
Spreads/Combos/Premium Selling -- E-mail Replies: Trading Strategies

One of the most common questions I receive from new traders concerns choosing the right trading strategy. With the market continuing to live up to its "ever-unpredictable" character, now is a good time for a brief comment on this popular subject.

Every strategy has risk and it is impossible to classify any specific technique as the absolute "best" one. Experts say that suitability, which involves an investor's risk tolerance and financial goals, is the key to determining which strategy may be most appropriate for any one individual. The average investor will normally do well with a position that has limited risk and the potential for large profits because one successful trade can easily overcome a series of limited losses. For example, someone who is willing to take relatively large risks for the opportunity of making greater profits might buy and sell equity or index options. In contrast, the conservative investor might not want to be an outright buyer of options. For him, a covered-call position with moderate profit potential and reduced risk would probably be more appealing. Other investors simply want low-maintenance plays with the chance to make reasonable profits without risking excessive amounts of money. Conservative spreads would probably appeal to this group. Finally, the wealthy investor may be attracted to methods that offer the opportunity to make money against portfolio collateral. Writing "naked" out-of-the-money options or short-strangles may solve his needs. Regardless of the approach you take, it is important to understand the mechanics of any strategy being used and work towards a portfolio of diverse positions based on your risk/reward attitude, as well as your experience level and trading style. Also, it is important to remember that the investment objectives are more important than the merits of the technique itself. If the strategy is not suitable for the investor, then it should not be used, no matter how attractive it appears.

  Keene Little   12/17/20,  3:23:54 PM
Jim, if I can pick from that max pain list, I'll select SPX for 1030 please.

  Jim Brown   12/17/20,  3:20:08 PM
Max-Pain Points for Indexes for Dec

SPX 1030
NDX 1375
OEX 525
RUT 500
SOX 500
DJX 96.00
QQQ 34.00
SMH 42.50
INTC 30.00
MSFT 25.00
DELL 35.00
IBM 90.00
MMM 80.00
GE 30.00

  Jim Brown   12/17/20,  3:19:41 PM
RMBS down -5.50 points on negative court news

  Linda Piazza   12/17/20,  3:16:41 PM
The OEX now heads down toward the 532.60-533 support zone. A fall through that level would now represent a fall through the ascending trendline shown on the chart linked to my 14:53 post. This is a different and longer-term lower trendline than the one I was watching earlier today, long since violated.

  Linda Piazza   12/17/20,  3:10:20 PM
About the time I got that last post up, the OEX fell cleanly through most of the Keltner support. The Keltner channels are usually pretty reliable, and the OEX did move up for about a minute, but I didn't mean quite that short a period when I said "on a very short term."

  Jeff Bailey   12/17/20,  3:09:24 PM
03:00 Internals at this Link

  Linda Piazza   12/17/20,  3:07:14 PM
The Keltner channels almost got out of whack there, but they've reeled in OEX prices and the channels are trying to align themselves again. Keltner support groups thickly between 533.54 and 533.66, with Keltner resistance spreading out a little. That suggests that it might be easier for the OEX to move up than down, on a very short term.

  Jeff Bailey   12/17/20,  3:00:00 PM
QQQ $34.70 -0.43% .... edges back from afternoon high of $34.85.

INDU back lower at 10,122.45, after briefly going green and session high of 10,134.61.

Backing lower after bond market closed.

  Jeff Bailey   12/17/20,  2:56:09 PM
HL Camp & Company must be starting their holiday vacation early. Still no posting of today's buy/sell programs. I left yesterday's $-0.68 and $-2.26 on my $PREM.X chart, and would not have seen any buy premium alerts, but 6 sell prem alerts. Last sell prem based on yesterday's $-2.26 came at about 01:20 PM EST. You can really see it on SPX chart as it fell from 1,072.21 to 1,071.16. That sell program didn't take out the early morning low of 1.071.14.

Will note that MONTHLY 19.1% retracement is at 1,071.04, so must be some type of computer buy level today, and I'm thinking it may well be due to rapidly approaching option expiration.

  Linda Piazza   12/17/20,  2:53:33 PM
Here's what I'm watching on the OEX intraday chart: Link

  Ray Cummins   12/17/20,  2:49:52 PM
Spreads/Combos/Premium Selling -- Portfolio Activity: Multimedia Games (NASDAQ:MGAM)

As I mentioned yesterday, Multimedia Games has been one of the more popular issues for "premium-sellers" in recent months and today the stock is climbing higher in the wake of an upgrade from CIBC World Markets. Shares of MGAM are up $1.82 at $41.58 and the issue seems destined to test the 2003 highs near $44. Bullish traders who like to sell options should consider the (short) JAN-$35 put as the current support area exists just above that strike price.

  Ray Cummins   12/17/20,  2:39:22 PM
Spreads/Combos/Premium Selling -- Portfolio Activity: Amazon.com (NASDAQ:AMZN)

One of our recent bearish candidates was listed earlier on the Briefing.com "update" and that is usually a catalyst for further directional activity. The note identified AMZN as "a laggard in early action" and suggested that "up-ticks beyond the 48.55/48.65 area are needed to improve the very short-term weaker pattern." We concur with that outlook and foresee lower share values for the Internet retail giant in the coming month. As our current bearish position (DEC-$65C/$60C) is expiring this week, we will look for some new opportunities to profit from the renewed downtrend in the issue.

