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  Jeff Bailey   2/3/2004,  9:24:31 PM
Pivot Matrix for tomorrow at this Link

SOX.X with weekly/monthly pivot retracement at this Link

  Jeff Bailey   2/3/2004,  5:45:37 PM
Retailer discussion on CNBC regarding heavy apparel "flying off the shelf" has me looking with a bullish eye on Burlington Coat Factory (BCF) $19.42 +0.72% Link as it hovers either side of its rising 200-day SMA.

  Jeff Bailey   2/3/2004,  5:35:37 PM
QQQ $36.64 in after-hours trade.

Tomorrow's DAILY Pivots S2= 36.44, S1= 36.69, P=36.96, R1=37.21, R2=37.48

  Jeff Bailey   2/3/2004,  5:09:26 PM
Gold/Dollar notes ... as I update the pivot matrix, I'm noting that today's 09:05-03:00 U.S. Dollar Index (dx00y) 86.85 -0.77% trade had the low of 86.61, which is this MONTH's MONTHLY Pivot. A time check shows this low came at 10:23 AM EST.

This may be an important observation for gold equity traders as the intra-day high on the AMEX Gold Bugs Index ($HUI.X) 216.57 +0.45% was 219.72, which came at 10:25 AM EST.

With the deficit getting great attention as well as reports of ricin, I would have thought gold would have found a much stronger bid in today's trade.

Here's a relative strength chart of the USD vs. the $HUI.X Link which we discussed in the market monitor a couple of weeks ago Link (see MM 02?37:46, 02:40:43, 05:43:26) , and it may be an intra-day break back below USD 86.61 and further bid in gold that becomes a near-term inflection point for gold to find a new luster, other than the shellacking this precious metal has taken in recent weeks.

  Jeff Bailey   2/3/2004,  4:43:15 PM
Closing Internals at this Link

  Jonathan Levinson   2/3/2004,  4:33:44 PM
Sorry, Jeff. With price coiling into 30 minute pennants on most of the indices, calls in either direction are a tough sell :)

  Jeff Bailey   2/3/2004,  4:32:34 PM
Darn it Jonathan... I thought I got ya!

  James Brown   2/3/2004,  4:31:05 PM
It is a very funny image, Jon!

  Jonathan Levinson   2/3/2004,  4:28:06 PM
Evidently, some clarification is necessary. The picture posted at 16:09:21, which has been posted several times in the past, is meant for humorous diversion. It is not intended to serve as trading advice.

  Jonathan Levinson   2/3/2004,  4:26:11 PM
Bullish call? I haven't made one, to the best of my knowledge.

  Jeff Bailey   2/3/2004,  4:25:09 PM
QQQ went out at $36.93 -0.1% ... ticking at $36.97.

  Jeff Bailey   2/3/2004,  4:24:16 PM
Cisco Systems (CSCO) $26.41 +0.8% ... $26.13 in after-hours, but up from Jonathan's bullish call of $25.97 (see 16:09:21).

  James Brown   2/3/2004,  4:08:57 PM
From the CSCO press release:

Q2 Net Sales: $5.4 Billion (14.5% increase year over year; 5.8% increase quarter over quarter)
Q2 Operating Cash Flows: $1.7 Billion
Q2 Earnings Per Share: $0.18 GAAP before accounting change; $0.10 GAAP after accounting change

"Having just met with business and government leaders from around the world at the World Economic Forum, it is becoming increasingly clear that the global economy is improving," said John Chambers, president and CEO, Cisco Systems.

"As customers feel more confident to invest, we believe that we are well positioned to provide compelling value as a strategic business adviser and technology partner. Our strong position in the core switching and routing business continues to be complemented by positive momentum in our Advanced Technologies, especially this quarter in storage, security, wireless and IP telephony. The company is also gaining significant momentum in the consumer space, driven by innovative products delivered by the Linksys division."

  James Brown   2/3/2004,  4:06:31 PM
CSCO estimates were 17 cents. Revenue estimates were $5.2 billion

  James Brown   2/3/2004,  4:06:15 PM
CSCO earnings are 18 cents a share. Net sales 5.4 billion.

  James Brown   2/3/2004,  3:57:40 PM
Wow! I just looked at Lowes Corp (LTR), the holding company for insurance company CAN Financial, cigarette maker Lorillard, hotel chain Loews, oil and gas driller Diamond Offshore (54%) and watch/clock maker Bulova. The stock has been up 11 weeks in a row, soaring more than 20%. What are the odds of a "sell the news" reaction on its February 12th earnings report?

  Linda Piazza   2/3/2004,  3:54:11 PM
As the other writers have been mentioning with respect to futures, the OEX has been hugging its daily pivot today. We're just on hold until after CSCO earnings. If you're in options, either calls or puts, consider whether you want to hold over those most-watched earnings and make decisions that are appropriate for your investing style. We've had CSCO-driven rallies and CSCO-driven declines that impact all the markets.

  James Brown   2/3/2004,  3:48:54 PM
MedcoHealth Solutions (MHS) has produced quite a turnaround this year. The stock looked poised for a breakdown in late December and early January but has since found renewed strength. Today's move builds on yesterday's breakout above the $38.00 level. This is a new all-time high since being spun off back in August and yes, they do have options.

  James Brown   2/3/2004,  3:42:30 PM
If you're interested in a seasonal play keep an eye on H R Block (HRB). The stock has been in a very strong up trend since October and more recently has been bouncing from technical support at its 21-dma.

