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  Jeff Bailey   2/24/200,  5:11:26 PM
Closing Internals at this Link

  Jeff Bailey   2/24/200,  4:38:29 PM
Excellent observation Keene (16:34:02).... resistance broken serving some support on the pullback test.

I'm sure some currency traders really relying on some technicals at this point after that recent rebound higher.

Treasury Secretary Snow continue to say the U.S. is for a strong dollar, but what does he really mean? Relative to a 20-year period or what?

  Keene Little   2/24/200,  4:34:02 PM
Jeff, here's another reason the dollar may have stopped where it did. I know traders love to use these trend lines. It came back for a retest and I wouldn't be surprised to see it bounce from here. But the daily stochastics is looking bearish so caution for any currency traders. Link

  Jeff Bailey   2/24/200,  4:28:50 PM
U.S. Dollar Index (dx00y) only explanation I can find for the dx00y finding some intra-day support where it did today. Link

  James Brown   2/24/200,  3:57:07 PM
Bears may want to take another look at Ingersoll Rand (IR). There is still minor support at $64.00 but today's decline has broken long-term support at its rising trendline. Target a move to $60.00 or its 200-dma near 57.50.

  Linda Piazza   2/24/200,  3:56:49 PM
The BTK, the Biotechnology Index, is holding by its nails onto the support just above 530 as we head into the close, another index just holding on. An apparent bad tick down to 500 makes oscillator evidence unreliable for now, but those oscillators looked to have flat-lined anyway, ahead of that occurrence, so that they weren't giving much evidence one way or another.

  Jeff Bailey   2/24/200,  3:54:37 PM
Amex Gold Bugs ($HUI.X) 224.54 +3.42% .... traded that 226.00 level with a session high of 226.38, but rather sudden reversal back lower near the close.

  James Brown   2/24/200,  3:53:51 PM
Short-term traders may want to watch OMC for a bounce. Shares failed under the $85 level and its 50-dma over a week ago and the stock dropped six days in a row. Now shares are bouncing from their 200-dma and its short-term technicals are coiling up into new bullish signals.

  Linda Piazza   2/24/200,  3:53:41 PM
The GSO is still holding above 151 and the 100-pma as we head into the last few minutes of trading, but it's also trading below the 153.24 level that had been important support earlier in February. On the weekly chart, this still looks like nothing more than either a bull flag or a falling wedge, both of which are bullish formations. Like many other tech-related indices, however, the GSO is falling out of its ascending regression channel, a channel that has been in place since early last March. Today's trade has been entirely under that channel, at least as Q-charts drew it. We really can't draw many conclusions, however, until the GSO violates the 100-pma, too, I don't think. This index is teetering on the verge of a precipice, too, like many others, but hasn't fallen yet. The GSO is still holding above 151 and the 100-pma as we head into the last few minutes of trading, but it's also trading below the 153.24 level that had been important support earlier in February. On the weekly chart, this still looks like nothing more than either a bull flag or a falling wedge, both of which are bullish formations. Like many other tech-related indices, however, the GSO is falling out of its ascending regression channel, a channel that has been in place since early last March. Today's trade has been entirely under that channel, at least as Q-charts drew it. We really can't draw many conclusions, however, until the GSO violates the 100-pma, too, I don't think. This index is teetering on the verge of a precipice, too, like many others, but hasn't fallen yet.

  Jeff Bailey   2/24/200,  3:53:04 PM
Swing trade short alert ... Newmont Mining (NEM) $43.86 +3.66% here, stop $44.30, target $42.50.

  James Brown   2/24/200,  3:50:31 PM
Best Buy (BBY) also looks like a candidate to watch list. The stock has been stuck in a trading range between $50 and $55. Now shares have pulled back to support near $50 again but this time it has extra support from its 200-dma. Bulls can look for a bounce after touching $50 and target $55. Bears can look for a breakdown under the 200-dma (currently 49.50)

  Jeff Bailey   2/24/200,  3:50:01 PM
Dang it! ... Industrials Services of America (IDSA) $19.10 +4.31% did give it up.

  Jeff Bailey   2/24/200,  3:46:57 PM
QQQ $36.33 -0.3% ... after watching the QQQ closely yesterday at the $36.22 level, I continue to see very squirly trade centered around the $36.25 level. QQQ doesn't really peg this $36.25 level, but really sees trade rate pick up around this level.

  James Brown   2/24/200,  3:45:10 PM
Keep an eye on First Data Corp (FDC). The stock is bouncing from its 200-dma and about to breakout over a multi-month trend of lower highs.

  Jeff Bailey   2/24/200,  3:43:42 PM
Dow Industrials (INDU) 10,559.70 -0.47% ... session low of 10,521.70 came right at the MONTHLY Pivot of 10,520.42, and now looks to try and hold a close right at the mid-point of our bullish regression channel.

I'm a temptend swing trade long, but still think it best to wait for a trade setup for strength above a DAILY R1.

  James Brown   2/24/200,  3:40:54 PM
If you're interested in a relative strength play UnitedHealth (UNH) looks good with today's new high near $62.00 coupled with strength in the HMO index.

  Linda Piazza   2/24/200,  3:34:01 PM
The TRAN is again testing its 30-minute 21-pma, with that average mostly capping upward movements since the 20th. I had mentioned watching a possible inverse H&S on the 30-minute chart, but had said that it was so malformed that I didn't give it much credence. As I suspected it would do, the TRAN dropped below the possible right-shoulder level, so we can stop wondering if that's an inverse H&S. Like the SOX, the TRAN has dropped far below the 30-minute 100/130-pma's, and may need to consolidate at current levels while those averages decline toward the current level or perhaps the TRAN might even rise as it zig-zags its way down to retest the recent low. Nothing on the 30-minute chart indicates that it's about to do that, but the distance that the TRAN is away from those averages still suggests that the TRAN is pretty far extended to the downside by this measure and due for a bounce.