  Linda Piazza   12/17/20,  2:34:48 PM
The OEX hit the descending trendline off the 12/15 high, and slowed its ascent. That trendline now crosses just under 534.50.

  Jim Brown   12/17/20,  2:32:27 PM
Update on the Etrade stops (14:03 post)
Two readers replied with work arounds.

Change the timeframe to day-only, and it should be allowed. Granted, you'll have to manage it on a daily basis, and hope there are no gap moves against your position. Gumby

You can use a stop limit order. However it must be at least $.25 under current bid or over ask. Cook

Thank you for your input. I relayed the info to the reader.

  Jeff Bailey   12/17/20,  2:32:14 PM
Dow Industrials (INDU) 10,130.82 +0.01% ... just turning green and rather notable 10-point jump in last 5-minutes.

QQQ $34.80 -0.14%

  Ray Cummins   12/17/20,  2:30:26 PM
Spreads/Combos/Premium Selling -- Portfolio Activity: Millicom International Cellular (NASDAQ:MICC)

It's nice to see MICC shares recovering from the recent drought. The stock is up $2.22 at $67.73 and the rebound occurred exactly where it should have: at the 50-DEMA -- and our sold (put) strike -- near $55. We will need to monitor the issue for the next two days (until the December options expiration) but with any luck, the recovery will continue and the bullish position will remain profitable.

  Jeff Bailey   12/17/20,  2:29:00 PM
NASDAQ 100 Volatility Index (VXN.X) 25.45 -2.67% ... now is when I think volatility index observations may actually become more important. VXN.X has been falling last couple of weeks, despite the NDX/QQQ price action also falling.

This gives impression that there's still a lot of call buying going on.

What I want to monitor in coming sessions is some type of quick jerk back higher in the VIX.X Link , as the NASDAQ-100 Bullish % ($BPNDX) Link and broader NASDAQ Composite Bullish % ($BPCOMPQ) Link show internals starting to soften up a bit.

  Linda Piazza   12/17/20,  2:23:07 PM
Jim, I would be concerned about that broker restriction, too. (See Jim's 14:03 post regarding a reader's comment that his broker did not allow stops on options under $3.00). Although I'm pretty disciplined and sit at the computer fulltime during market hours, I've gotten myself into trouble by inching stops away, thinking the market is just about to turn around. And just about to turn around. And just about to turn around. The temptation is just too strong without hard stops. While there are instances when I prefer mental stops, it's not a good practice generally. All it takes is one phone call or one puppy deciding to run away with the cell phone in his mouth or one such instance, and your investment could be gone.

  Ray Cummins   12/17/20,  2:22:49 PM
Spreads/Combos/Premium Selling -- Portfolio Activity: Winnebago (NYSE:WGO)

I simply had to mention the astonishing rally in WGO shares again. I noticed the issue reached a high near $67.70, up $7.32 at its peak during today's session. Absolutely amazing!

  Jeff Bailey   12/17/20,  2:19:56 PM
Sector Winners continue to be Home Builders (DJUSHB) +1.65%, Retail (RLX.X) +1.59% and Gold Bugs ($HUI.X) 235.21 +1.2%

Sector Loser Airline (XAL.X) 59.31 -1.23%

  Mark Wnetrzak   12/17/20,  2:15:46 PM
Covered-Calls -- E-mail Replies: Part III

Regarding Position Adjustments: Each individual trader must evaluate the risk-reward scenarios for a specific situation and make a decision that is consistent with their trading plan and fits their personal outlook for the underlying equity and stock market. At times, it can be a very difficult process but Larry McMillan's book, "Options: As a Strategic Investment," is an excellent resource for new traders and in Chapter 2, he explains the various strategies (and possible adjustments) involved in writing covered-calls. In addition, Stan Weinstein's book, "Secrets for Profiting in Bull and Bear Markets," provides a simple, easy-to-use (layman's) approach to technical analysis. Regards, Mark

  Jeff Bailey   12/17/20,  2:14:02 PM
Dow Industrials (INDU) 10,116.23 -0.13% ... bugger popped back above its WEEKLY R1 of 10,109.30

QQQ $34.70 -0.43%

  Jane Fox   12/17/20,  2:14:02 PM
Jim (post 14:03) I would seriously consider changing brokers. Trading is hard enough without these silly restrictions.

  Jeff Bailey   12/17/20,  2:11:22 PM
02:00 Internals at this Link

  Jim Brown   12/17/20,  2:03:38 PM
I'm a new subscriber and have opened an account with E Trade I just purchased 4 QCOM Jan 50 calls at 1.90 per contract. E Trade will not allow me to enter a stop/loss on any contract valued under 3. Should I sell these 4 contracts and reenter with April contracts that are valued over 3.00? Or should I not buy contracts valued under 3.00 Tough question. I responded to the reader already but I was wondering if anybody else has a method for handling the Etrade restriction?