  James Brown   2/3/2004,  3:38:08 PM
Thanks, Linda!

  Linda Piazza   2/3/2004,  3:37:40 PM
James, Yahoo Finance does list UPS as a member of the DJ Transportation Index, so you were certainly right to suggest that readers watch UPS. Here's a listing of the components: Link

  James Brown   2/3/2004,  3:35:14 PM
Aggressive tech traders may want to watch MXIM. This chip stock has pulled back to the $50.00 level and bounced. This region of support happens to be close to the bottom of its rising channel albeit on the outside of the bottom edge.

  James Brown   2/3/2004,  3:31:10 PM
The breakdown continues in Dow component GM. Shares look headed to test previous resistance at $45.00.

  James Brown   2/3/2004,  3:28:43 PM
If you're following the Transports, keep an eye on UPS. I don't think it's a component of the Dow Transport index but shares look ready to breakdown below support near $70.00.

  James Brown   2/3/2004,  3:27:41 PM
Keep an eye on Procter & Gamble (PG). The stock is producing a nice breakout over the $100 level and if the markets continue to oscillate traders could move into it as a defensive play. Only problem is the fading volume on the rally.

  Linda Piazza   2/3/2004,  3:18:32 PM
Jane has said before that while we should be cognizant of the empirical levels of the TRIN, we should also watch its trend, the trend of the TRIN. Today there hasn't been a trend as it has fluctuated within a tight range. Similarly, it's been difficult to discern a trend for the advdec line.

  Jeff Bailey   2/3/2004,  3:07:51 PM
03:00 Internals at this Link

  Linda Piazza   2/3/2004,  3:01:14 PM
My charting system is still not cooperating by giving me daily charts today, and the 720-minute ones (a substitute for daily charts) cut off at October, so that the long-term moving averages are not correct. The candles are correct, however, with today's OEX candle so far a doji within a congestion zone. The doji's diagnosis of uncertainty and stagnation at the current level perfectly describes today's action and it seems only appropriate that we should be seeing one today, so far at least. A doji at the top of a climb is a typical reversal signal, but a doji in the middle of a congestion zone just emphasizes what the congestion is already saying--the market in question can't decide which direction to go. If the last hour should see a strong climb, then we'll be looking at a bullish candle within a likely bear flag formation, unless that climb brings the OEX to a close significantly above 565.40, the midpoint of the flagpole drop. If we should see a strong drop, that continues the possible "b" distribution pattern at the bottom of that flagpole drop unless the OEX closes significantly below 559.50.

  Jeff Bailey   2/3/2004,  2:48:53 PM
Ford Motor (F) $13.70 -1.79% Link ... reported a 5% decline in January sales. Credit Suisse expected a 5-7% decline.

  Jeff Bailey   2/3/2004,  2:46:35 PM
General Motors (GM) $47.50 -2.46% Link ... said January sales fell 2% and cited disappointing sales of cars in certain regions of the country. Credit Suisse had expected GM to report a 3-5% gain in January sales.

  Linda Piazza   2/3/2004,  2:46:32 PM
The SOX continues lower after falling out of its symmetrical triangle, but it has not yet breached yesterday's low. It continues to find intraday support near its 72-ema, currently at 504.96, with the last five-minute dip within one penny of that moving average.

  Linda Piazza   2/3/2004,  2:39:50 PM
The TRAN is sinking, again near the day's low of 2851.52.

  Linda Piazza   2/3/2004,  2:31:36 PM
For kicks, I snapped a retracement bracket on TASR's first five-minute bar this morning, following it according to Jeff's 5MRT. I don't trade TASR, but was interested in seeing how it would react. A drop below $142.79 signaled a bearish mode for a daytrade in the stock. It's now pausing at the bearish #4 at $135.77, which also happens to be the bottom of today's gap higher. A bearish trader would now be able to set that stop at breakeven on that entry at the bearish #2. Jeff's system would have worked well in TASR today, then, but it sure would have been too scary an adventure for me, with TASR's legendary percentage of shorts. For those thinking with regret of the gains that might have been made, I'm not sure how hefty those gains might have been. I didn't price options yesterday or this morning since I had no intention of trading it. Options are usually inflated going into earnings and then the volatility collapses after earnings, so that it requires a big move to keep up with the negative effect of that decreasing volatility despite a move your direction. I suspect that this move was big enough to have been profitable, but perhaps not as profitable as it seems that it should have been.

  Ray Cummins   2/3/2004,  2:31:14 PM
Spreads/Combos/Premium Selling -- Market Movers: Sandisk (NASDAQ:SNDK)

One of the popular stocks for momentum traders is getting hammered today as investors continue to lament the company's recent warning about shrinking product margins. In late January, management predicted that margins may drop as low as 28% in the second half of the year in addition to a 40% decline in product prices. Obviously, that doesn't bode well for earnings and the company's share value has fallen precipitously, down another $3.51 to $49.78 in today's session. Our bearish (short call) position at $80 is comfortably "in-the-money", however there may be another opportunity for a "premium selling" play (or a conservative credit-spread) at the $55 strike in February.

  Linda Piazza   2/3/2004,  2:22:47 PM
The advdec line stopped its gentle advance about 20 minutes ago, and now is slightly negative, down by 16 issues.