  Mark Wnetrzak   12/17/20,  2:03:35 PM
Covered-Calls -- E-mail Replies: Position Adjustments Part II

As for timing an exit or adjustment, many professionals will use a strict percentage of one’s overall portfolio value, or a fixed dollar amount, or a technical violation of a key support area (moving average or trend-line), etc. Many stocks will climb too fast and then falter, but their primary technical trend will remain bullish. The questions you should ask are: [1] Is the stock still above its 30-, 50-, or 150-day MA? [2] Is the stock simply testing support or has the support area failed and the stock is now in a free fall? [3] Did negative news impact the stock and change the fundamental outlook? [4] What is the overall trend of the major averages and how is it expected to impact your position? These are the type of questions an investor must answer before making an adjustment with a covered-call position.

  Linda Piazza   12/17/20,  2:00:44 PM
Is the OEX's test of broken support failing? I'm not sure yet. The OEX turned down, but five-minute oscillators aren't committed to the downside just yet. We need to see a move below the 532.65 five-minute low before we decide. Support might also be found at 532 and again between 530.50-531. Actually, support is layered rather thickly in $0.50 intervals down to 529, and maybe all the way down to 527.50. (Note: As I was uploading this post, the OEX began climbing. Looks as if the test isn't over yet.)

  Linda Piazza   12/17/20,  1:45:57 PM
The OEX decline stopped at 532.65, just below the identified 532.80 S/R zone. It has slipped quietly below its 30- and 60-minute 21-pma's. That suggests a decline to test the 100/130-pma's on each chart, but the OEX isn't exactly plummeting once it fell below those averages. In any other market in any other time than this year since March, that would have been confirmation of weakness, but the OEX is rising now, almost immediately, to retest those violated averages. If the OEX should break back above those averages, I will be watching the descending trendline off the 12/15 high, with that trendline now crossing at about 534.50.

  Mark Wnetrzak   12/17/20,  1:41:21 PM
Covered-Calls -- E-mail Replies: Position Adjustments Part II

As I said earlier, exiting a covered-call outright isn't an investor's only choice when the price of the underlying issue declines. If an investor is defensive and desires to lower the cost basis in their covered-call position, they can roll down to a lower strike and/or move forward in time with the sold options. If this is done before expiration, the investor will need to buy back the current "sold" calls, which should be relatively cheap. An investor who remains bullish in the long-term will do this to protect for short-term weakness but ultimately, he expects the stock to recover. An investor who "rolls" forward, selling longer-term calls as an adjustment technique, will usually have to move forward several months (or use LEAPs) in order to obtain a credit in the new position. Sometimes, even the best adjustment will only "lock-in" a loss (until expiration), but that outcome should still be less than the current loss if the stock price doesn't drop further.

  Mark Wnetrzak   12/17/20,  1:28:07 PM
Covered-Calls -- E-mail Replies: Position Adjustment Strategies

(condensed) Hello Mark, I bought stock in Aria and GSS and sold covered calls...problem is that the stocks have fallen recently about 15-20% from my purchase prices. Do you have any "sell" recommendations on them now? I'll probably just buy the calls back and give the stocks time to come up and try and sell them again at a higher price, assuming they there's no sell recommendation on the stocks. TI

Regarding "sell" recommendations: Each week, the covered-call section offers a list of candidates to supplement your search for potential covered-call positions. However, as an information service, the OIN can NOT provide specific instructions or trading advice and I can't make "buy" or "sell" recommendations as I am not a registered broker or financial advisor. In the weekly summary narrative, my (delayed) comments are simply a service to help new traders understand when positions might be opened and closed, due to changes in technical character. In most cases, actions taken based on the commentary would be far too late to be effective, thus it is not intended as a substitute for personal trade management. As the weekly summary of the portfolio is a simple static representation of the candidates offered (and for ease of publishing), the primary adjustment technique used is closing a position. However, exiting a covered-call play outright isn't an investor's only choice...(cont)

  Linda Piazza   12/17/20,  1:21:57 PM
Days like today aren't good for trading. They are good for experimenting or thinking about strategies you'd like to employ. For example, I've been talking a lot about spreads lately, and I've been doing that with a purpose. I was convinced that we'd see choppy trading heading into the holidays as markets tried to maintain their gains. Although concentrating on this type of trade means that some good opportunities were probably lost along the way--the decline from the 12/15 high to the 12/15 low comes to mind--some miserable trades were probably avoided, too. Perhaps you've been interested to see how the spread has progressed. If so, perhaps days like today would be great for reading about the strategy, perhaps in McMillan's Options as a Strategic Investment or even in our own OIN archives.

  Ray Cummins   12/17/20,  1:11:34 PM
Spreads/Combos/Premium Selling -- Straddle Update: Fuelcell (NYSE:FCEL)

Another position in the straddle portfolio reached the target profit today. Fuelcell Energy (NASDAQ:FCEL) fell to a low near $10.75 this morning, offering a gain of up to $0.65 (per contract) on $0.85 invested in just three days. The catalyst for the downside activity was the company's earnings announcement, which saw revenue fall 47% to $7.3 million, due to lower government R&D funding. The quarterly report provided an excellent opportunity to speculate on news-driven volatility and with the option prices theoretically cheap, the short-term position offered a favorable risk/reward outlook for speculative traders.

  Jeff Bailey   12/17/20,  1:11:12 PM
01:00 Internals at this Link

  Ray Cummins   12/17/20,  12:57:18 PM
Spreads/Combos/Premium Selling -- Martek Biosciences (NASDAQ:MATK)

Shares of MATK are rebounding today and the move came just in time as the stock was approaching our sold (put) strike at $55. The stock is up $1.47 at $58.26 and the bullish activity is due primarily to the announcement Tuesday that the company's fiscal fourth-quarter net income rose sharply as revenue more than doubled from higher sales of its infant formula products. Martek, which makes products derived from microalgae, attributed its earnings growth to increasing demand for the ingredients DHA and ARA and the company estimated that the U.S. market share for infant formulas containing its products grew to more than 40% from less than 10% a year earlier. Our "naked" put position now seems less likely to need an adjustment or early-exit trade, however we will monitor the issue closely for any signs of a pullback over the next few days.

  Jeff Bailey   12/17/20,  12:54:28 PM
United Online (UNTD) $15.95 -7.4% Link ... Jeff: UNTD's triple (quadruple?) bottom sell signal today two boxes down is ominous for the stock. I will exit the long trade here and look for a bounce to get short. Nice thought on a bounce in the Inets for year-end but this one looks like its done.

I agree, and with NASDAQ bullish % in "bear alert" and "bear confirmed" status, I would be getting defensive with UNTD here. I was looking for support at the bullish support trend, and while the stock did try and hold, supply for 4-lettered stocks looks to begin outstripping demand. Might look for a 3-box reversal back higher, but stock shouldn't have traded back below $16.50. Today's trade at $16.50 was a triple-bottom sell signal.

In "bear" phase, this pattern profitable for a bear 93.5% of time, average decline 23%, in 3.4 months. (Professor Davis).

  Linda Piazza   12/17/20,  12:53:09 PM
One sector that is gaining today is the retailing sector. WMT bounced, as did S, JCP, and DLTR. Some higher-end retailers such as TIF and ANN are gaining, too.

  Jeff Bailey   12/17/20,  12:45:49 PM
QQQ bearish trader liking this action in the SOX.X Link

Saying... "break darned you... break!

  Linda Piazza   12/17/20,  12:44:25 PM
The SOX has rolled down again, looking to be headed down to test the day's low again. The BIX has inched below its 30-minute 100-pma, but is still within the range that could be called testing that average rather than falling below it. The OEX is now testing its 30-minute 21-pma and is also testing that ascending trendline I've been mentioning off the 12/09 low, now risen to 530.30. It can't hold up indefinitely without the help of the big caps in these other indices, but bulls could argue convincingly that these indices are at possible bounce points, too. I'm trying not to read too much into anything today, but this looks weak right now.

  Ray Cummins   12/17/20,  12:41:38 PM
Spreads/Combos/Premium Selling -- Cyberonics (NASDAQ:CYBX)

Shares of CYBX are enduring some profit-taking today and with the lack of public news, investors are attributing the retreat to a technical consolidation and renewed activity among "shorts" who trade the volatile issue. Cyberonics, which makes a surgically implantable pacemaker-like device to treat severe epilepsy, is down $1.24 at $31.68 and that's almost a 20% retracement of the recent rally. CYBX shares have enjoyed strong upside activity since last week, when the U.S. FDA announced that the company's application to use a pacemaker-like device to treat chronic, drug-resistant depression, was suitable for filing. Stock buyers were also optimistic about the decision by Boston Scientific (NYSE:BSX) to increase its equity stake in Cyberonics to 20%. Some experts believe BSX will eventually purchase the remaining outstanding shares of CYBX and the market seems to be valuing the stock accordingly. In any case, our bullish (put-credit) spread deserves more attention and the first goal is a successful test of technical support near the recent trading-range top at $30.

  Linda Piazza   12/17/20,  12:37:05 PM
To evidence the tight range on the OEX, Keltner channels have begun to align themselves at a position of equilibrium. Did you all read Jonathan's wrap last night when he used a pipe analogy to talk about the way the 30-minute oscillators behaved within the context of the daily ones, like a smaller pipe inside a larger one? That's how these Keltner channels behave, too, and the three are trying to line up in position so that their centers would be congruent. They're not quite there and they can't stay there forever, either, but they can through a number of five-minute bars.

  Ray Cummins   12/17/20,  12:20:55 PM
Spreads/Combos/Premium Selling -- Earnings Watch: Take-Two Interactive Software (NASDAQ:TTWO)

Shares of this video game maker are up $1.14 at $30.34 as investors speculate on the company's earning report, due out Thursday morning. Earlier this week, industry experts painted a gloomy picture for holiday video game sales, citing excess inventories and muted demand. Since the month of December is when most game makers earn much of their yearly revenue, a bad holiday season can have a significant effect on annual earnings and analysts often use sales data from the period to determine the outlook for the group. Apparently, Merrill Lynch is less negative on the seasonal results than the majority of brokerages as they initiated coverage on TTWO with a "buy" rating Wednesday. The news was likely a catalyst for some of today's buying pressure but despite the upside activity, our bearish "premium-selling" positions at $32.50, $35.00 and $37.50 are profitable (for now...)