  James Brown   2/3/2004,  2:16:57 PM
Update on Taser Intl (TASR)...The company reported earnings yesterday evening that reached 56 cents a share versus just 2 cents the same period a year ago. Estimates had been for 31 cents a share. Revenues soared 282% to $10.8 million, well above the $6.4 million estimates. As reported earlier the company only has 5% of the U.S. police market and less than 1% of the global market. TASR is guiding 2004 revenues in the $48 million range, vs. analysts' estimates currently at $30 million.

The stock shot higher to $154 (+$19.00) this morning before profit taking finally set in (now at $135). Any shorts still left (short interest is more than 50% of the float) are probably praying for more profit taking tomorrow. Keep in mind that TASR is due to split 3-for-1 on February 10th.

  Linda Piazza   2/3/2004,  2:15:20 PM
The SOX appears to be turning down from a retest of the broken support from its neutral triangle. It's a sign of the times that I feel the need to qualify that statement with an "appears," since the SOX clearly broke the trendline, clearly rose to test it, and clearly turned lower. This should be even more significant since the SOX rose toward the violated 50-dma today before settling into that triangle, but could not move above it. The fact is, however, that there may not be that much more downside before the SOX finds a level from which to bounce. The 72-ema which strangely has shown itself to be significant in some tech-related indices and stocks, lies just beneath near 505. Round-number support near 500 can be presumed to exist, and then there's further support between 494-496, if that 500 level is momentarily breached.

  Ray Cummins   2/3/2004,  2:14:19 PM
Spreads/Combos/Premium Selling -- Market Movers: Timberland (NYSE:TBL)

Footwear maker Timberland said profit jumped sharply this quarter, beating analysts' forecasts as strong sales abroad helped boost revenues. The company announced earnings for the fourth quarter of $39.4 million, or $1.10 a share, $0.15 better than the average forecast among analysts and the stock soared $3.28 to $53.91 on the news. Our bearish position at $55 remains profitable and there is substantial overhead supply near the current price, thus traders should watch for signs of additional upside activity before initiating an early-exit in the play.

  Jeff Bailey   2/3/2004,  2:11:36 PM
02:00 Internals at this Link

  Ray Cummins   2/3/2004,  2:03:53 PM
Spreads/Combos/Premium Selling -- Market Movers: Sohu.com (NASDAQ:SOHU)

SOHU led China-based Internet stocks lower today, plunging over $7 to $30.55 after the company said fourth-quarter revenue grew only to the low end of its target range. Expanding corporate online advertising and a large paying consumer base drove its revenue up 133% from previous-year levels to $24.6 million, but it was not enough to maintain the torrid growth previously seen in this group and investors showed their displeasure with the news. Our bullish (short put) position at $30 is still profitable, however it maybe prudent to close the play early in the interest of capital preservation.

  James Brown   2/3/2004,  2:03:39 PM
Walgreens (WAG) reports Jan. same-store sales +13.2%

Rite Aid (RAD) January same-store sales +7.2%

  Jeff Bailey   2/3/2004,  1:59:57 PM
KLA-Tencor (KLAC) $56.54 +1.38% Link ... At Thomas Weisel Tech 2004 Conference, KLAC reaffirmed its Q3 (March) EPS guidance of $0.27 to $0.29 per share and said it saw revenues in the range of $370 to $380 million. This surrounds current consensus of $0.29 EPS and revenues of $379 million. The company also reaffirmed booking orders to increase 15%.

Novellus (NVLS) $32.89 -1.67% Link continues to struggle after its recent quarterly earnings, while semi-equipment bellwether Applied Materials (AMAT) $21.43 -0.74% Link slips $0.16 per share, but off its morning low of $21.11.

  Linda Piazza   2/3/2004,  1:55:42 PM
The OEX has traveled along the central Keltner channel S/R level for much of the day now, with that equilibrium level looking a little long in the tooth now. A breakout one direction or the other should eventually send the OEX either to the top or the bottom of those Keltner channels. Upper Keltner resistance is at 566.32 and lower Keltner support is at 559.27, although some resistance and support levels lie between those two, of course.

  Jonathan Levinson   2/3/2004,  1:49:28 PM
Gold and silver are off their intraday highs but still positive, as are the mining indices. The bloom started to come off the proverbial rose around the same time as Robert Moskow's comments began to circulate. Not as well that bonds have risen modestly this afternoon, with ten year note futures currently up .30%: (Following excepted from the Wall Street Journal)

CHICAGO -- Federal Reserve Bank of Chicago President Michael Moskow said Tuesday that any concerns of rising inflation given the recent pickup in U.S. economic activity are "premature."

"We have yet to see the kinds of pressure on labor and capital resources that often signal an increase in inflation," Moskow said in prepared remarks to the Chamber of Commerce of St. Joseph County in South Bend, Ind.


  Ray Cummins   2/3/2004,  1:42:37 PM
Spreads/Combos/Premium Selling -- On the "watch" list: Coventry Health Care (NYSE:CVH)

The share value of CVH plunged $2.91 to $41.78 this morning after the company said quarterly profit rose, but only in line with analysts' average forecast. The company also raised its 2004 outlook, yet investors showed their disappointment both in the results and the profit forecast. The infamous "post-split slump" also contributed to the downward pressure and with our sold put at $40, the issue will certainly be on the "watch" list in the coming sessions.

  Linda Piazza   2/3/2004,  1:37:27 PM
The SOX had established a neutral triangle on its five-minute chart. About 10 minutes ago, it broke through the bottom support of that triangle, but that break came just ahead of the typical 1:35-1:55 stop-running push of the day. Typical of many bearish breaks lately (and today), and especially often typical of breaks that come during this stop-running time of day, the SOX immediately turned around and headed up to test the broken support, which it is doing right now. If it should roll down now, that confirms the bearishness of the broken support, but we've seen many of these tests result in a zoom higher, too.

  James Brown   2/3/2004,  1:34:55 PM
With the country experiencing red-hot home sales last year investors may have been expecting more from WHR's earnings report. New homes need new appliances don't they? Whirlpool Corp (WHR) announced earnings this morning that only beat estimates by a penny. Revenues were up 14% to $3.36 billion, above the estimates of $3.04 billion. The company even guided higher for fiscal year 2004 but the stock is down on the news and painting a bearish engulfing candlestick.

  James Brown   2/3/2004,  1:24:47 PM
Investors are reacting positively to news that Genome Therapeutics (GENE) is offering almost 17 million shares of new stock to pay for its Genesoft Pharmaceuticals acquisition.

Normally, investors don't appreciate companies diluting their shares but GENE is up 4.9% on big volume. The daily chart appears to be building a pennant formation.

  Ray Cummins   2/3/2004,  1:21:18 PM
Spreads/Combos/Premium Selling -- On the "watch" list: Avocent (NASDAQ:AVCT)

Shares of the popular maker of computer peripherals rallied today, up $2.09 to $38.90, after the company said strong demand across most product lines, distribution channels and geographic markets boosted its net income by 36% in the fourth quarter. Earnings increased to $17.4 million or 36 cents a share, up from $12.8 million or 28 cents a share in the fourth quarter of 2002. Our speculative "earnings play" in the issue is short (call) at $40, thus the position will require daily monitoring in the near-term. Technical resistance exists near the current price, so any further upside movement would suggest an early exit in the bearish spread.

  Linda Piazza   2/3/2004,  1:19:25 PM
The TRAN just can't drive through that 2880 resistance, or at least not yet. It keeps pulling back into a pattern of lower highs and lower lows. After this morning's flagpole rise, we should at least consider the possibility that this is a bull-flag pullback on this five-minute chart, although this formation is not as tight as is usual with flag formations. It's too wide with respect to the former trading pattern. However, not all formations are classic, and some still perform well anyway. To clarify my impressions, I've expected a technical or oversold bounce in this index, but would expect such a climb to turn down again at some point as the TRAN tries to establish support.

  Linda Piazza   2/3/2004,  1:15:15 PM
A glance at the advdec line shows that it's been generally climbing since shaking off its early-morning volatility. Sometimes such a rise precedes a rise in the indices, too, so it's worth keeping a watch on this. It's far from strong at this point, being up by only 341 issues so far.

  Jeff Bailey   2/3/2004,  1:13:27 PM
01:00 Internals at this Link

  James Brown   2/3/2004,  1:10:19 PM
Keep an eye on AVID. The company announced earnings a few days ago and shares are being sold on the news. It's probably no coincidence but after almost four months of consolidation from its early October highs, the recent sell-off stopped at its 38.2% retracement level (March-October run).

JPM came out this morning with an upgrade for the stock from "neutral" to "over weight" and AVID is bouncing, up 2%. However, today's candle is an inside-day so bullish traders willing to buy a bounce (hoping for a rebound back to $50) can look for a move over yesterday's high (near $46) as a potential short-term entry point, bears should look for a drop through yesterday's low.

  Linda Piazza   2/3/2004,  1:01:44 PM
For reference, the 50% retracement of the OEX's flagpole drop on its daily chart lies at 565.40, a level that was breached yesterday afternoon. The OEX closed back below that level yesterday. If the current OEX rise off last week's low is indeed a bear flag climbing off last week's low, then the OEX really shouldn't see a daily close above 565.40 and shouldn't see an intraday move much above it, either. If that level is breached significantly, that may mean something else is happening. With CSCO's earnings due today after the bell and with mo-mo traders seeing action lately like RIMM's December 12-point news-driven gap and TASR's equally spectacular earnings-driven (or shorts-covering-driven) gap this morning, I wouldn't be surprised to see markets pushed higher and the OEX continuing to climb within that possible bear flag. Last year's February earnings report didn't prompt the expected CSCO rally, with the OEX opening February 4, the day of CSCO's after-the-bell earnings report, at 435.70 and falling through the day. The OEX didn't stop until it hit a low of 407.79 on February 13, at which point it rose before sinking to March's low. That was a different time, however, without the intervening year of momentum moves, and hopes have been stoked by those recent moves in other stocks.

  James Brown   2/3/2004,  1:01:25 PM
CSFB is upgrading Ameritrade (AMTD) to an "out perform", which follows a positive article in Barron's over the weekend. Shares of AMTD aren't doing much today but the stock is up off its lows from last week (and still trading near 3-year highs). The stock could be building a bull flag consolidation pattern.

  James Brown   2/3/2004,  12:56:30 PM
Ouch! One of today's biggest decliners is ActivCard Corp (ACTI), which is down 18% at $5.86 but up off its lows of $5.22. The CEO of the company resigned after a clash with the Board and JPM downgraded the stock to "under weight".

  James Brown   2/3/2004,  12:47:23 PM
Not only is the Avian flu outbreak and $35/bbl oil prices pressuring airlines but Delta (DAL) is down 5.74% (gapping down below the $10 level) after a $325 million convertible bond sale.

AMR is down 2.78% and approaching the top of its gap from mid January.

CAL is down 2.25% after breaking its 200-dma yesterday.

LUV is also hitting new lows today, but up off the worst of the session.