  Linda Piazza   12/17/20,  12:19:35 PM
Once again today, we see a day when the up/down volume is closely matched on the NYSE. Advancers and decliners were, too, as of a few minutes ago, but as was true yesterday, volume patterns are more bearish on the Nasdaq. As of a few minutes ago the adv:dec ratio was 12:18 for the Nasdaq. New highs are at 219, slightly higher than yesterday's figure by about this time but still far below the figures we used to see in recent months, with new lows at 17.

  Jeff Bailey   12/17/20,  12:06:53 PM
12:00 Internals at this Link

  Linda Piazza   12/17/20,  12:03:43 PM
This is one of those days when you could walk away from the computer and come back twenty minutes later and the OEX would still be in almost the same place it was when you left. I'm studying the charts intensely, trying to find the one definitive thing that's going to show direction, but it's not there or I can't discover it if it is. The OEX looks to be drifting slowly toward the ascending trendline off the 12/09 low while that trendline rises, now located at about 532.80, a level that shows up as potential support from several other methods. For example, the 9:30 a.m. low was 532.82. Before it can touch that trendline, however, it has to sink below the 60-minute 21-pma, currently at 533.17, so it might not make it quite there before attempting a bounce or a steadying.

  Ray Cummins   12/17/20,  12:03:14 PM
Spreads/Combos/Premium Selling -- Portfolio Activity: Winnebago (NYSE:WGO)

One of the morning's big winners is also one of our favorite recreational vehicles stocks. WGO shares are up $4.05 at $64.43 after the company said Wednesday that quarterly earnings rose as low interest rates and consumer confidence boosted demand. Winnebago said its sales order backlog jumped 42% compared with a year ago, to 2,768 motor homes, and increasing interest in Winnebago's 2004 models helped the company exceed consensus earnings expectations by $0.14 a share. Our recent bullish (put-credit) spread at $55 is off to a good start and the position should expire profitably in the coming month.

  Jonathan Levinson   12/17/20,  11:40:45 AM
The put to call ratio has bounced to .87, VXO down at 15.76.

  Linda Piazza   12/17/20,  11:31:14 AM
The BIX 30-minute candles continue to flatten along the 30-minute 100/130-pma's, just above those averages, while 30-minute oscillators decline at a flat angle. This could actually be viewed as bullish divergence, since the BIX consolidates while overbought pressure is relieved, ready to turn up when oscillators do, too. However, the same thing was happening late last week and early this week, with the oscillators finally tipping over into fully bearish mode and the BIX plummeting when they did. I don't fully trust the bullish interpretation, then.

  Jim Brown   12/17/20,  11:28:16 AM
The A/D is rising but still negative. The opening drop was quickly bought. All the other indicators including volume have flatlined. Tough to make any upward progress at these levels. Link

  Linda Piazza   12/17/20,  11:08:14 AM
As Jim has probably mentioned on the futures side of the Monitor, the advdec line has been improving since shortly before 10:00. It's not positive yet, however, but this is something to watch. (Note: I see that Jim has mentioned it, just a couple of posts down.)

  Jeff Bailey   12/17/20,  11:04:43 AM
11:00 Internals at this Link

  Jane Fox   12/17/20,  11:00:55 AM
The SEC has voted unanimously to approve reforms at the NYSE. John Reed, interim NYSE Chairman, promised regulators the exchange will hire a separate chairman and CEO, which some SEC officials said was critical to their approval of the plan. The plan will create a smaller NYSE board and increase independence for NYSE regulators.

  Jeff Bailey   12/17/20,  10:57:34 AM
China Life Insurance (NYSE:LFC) $24.28 +30% .... new IPO. Priced 153.68 million at $18.68. Initial range was $15.35-$18.80. Lead Underwriters China Intl. Capital, Citigroup, CSFB, Deutsche.

  Linda Piazza   12/17/20,  10:51:59 AM
The 30-minute Donchian channels are showing that the OEX highs have been gradually descending, as the top Donchian channel line is descending. Yesterday's 535.17 high was the highest high in the last 20 thirty-minute periods, and that level should now represent resistance on a 30-minute closing basis. The OEX does often pierce one channel boundary or the other, but it doesn't often close outside the channel. Such a close would suggest a breakout in the making. The Donchian channels suggest first support at 532.78, the lowest low in the last five thirty-minute periods, with that level coinciding with the location of an ascending trendline that I mentioned earlier today.

  Jeff Bailey   12/17/20,  10:50:31 AM
Provide Commerce (PRVD) $14.50 -3.33% ... new IPO open for trade. Priced 4.33 million shares at $15, expected range was $14-$16. Lead Underwriter SG Cowen.