JBLU is down another 2% and trading near new lows after three days of trying to hold support at $22.50.

  Jonathan Levinson   2/3/2004,  12:45:13 PM
That's Chicago Fed President Michael Moskow...

  Gerald Melson   2/3/2004,  12:43:46 PM
Fed President speaking at this moment. Indicating that the US job market is still key area of weakness. He will not be surprised if the economy was to grow more then 4 percent in 04.

  Linda Piazza   2/3/2004,  12:25:05 PM
The TRAN is heading up for another test of the 2879-2880 level that stopped its advance earlier today.

  Linda Piazza   2/3/2004,  12:23:35 PM
The OEX is now heading up to challenge its 30-minute 100/130-pma's, at 563.56 and 563.35, respectively. The 60-minute chart shows four 60-minute candles that spring up from the 60-minute 100/130-pma's. We've seen many days over the last few weeks when the OEX is caught between the 30-minute and 60-minute versions of these averages. Usually, the resolution is a breakout above the 30-minute versions and a climb, and that may happen today, too. If it does, that daily pattern may resolve into a flag-like pattern, perhaps a bear-flag climb likely to turn down at a lower high. Perhaps not so likely to turn down, if recent history is a guide.

  James Brown   2/3/2004,  12:14:39 PM
I'm surprised that the SOX is holding up so well. The index is right above support at 500 and isn't moving much after Goldman's chip sector downgrade last night (from attractive to neutral).

If you remember, I think it was only a couple of weeks ago that S&P came out with a 52-page report on why chip stocks are likely to appreciate another 20% this year despite their pricey valuation levels. There may be too many traders trying to buy any dip.

  Linda Piazza   2/3/2004,  12:13:32 PM
Even TASR, up 13 points but down 6 from the high of the day, trades in a straight-and-narrow line, still within the neutral zone as defined by Jeff's 5MRT system. When a stock like that shows candles that march in a straight line across a five-minute chart, what can we hope for on the rest of the stocks? Incidentally, TASR's five-minute chart does show it approaching the apex of a triangle that was formed when TASR's trading opened this morning. It should break one direction or the other soon. I don't follow TASR closely, just look at it in amazement every now and then.

  James Brown   2/3/2004,  12:09:02 PM
Current Sector Winners:

DJUSHB home builders: +1.58%
XAU gold & silver: +0.92%
SOX semiconductors: +0.41%
RLX retail index: +0.40%

Current Sector Losers:

XAL airlines index: -2.43%
DDX disk drives: -1.85%
HMO healthcare: -1.59%
OSX oil services: -1.44%

  Jeff Bailey   2/3/2004,  12:08:06 PM
12:00 Internals at this Link

  Jane Fox   2/3/2004,  12:07:42 PM
Dateline WSJ Three Senate office buildings were closed Tuesday after a suspicious white powder, apparently delivered through the mail system, was found in the Senate majority leader's office. Officials said several preliminary tests, though not all, were positive for ricin, a deadly poison. More definitive test results were expected later Tuesday. "This is a criminal action," said Sen. Bill Frist, a Republican from Tennessee, whose staff discovered the white powder in their Dirksen Senate Office Building mailroom Monday afternoon. And, while "the powder was ultimately determined to be ricin," none of the substance has turned up outside his office, Mr. Frist told his colleagues as the Senate opened its session Tuesday. "All air sampling and all environmental studies today are negative with the exception of what was found in that single office at that site." Charles Dasey, a spokesman at Fort Detrick, Md., said scientists there were doing a "confirmatory" test on the substance. The test is "higher reliability" but will take longer, he said.

  James Brown   2/3/2004,  12:02:17 PM
That's interesting... Sue (on CNBC) just mentioned that AOL, a big ad spender for the Super Bowl, wants its money back because of the half-time incident.

  Gerald Melson   2/3/2004,  12:02:00 PM
Suspicious powder found in US Capital Building ... being reported by Fox News .... this is a new report, not from overnight.

  James Brown   2/3/2004,  12:00:11 PM
Current OI call play MWD is not performing well. The XBD has been slowly drifting higher after its low four days ago but MWD is starting to roll over again. Yesterday's intraday high for MWD touched its 10-dma and investors used it to sell into strength. This stock could see a retest of its current support level 56.75-57.00.

  Linda Piazza   2/3/2004,  11:58:12 AM
The OEX has traded within the neutral zone as defined by Jeff's 5MRT system all day today. We saw a lower high complete with bearish divergence on the stochastics and MACD on the five-minute chart, but it's possible that the OEX is in the process of forming a higher low (without bullish divergence). So far, the OEX is mired within this morning's congestion zone which is set within the bigger congestion zone on the daily chart.

  James Brown   2/3/2004,  11:54:52 AM
Current OI call play GENZ is out performing the BTK to the upside this morning. The stock managed a new one-year high before slipping back in the last 30 minutes. Shares are still up 1.57%.

  James Brown   2/3/2004,  11:52:12 AM
Traders following the DHR call play will notice that its short-term trend of lower highs is still in effect. At this point we might get another dip to the $90 level.

  Jeff Bailey   2/3/2004,  11:47:39 AM
Express Scripts (ESRX) $70.42 +1.64% ... Jeff: seems to be holding above 70 today!! Still waiting for 72-74 by next Friday?

I don't really have a time target on this swing trade long, with target still at $75.

MONTHLY Pivot levels for ESRX are $60.07, $64.63, $67.67, $72.23, $75.27.