  Linda Piazza   12/17/20,  10:43:57 AM
In my last post, I spoke of daily 5(3)3 stochastics that had kissed and then unkissed, and were kissing again. That's not the only indicator that can redraw itself. Looking at the daily chart now, it appears that we should have been able to predict an upside break of the orthodox broadening formation on that daily chart by December 8, if not by December 4. Link Studying the chart now, it's clear that daily MACD broke through a descending trendline while the OEX was still mired in that orthodox broadening formation, predicting more upside. It seems clear, but it wasn't so clear then. I was watching that trendline, waiting for just such a break. I think the MACD was actually showing something different back on December 6-8. The chart was showing a flatter MACD, looking to flatten as it touched that trendline. It was only this week, when the OEX moved up strongly, that the MACD did, too, with the smoothed-out MACD then showing that it had apparently broken cleanly above the line by December 8. That wasn't so apparent last week.

  Jim Brown   12/17/20,  10:41:05 AM
In my market wrap last night I explained why the VXO is so low. Funds are rotating out of small caps and techs and into highly liquid blue chips. This takes them out of danger for January and dresses up their portfolio for year end statements with names like MMM, IBM, CAT, GE, etc. Once in the liquid blue chips they can bail in a heartbeat when the January dip begins and not take a big hit like they would in a low volume stock. A rotation into blue chips like IBM, MMM, CAT, GE, etc sends the OEX higher relative to the overall market because it is the top 100 blue chips and drops the VXO which is calculated on the OEX. It is purely a liquidity rotation and not specifically a surplus of bullish sentiment. I posted comparison charts of the RUT, Nasdaq, Dow and OEX in my wrap which illustrated this event.

  Jeff Bailey   12/17/20,  10:41:05 AM
Crude inventories .... API reported that crude oil inventories fell by 2.1 million barrels. DOE reported that crude oil inventories fell by 5.1 million barrels.

  Jeff Bailey   12/17/20,  10:36:40 AM
S&P Retail Index (RLX.X) 363.67 +0.92% .... Best Buy (BBY) $50.00 +0.96% shrugging of early weakness. Jefferies upgrades to "buy" from "hold" saying the bad news was already factored in.

  Linda Piazza   12/17/20,  10:31:39 AM
The daily 5(3)3 stochastics have now made a bearish kiss, showing bearish divergence with price (lower stochastics highs and higher price highs). The problem? It did the same thing on Monday, but then "unkissed" with yesterday's stronger performance.

  Jeff Bailey   12/17/20,  10:30:29 AM
Swing Trade short trader in QQQ, .... those short the underlying QQQ with $34.11 target at this point.

Think about potential for selling the QQQ December $34 puts (QAVXH) currently offered $0.10, at possible offer of $0.15, should QQQ trade $34.50 today. While this obligates the trader to BUY the QQQ at $34.00, less the $0.15, or $33.85, this option strategy ahead of expiration might be to swing trade bear's liking.

  Keene Little   12/17/20,  10:25:26 AM
Jonathan's comment on the VXO (10:09) reminded me of something I read last night, which was a reminder what the VIX is really all about. We look at it to see if we can guage bullish or bearish sentiment and hopefully to discern major turning points. The real story with the low volatility is that trading has become very difficult in this environment. Low volatility means small moves. I know Linda has been struggling finding a good OEX option trade--you need some movement to make it work.

The low volatility is a warning to us traders that scalping is the name of the game. We can't expect big moves if the volatility is so low. Once we start seeing more volatility (higher VIX/VXO) then we can start expecting more trades that actually trend for more than half a day.

  Jeff Bailey   12/17/20,  10:20:28 AM
QQQ intra-day chart on 5-minute intervals with 5-MRT. Link

  Linda Piazza   12/17/20,  10:13:34 AM
Have you ever watched options prices closely, using them to gauge where the next move in the underlying might be? Sometimes just before a move up, spreads will be widened, with the asks on calls being raised. Just before a downturn, they might be widened again, with the bids on calls being lowered. The opposite happens on puts, of course. This isn't a foolproof way of trading, of course, but it's something I watch from time to time, just to get an idea of what might happen next. A few minutes ago, the asks on the calls moved up, warning me that the OEX was about to attempt a bounce, which it did. So far, it hasn't been much of a bounce, though.

  Jonathan Levinson   12/17/20,  10:09:59 AM
Opening p/c ratio .65, VXO down to 15.71.

  Jeff Bailey   12/17/20,  10:07:07 AM
10:00 Internals at this Link

Yesterday's full internals at this Link

  Linda Piazza   12/17/20,  10:05:12 AM
The SOX attempts a bounce, but that bounce effort hasn't yet unhooked the 30-minute MACD that was attempting a bearish cross from below signal. The BIX hovers just above its 30-minute 100/130-pma's with indicators looking bearish, but not totally committed to the bearish side. MACD lines touch, but haven't quite completed a bearish cross, and the histogram value is negative, but only -0.003--not exactly a soundly negative number. CCI approaches zero, but hasn't gotten there yet. Momentum and RSI have flattened. OEX 30-minute oscillators appear similarly inconclusive as the OEX attempts a bounce from its 30-minute 21-pma. I don't see convincing strength when I look at these three together. Not as yet, anyway, but I'm not so sure that any of these are ready to give up on the bounce attempt, either.

  Jonathan Levinson   12/17/20,  10:03:54 AM
Precious metals are dusting themselves off a bit, with Feb gold up 1.10 at 409.50, silver +.036 at 5.681, XAU +.21 and HUI +.95. Bonds remain firm, with the 10 yr up 3.8 bps.

  Jonathan Levinson   12/17/20,  9:54:08 AM
The aged-but-groovy Al Green announces no action from the Fed today, for a net add of 1.75B on the expiring reverse repo from yesterday.

  Linda Piazza   12/17/20,  9:49:34 AM
If we'd actually initiated an OEX 535/540 bear call credit spread two weeks ago at the time I priced it, we'd have had a tough decision to make at yesterday's close, only the second time since the position was hypothetically initiated that a tough decision needed to be made. That close was just under the 535 mark. Holding overnight risked a gap up this morning that would have taken the OEX above the level at which the position would be profitable at expiration. I probably would have counseled waiting, watching what happened today. Although yesterday's candle negated Monday's potential reversal signal, that bearish candle still exists, and I'm wondering about consolidation at this level into option expiration. Remember that as long as the OEX settles below 535.95 - commissions paid (535 + the $0.95 hypothetical credit taken in when the credit spread was priced - commissions paid), the position is profitable. At this moment, that sold call still has $1.50 of time value left, so it wouldn't be possible to exit the position now for a profit, but it would be possible to do so for only a small loss ($0.20 as I type). I'd still probably counsel waiting and watching.

  Jeff Bailey   12/17/20,  9:49:21 AM
Mortgage Banker's Assoc. said its Market Composite Index of mortgage loan applications rose by 12.6% to 677.2 from 601.6. Table at this Link

Dow Jones Home Construction Index (DJUSHB) 576.82 +0.36%. Link

  Jeff Bailey   12/17/20,  9:46:23 AM
Dow Industrials (INDU) 10,105.11 -0.23% ... session low so far has been 10,094.75, just below its DAILY Pivot of 10,096.84.

QQQ $34.68 below its DAILY Pivot of $34.76.

SPX 1,072.64 -0.24% just below its DAILY Pivot of 1,073.04

OEX 533.35 -0.26% just below its DAILY Pivot of 533.46

  Jeff Bailey   12/17/20,  9:43:04 AM
Sectors broadly lower in early going. Airline (XAL.X) 59.13 -1.53% leading declines, most likely on SARS news out of Taiwan.

  Linda Piazza   12/17/20,  9:38:15 AM
The OEX currently tests its 30-minute 18/21-pma's. The SOX is weak again today, with the BIX declining, but holding up somewhat better. It's got its 21-, 100-, and 130-pma's just beneath the current level.

  Linda Piazza   12/17/20,  9:33:58 AM
The OEX first five minutes hit a high of 534.75 and a low of 533.89, with a midpoint at 534.32. The OEX is below that midpoint, of course, indicating weakness in earliest trading, but our first reversal period of the day hasn't really begun. The advdec line is negative, and falling further as I type, but at about 532.30, the OEX hits an ascending trendline that has been supporting its prices since 12/09, except for break the afternoon of 12/10.

  Jeff Bailey   12/17/20,  9:33:43 AM
QQQ $34.76 -0.28% ... testing its DAILY Pivot support here.

  Jeff Bailey   12/17/20,  9:27:21 AM
QQQ $34.85 ... unchanged at $34.85. Adjustment to bearish swing trade alert and will adjust stop higher from $35.12 to $35.16.

  Linda Piazza   12/17/20,  9:26:48 AM
Why have I been watching the BIX and the SOX so closely when trying to gauge where the OEX might go? Because these indices share some big caps. If you haven't read Jim's Wrap from last night, he offers an explanation for why the OEX might be benefiting as we approach the end of the year.

Yesterday's OEX candle was a bullish candle, negating the bearish implications of the shooting star produced on Monday. Dialing down to the 30-minute charts of the OEX, SOX, and BIX doesn't give clarity on what comes next, however. The SOX and BIX have each reached all the way up to challenge the top 0.675% envelope band on their 30-minute charts, with that envelope band often containing prices. While MACD, slower to move, generally turns up on the SOX, BIX, and OEX 30-minute charts, other faster-moving oscillators have begun to tip over on some of those charts. They can redraw themselves with one quick up-move, however, so that evidence isn't conclusive. The big caps in the SOX and BIX are going to have to cooperate if the OEX is going to continue to make gains.

  Jane Fox   12/17/20,  9:23:59 AM
FedEx (FDX) posted a 63% decline in second-quarter net income alleging costs related to early retirement and severance programs negated revenue gains. FDX reported net income of $91 million, or 30 cents a share, for the quarter ended Nov. 30, compared with $245 million, or 81 cents a share in the year-earlier period.

  Jeff Bailey   12/17/20,  9:23:53 AM
09:00 Update posted at this Link

  Jonathan Levinson   12/17/20,  8:52:47 AM
This should be good for a laugh, Jeff! Link

  Jonathan Levinson   12/17/20,  8:22:01 AM
No major news awaiting us at 8:30.