  Jane Fox   2/3/2004,  11:44:59 AM
Jeff I'm sure you noticed ESRX is +1.16 and SWC +0.75.

  Linda Piazza   2/3/2004,  11:36:28 AM
The OEX just does not want to travel through the lower half of its Keltner channels, preferring the more elevated upper half. It's challenging that central level again in a day that's so far extending the congestion zone from recent days. The current OEX level hovers near the top of that congestion zone, hinting that if the OEX again breaks out, as it did yesterday, that the former rectangular consolidation pattern could resolve into a flag-like formation, a probable bear-flag climb. Even with the words "bear-flag" associated with the word "climb," bears worry, however, as bear flags haven't typically resolved in the expected way over the last few months. As evidence, this morning the OEX broke below bear flag support on the five-minute chart. At the time, I said I was wary of trusting that breakdown and considered it a possible stop-running action, and that wariness proved to be justified on a short-term basis anyway. On a longer-term basis, the outcome still isn't known. It's going to take a break below 559.50 for me to begin to have confidence in a breakdown and then a break below last week's 557.36 low before I feel slightly more confidence. With all that said, though, I'm not looking for a total breakdown of the markets here. Just a retracement to establish support after December's too-steep climb. That support could be established through a prolonged period of consolidation instead, however.

  Jeff Bailey   2/3/2004,  11:24:27 AM
11:00 Internals at this Link

  Linda Piazza   2/3/2004,  11:23:49 AM
The TRAN confirmed a double-bottom formation on its five-minute chart this morning, a short-term bullish sign, and now has slightly exceeded the upside minimum target of 2873.50, another short-term bullish sign. We've been expecting an oversold or technical bounce on the TRAN, bringing it back up to test broken resistance. At about 2885, the TRAN will hit a short-term descending trendline that began forming last Friday, with that trendline descending as the day goes on, but it's about to slam up against its first test of resistance at 2880, with the TRAN at 2879.50 as I type. The five-minute Keltner channel confirms the 2880 level as resistance, but this is an index on the move and it may charge right above this. Above that, next horizontal resistance lies near 2890-2892, but there's no confirming Keltner channel resistance showing up there. Keltner channels show that if the TRAN charges above the current level, 2903.50 is next.

  Jonathan Levinson   2/3/2004,  11:09:29 AM
The put to call ratio has risen to .66 for the past half hour after one hour of sub .60 prints. VXO is currently +3.56% at 17.47.

  Jeff Bailey   2/3/2004,  11:08:14 AM
Darden Restaurants (DRI) $21.84 +5.2% Link ... continues its run from yesterday. Breaks above MONTHLY R1 of $21.27 with MONTHLY R2 now ahead at $22.55.

  Linda Piazza   2/3/2004,  11:06:54 AM
The OEX is back at the central Keltner level again, not willing to give up its test of that central level. Keltner resistance gathers thickly overhead from 562.67-563.04, but if the OEX should be able to break firmly above that resistance again, next Keltner resistance is a far 564.90 and then 567.07. The Keltner channels are reaching an equilibrium position, so after some time at that level, we should expect a breakout one direction or the other. The presumption is that the breakout will occur to the downside, but that's a presumption only. Downside, Keltner support lies at 562.07, 560.90-561.12, and then 558.28. Remember that 561.23 is the 38.2% retracement of the bear-market decline, but that 559.50 proved more a more important S/R level. That's now the site of an ascending trendline on the daily and 60-minute charts. I'd still watch both, however.

  Linda Piazza   2/3/2004,  10:46:24 AM
The OEX is breaking through its five-minute bear flag, although it remains above 559.50 support, and it looks to be turning right back up again to retest the just-broken support. I'm leery of stop-running moves today, and this could have been one.

  Jeff Bailey   2/3/2004,  10:38:41 AM
Coventry Health Care (CVH) $41.00 -8.25% Link ... lower after reporting quarterly EPS of $0.76 per share, which was a penny better than consensus. Company said revenues rose 29% year-over-year to $1.22 billion. Coventry said membership, excluding network rental members, rose 17% to 2.38 million, while organic membership increased 7.7%.

  Linda Piazza   2/3/2004,  10:35:47 AM
If the last few nine months hadn't intervened, I'd know exactly what to think about today's action, and I'd be confidently looking for a place to enter a bearish trade ahead of the expected and almost-sure-to-materialize rollover of proportions such as the TRAN's rollover, setting a wide stop and ready to hold for a day or two if necessary before that rollover got started. Unfortunately, those last few months have intervened and we no longer can trust what technical charts show us. During that time, those previously beneficial (for swing trades on options) wide stops just brought us more pain when stopped out, with collapsing volatility adding to the pain.

Despite those intervening months, however, this looks like a typical bear flag rise on the OEX five-minute chart, with the 30-minute chart showing that the OEX appears to be turning down below the 100/130-pma's. The OEX currently approaches bear-flag support, however, and may turn up again for another test. Or it may not, as bear flags may return to their original resolution, breaking to the downside.

  Jeff Bailey   2/3/2004,  10:33:26 AM
Sectors mixed with Homebuilders (DJUSHB) 572.24 +2.42% and Gold Bugs ($HUI.X) 218.87 +1.52% only two sectors posting gains greater than 1%.

Airlines ($XAL.X) 59.01 -2.38%, HMOs (HMO.X) 877.92 -1.71% and Oil Service (OSX.X) 100.71 -1.3%.