  Jonathan Levinson   12/17/20,  8:21:16 AM
Nasdaq chart from my friend Grot: Link

  Linda Piazza   12/17/20,  7:02:51 AM
Good morning. The Nikkei's five-day chart shows that the Nikkei closed Wednesday's trading about where it closed last Thursday's, erasing almost all the gains made Friday and Monday. The Nikkei declined throughout Wednesday morning's session and the early part of the afternoon session, pulling off its lows in the last couple of hours. It closed down 178.96 points or 1.74%, at 10,092.64. A confirmed case of SARS in Taiwan hit travel-related stocks and the dollar's continued weakness against the yen hit importers, especially tech-related importers. Reports indicated that the man who contracted SARS was involved in medical research, and one report said he had visited or was visiting Singapore, but airliners across Asia plummeted anyway. Banks and many automakers also declined in Japan, although Honda moved higher after giving an upbeat forecast.

Elsewhere in Asia, the Taiwan Weighted plummeted 2.30 points, hit especially hard by the news that one of its citizens had a confirmed case of SARS. South Korea's Kospi tumbled 1.32%, also declining as LG Card dropped further on news that it would sell its troubled credit card division to creditor banks. Singapore's Straits Times dropped 0.32% and Hong Kong's Hang Seng dropped 0.55%. China's Shanghai Composite lost 0.84.

Most European bourses trade lower, too, although the FTSE 100 is bucking that trend. That single SARS case is impacting bourses worldwide. European airlines declined, too. Several chip makers have been impacted by declining DRAM prices, a decline of 15% since September in spot prices of the DRAM 256 megabyte. Under that pressure and for other reasons, chipmaker Infineon continued Tuesday's losses.

Currently, the FTSE 100 has gained 14.00 points or 0.32%, to trade at 4347.00. The CAC 40 has lost 15.89 points or 0.46%, to trade at 3470.71. The DAX has lost 12.95 points or 0.33%, at 3853.03.

  Jeff Bailey   12/16/20,  11:39:53 PM
American Intl. Group (AIG) $64.18 +2.03% Link .... Be careful of these technicals if looking to short individual stocks. AIG gave a double-bottom sell signal at $57, and has now bounced back higher to generate a double-top buy signal at $54. This was the one stock in the OEX to generate a reversing double-top buy signal on Tuesday.

As noted in Tuesday morning's 09:00 Update, General Dynamics (GD) $85.67 +1.6% Link was the lone stock to generate a PnF buy signal in the OEX on Monday.

  Jim Brown   12/16/20,  11:20:30 PM
2003 Annual Renewal Special

OptionInvestor's TOP 50 Stock Picks for 2004

Reserved yours yet? Click here: Link

  Jeff Bailey   12/16/20,  9:35:47 PM
Semiconductor Index (SOX.X) ... here's chart of SOX.X with MONTHLY and WEEKLY Pivot analysis overlaid. Also tie in recent sector bullish % status change of "bear alert". Link

While INDU/SPX/OEX made new highs on Saddam news, SOX didn't, and can begin to understand SOME contributing weakness to QQQ/NDX.

For QQQ, I try and tie some similar SOX/QQQ price levels together for tomorow's trade. SOX 485.63 is close to QQQ $35.00, while SOX day's low is equal to QQQ day's low. Should SOX trade WKLY S2, then might expect some basket buying of semiconductors, just as QQQ approaches current bearish target of $34.11.

Tomorrow, QQQ bear certainly doesn't want to see SOX much above 485.63.

The bigger picture and the point and figure chart set on 10-point box size. Link

  Jeff Bailey   12/16/20,  9:28:05 PM
Pivot Matrix for tomorrow at this Link

I think I've gone and done it again! Today's profiled bearish swing trade in the QQQ was profiled with a stop loss of $35.12. (see DAILY R1 and WEEKLY Pivot)

In tonight's Index Wrap, I'm suggesting bears holding the QQQ swing trade short, allow a little more room, to $35.16 if this is allowable.

It was on December 8th that I lowered a stop intra-day on the QQQ to $35.45. On December 9th, the QQQ bid higher early (DAILY R1 was $35.45) the QQQ traded a session high of $35.46, then fell to what was the bearish target.

While I do not like to adjust stop losses, I will change bearish profile, with stop raised from $35.12, to $35.16.

  OI Technical Staff   12/16/20,  9:27:47 PM
The Market Monitor has been archived. You may view it and any previous days here: Link

Disclaimer: Stocks discussed in the Market Monitor are for educational purposes only and any analysis is not meant to imply a recommendation for or against that stock. The analysts in this forum as on any other website are prohibited by the SEC from giving any specific advice to ANY individual trader. All information posted is for ALL readers and is not meant to be directed to any individual. Our analysts cannot answer any email questions regarding any specific stock. Please do not ask and please do not take offense if requests are denied.

Results posted in the Market Monitor are hypothetical and OIN does not claim that any reader achieved these exact results. Due to the lag time between research, writing, posting, uploading, reading and execution there will be differences between the actual signal given and the fill achieved by the reader. Fills may be better or worse but in many cases they will be different. The writers will make every effort to give advance notice of intended signals and indicate potential price targets. Your individual results may vary depending on your activity level and aggressiveness. This forum is intended as an education service only. Trading involves risk and should not be attempted by anyone not ready to accept this risk. By acting on any signal in this forum you agree and personally accept this risk.


Market Monitor Archives