  Linda Piazza   2/3/2004,  10:25:36 AM
Although the SOX should be presumed to have round-number support at 500 and has been bouncing from its approaches to that level, the descending channel on the 60-minute chart actually bottoms out at 494.50, with the SOX daily chart showing some support near that 494-496 level, too.

  Linda Piazza   2/3/2004,  10:22:32 AM
The OEX now sits at mid-channel level on the Keltner channels, with the presumption being that it will turn down from this level after this test. The rise off yesterday's low still looks like a bear flag rise, but we've seen bear flag formations resulting in upside breakouts enough that I don't count on them breaking to the downside. Depending on where you consider the beginning of the flagpole drop yesterday, the short-term bear flag should probably break before the OEX retraces higher that about 563.15, with the OEX having overshot that by a little already this morning, but then promptly turning down again. The advdec line is no help, as it's zoomed around more than the indices.

  Linda Piazza   2/3/2004,  10:15:03 AM
So far, it looks to me as if some markets are rising within a bear flag pattern, but since some of those patterns are daily patterns, that means that the short-term rise could carry over the entire day. I'm not sure yet, and think a lot depends on what happens as the SOX and the TRAN rise. My charting service still won't provide a daily chart of the SOX--perhaps a lot of people are viewing that chart today--but my memory is that the 50-dma is somewhere in the 515 region. There's a descending trendline at about 518, and the 30-minute 100-pma is at 521, with the SOX having just reached 511. In other words, the SOX faces lots of overhead resistance now, and the presumption is that it's going to roll down again at some point, but if bullish fervor should carry it higher, then it could carry the NDX with it. Note: As I typed, the SOX began falling again.

  Jeff Bailey   2/3/2004,  10:10:08 AM
10:00 Internals at this Link

Yesterday's internals at this Link

  Linda Piazza   2/3/2004,  10:04:53 AM
The TRAN dipped below yesterday's low this morning, but it's trying to haul itself back up, leaving only a thirty-minute candle shadow at that lower level. The TRAN is in a congestion zone that might offer support and its steep plummet has left it looking oversold on daily charts. Those daily oscillators aren't showing any sign of turning up again yet, and 30-minute and 60-minute oscillators are flattening or even showing a propensity to turn over again, so there's no overt sign yet that the TRAN will see an oversold bounce. The Keltner channels show the TRAN deeply oversold on a five-minute basis, suggesting a rise toward central channel resistance, currently at 2882.98, but it's far from certain that's going to happen just yet. Like the SOX, this index bears watching for those trying to guess market direction.

  Linda Piazza   2/3/2004,  9:59:01 AM
My charting service refuses to give me a daily chart of the SOX this morning, so I've switched to the SMH. I know they're not completely analogous, but after dipping below its 72-ema, an average I've begun watching on some tech-related indices lately, the SMH is attempting to steady, with RSI attempting to hook up. The SMH heads up toward its 50-dma again, as does the SOX. On intraday charts, this SOX climb looks too fast to be a bear-flag climb. Instead, it looks like impulsive buying when the SOX approached 500 and last week's low, but until and unless the SOX can get back above yesterday's high of 517.55, the potential double-bottom will not be confirmed. I think the SOX bears watching today, however, as we decide what will happen on other markets.

  Jonathan Levinson   2/3/2004,  9:58:38 AM
The Fed is not entering the market today, and so 3.25B worth of overnight repos expire unrefunded, for a net drain in that amount.

  Linda Piazza   2/3/2004,  9:45:50 AM
The OEX now tests its 60-minute 100-pma, at 562.08, having slipped slightly below that average. On a five-minute chart, the pattern looks like a bear flag rise after a steep fall, with the OEX currently at the bottom of the short-term channel that makes up the flag. The 130-pma is just below at 560.39. That suggests that it could now rise again, zig-zagging its way up inside the bear flag until the ultimate breakdown occurs, but that breakdown could occur at any point or the OEX could reject the formation and make a new five-minute high. Keltner channels also suggest that the OEX could find support at the now current level as it eventually works its way back and forth, down toward 558.60.

  Linda Piazza   2/3/2004,  9:36:38 AM
During the first five minutes of trading, the OEX traded a high of 562.77 and a low of 561.62, with the midpoint at 562.20, and with the OEX currently slightly above that midpoint. Traders can watch this midpoint as a benchmark of early strength or weakness during the first retracement that typically begins in a few moments.

  Linda Piazza   2/3/2004,  9:34:10 AM
The OEX opened near midline support on its Keltner channels and now heads down. Unless the OEX can climb back above that midline level, currently at 562.86, it will presumably work its way down toward the bottom of the channel, currently at 558.61, but declining.

  Jeff Bailey   2/3/2004,  9:30:34 AM
TASR Intl. (TASR) $135.02 Link ... $155.51 in pre-market. As of January 15, NASDAQ reported 1.238 million shares short, which is more than 1/2 the public float of 2.2 million.

  Linda Piazza   2/3/2004,  9:30:30 AM
Yesterday, the OEX ended the day in the congestion zone from the last few days, but that congestion zone is forming at the bottom of a steep decline. That makes it likely that it's some type of distribution pattern, either a "b" distribution pattern or the beginning of a bear flag. Both will be presumed to break to the downside, but a bear flag would likely first rise into resistance, forming a lower high. The daily chart shows the possibility of a H&S formation with a rising neckline, and a bear-flag rise would fit with that scenario. On the five-minute chart, the OEX broke below central Keltner support, suggesting that it might work its way down toward bottom support, currently at 558.69, but that central support was about to be tested again as trading closed and it's possible that the late-day sell-off simply resulted in the OEX overshooting that support. A dip down to 558.69 would still keep the OEX within the recent congestion zone, and would not constitute a breakout on that basis, but it would constitute a break below the short-term ascending trendline that began building off last week's low, with that trendline now crossing at the important 559.50 level. That short-term trendline can also be extended back as far as the 1/13 low. Thirty- and sixty-minute charts show the OEX plunging beneath the 30-minute 100/130-pma's, a bearish sign, but closing the day just above the 60-minute versions, at 562.09 and 560.37, respectively. A fall below the support level at 559.50 would then constitute a fall below that support, a rising trendline, and the 60-minute 100/130-pma's. If the OEX rises instead, I would look for a rollover at a lower high, perhaps near 567.

We can't be sure that rollover will come, of course. Markets sometimes consolidate sideways for long periods rather than pull back, and some daily oscillators already show a tendency to hook up again. The SOX is approaching round-number support at 500. We've seen post-CSCO-earnings rallies re-inflate markets in the past, and it's possible that could happen again, too. The TRAN is oversold and approaching support, and it could lead stocks higher, too. Heck, TASR could spark something as it seems capable of marvelous feats.

  Jeff Bailey   2/3/2004,  9:17:34 AM
09:00 Update posted at this Link

  Jane Fox   2/3/2004,  9:10:13 AM
The SEC is looking into modifying a rule that requires markets always get traders the best price, even if it means going to a competing market to fill the order. SEC staff is recommending that in some instances, speed of execution should take precedence and markets should be able to ignore or "trade through" a superior price if getting that price would slow down execution. The recommendation is expected to be part of a broader package of market structure changes that the commission will consider later this month. This ruling has implications for the NYSE for many of its critics believe it helps the Big Board maintain its dominant market position. Electronic markets, such as the Nasdaq Stock Market, have lobbied aggressively to have the "trade through" rule eliminated by the SEC.

  Jonathan Levinson   2/3/2004,  8:01:55 AM
We await auto sales for Jan. at noon, est. 5.9M, and truck sales for Jan., est. 7.8M.

  Linda Piazza   2/3/2004,  7:22:56 AM
Good morning. The Nikkei opened near the flat-line level in Tuesday's trading, but instead of the typical early-morning climb seen lately, the Nikkei plummeted, dropping straight down to test 10,500 support, hitting a low of 10,507.93 in mid-morning. After testing that support, the Nikkei ground its way higher the rest of the day, closing down 134.81 points or 1.25%, at 10,641.92.

Market watchers had been commenting that Japanese banks typically sold some of their stock holdings during February, and somebody was selling lots of something, but the yen's rise against the dollar had to be given some of the credit for the sell-off. Sometime during the night, reports began to surface that an envelope found in a U.S. Senate office tested positive for traces of ricin, a deadly poison, with those reports also credited with sending the dollar lower again, but the U.S. budget deficit has to take center stage as the G7 delegates meet this week in Florida. Exporters Toyota, Olympus and Sharp were among the decliners, heading lower even before the news reports about the ricin began to surface, at least in print sources. Olympus was also hit by a negative report on the outlook for digital cameras, and some thought that the downturn in Olympus snowballed into profit-taking in other techs, with many techs declining. Automakers turned in a mixed performance, with Toyota trading down despite early gains and Mitsubishi ending with a 2.3% gain after a report that the company and DaimlerChrysler might have driven through a rescue package for Mitsubishi. The airliners fell on news of new deaths due to avian flu.

Most other Asian bourses also declined, but the ones we typically watch turned in a mixed performance. In addition to the impact of avian flu and the declining dollar on this region, North Korea also announced that the six-nation talks on North Korea's nuclear weapons program will take up again on February 25. The Taiwan Weighted fell 1.07% and South Korea's Kospi fell 1.76%. Singapore's Straits Times declined only 0.17%. Hong Kong's Hang Seng climbed 0.69% and China's Shanghai Composite gained 1.56%. Early in the day, China Life fell on reports that it might have accounting irregularities, but the company had recouped those losses by the end of the day.

Currently, European markets mostly trade lower as investors weigh the impact of the lower dollar due to increased terror fears and increased U.S. budget deficits, unimpressive earnings in some European companies, and a downturn in auto stocks. Volkswagen announced it would give free air conditioning in its Golf vehicle as it competes with the Opel Astra, and those same speculations that helped Mitsubishi were hurting DaimlerChrysler. In addition, auto sales fell in France, hurting French automakers. Swedish truck maker Volvo's chairman was forced to resign and the company's Q4 profit was lower than expected, although double last year's number. Commentators on CNBC Europe focused on the chemicals group after a 2003 profit miss by Ciba Specialty Chemicals and a fall in 2003 net income by Dutch pharmaceutical and chemical group Akzo Nobel. Brokers were also out with changes in their ratings, with Merrill Lynch cutting German insurer Allianz and reinsurer Munich Re to sell ratings from their previous neutral rating, and with Goldman Sachs upgrading Infineon and downgrading ASML. Both insurers dropped in early trading and both chip stocks traded higher.

As of this writing, the FTSE 100 has dropped 13.50 points or 0.31%, to trade at 4367.90. The CAC 40 has dropped 20.71 points or 0.57%, to trade at 3644.31. The DAX has dropped 34.43 points or 0.85%, to trade at 4037.17.

  OI Technical Staff   2/2/2004,  11:54:41 PM
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