  Linda Piazza   2/24/200,  3:10:14 PM
I usually watch the OEX Keltner channels on a five-minute chart, but here's how today's action looks based on a fifteen-minute chart, with the central channel support/resistance at the boldest line. Link Notice how the OEX rose to test that line twice today before giving up and diving? On this chart, the OEX is often contained within the intermediate-term channels, defined by the black lines on my chart, but if that support doesn't hold, that suggests an eventual move down to the bottom support, now at 559.16 but declining. I'd certainly expect some zigging and zagging along the way down to test that level, if that happens.

  Jeff Bailey   2/24/200,  3:06:42 PM
03:00 Internals at this Link

  Linda Piazza   2/24/200,  3:01:48 PM
The current OEX bounce looks like a bear flag on the five-minute chart. It's early yet and that formation could reform, but if it is a bear flag, it should break to the downside before climbing higher than about 563.60, the midpoint of the decline. The OEX did touch bottom Keltner channel support on that last dip, so a bounce could be expected from that level, especially since it also was near the 38.2% retracement of the bear-market decline.

  Jeff Bailey   2/24/200,  2:52:24 PM
S&P Banks Index (BIX.X) 350.38 -0.84% ... rather important area of near-term support here. WEEKLY S2 just below at 349.55.

SPX 1,136.01 -0.43% sitting right on its WEEKLY S1 of 1,135.75.

The the banks fall, and financials start giving back gains, will be another negative for these markets.

  Linda Piazza   2/24/200,  2:51:19 PM
This feels like a boxer being almost knocked out, stumbling up, and being knocked down again. This time, the OEX dipped right down to the 561.23 level, or almost right down to it, that represents the 38.2% retracement of the bear-market decline.

  Ray Cummins   2/24/200,  2:42:13 PM
Spreads/Combos -- E-mail Replies: Strategy Selection/Position Analysis

Just one more thought...many people who trade index-based credit spreads often hedge their portfolios through the use of simultaneous bearish and bullish spreads and in some cases, you can benefit from the reduced collateral requirements of a neutral-outlook position. If you plan to try this strategy, it would be prudent to review the material written by professional traders who have used the technique extensively (Don Fishback and Jay Kaeppel come to mind) and try to focus on the probability aspect of the position, as well as the technical indications, to help make price forecasts and volatility projections. I hope these suggestions will provide you with some guidance to help improve your trading skills and I wish you much success in the future. Ray

  Ray Cummins   2/24/200,  2:39:28 PM
Spreads/Combos -- E-mail Replies: Strategy Selection/Position Analysis

(condensed) Ray...I noticed that you also mentioned OEX credit spreads in your earlier post on the MM. How does the selection process and entry/exit strategies differ (from stocks) with index options? Thanks for the great info on spread trading! LR

Hello LR, My approach to analysis and trading of broader instruments is much the same as with any financial issue: Define the primary trend, the support and resistance areas, review the historical volatility (which leads to a probability assessment), and identify any potential news or events that could affect the future price of the underlying issue. As far as position management and adjustment strategies, they are similar to those used in equity-based credit spreads: close, cover or roll-out -- all of which have been discussed at length in the strategy narratives on the OIN website (look in the newsletter archives on the left side of the page). Here is an example: Link

  Jeff Bailey   2/24/200,  2:38:05 PM
Sell Prog. Prem. Alert ... first program premium since earlier this morning.

  Linda Piazza   2/24/200,  2:27:52 PM
We saw a minimal bounce on the OEX from the level at which I expected it a few minutes ago, but it lasted all of one five-minute candle.

  Linda Piazza   2/24/200,  2:27:07 PM
On the BIX daily chart, the BIX has slipped below an ascending trendline that had been supporting prices since late January. Today that trendline crosses at about 352.30-352.50. To me, this suggests that the BIX will head down to retest its 50-dma, currently at 344.29, but I would expect a bounce back up to test that broken trendline, with such a bounce probably occurring near 348.30, if not before. Any time between the current 350.65 and 348.30 might be the place from which a bounce up to test that broken support might occur, but I wouldn't consider the bounce bullish at this point, until and unless it climbed back above that trendline. As Jeff has warned us, it's important to watch the BIX as one measure of OEX strength or weakness.

  Jeff Bailey   2/24/200,  2:24:02 PM
02:00 Internals at this Link

  Linda Piazza   2/24/200,  2:20:34 PM
It looks as if it's almost time for a brief bounce on the OEX again, with OEX Keltner channel resistance is now firming up between 564.15 and 564.77. Let's see if it holds.

  Linda Piazza   2/24/200,  2:13:00 PM
The OEX has retraced more than 50% of today's bounce, with 564 being the midpoint of that range. This, on the surface, has a negative connotation. Keep your eye on the TRIN, though. Bears want to see it rise again or at least stop dropping.

  Jeff Bailey   2/24/200,  2:11:50 PM
Day trade bearish stop alert ... IDSA $21.50

The $21.44 level should have held resistance along with intra-day downward trend. It didn't, so a short needs to be very careful here.

  Linda Piazza   2/24/200,  2:11:21 PM
The BIX is falling below its 21-dma, testing that 349-351 support range.

  Linda Piazza   2/24/200,  2:09:01 PM
A study of the TRAN's 30-minute chart shows that it's been following the 30-minute 21-pma down since the 20th. It's just tested that 21-pma, currently at 2858.97, with the TRAN at 2855.61 as I type. It's been trying its best to climb over that average again, but its best hasn't been good enough so far. There's a bit of an inverse H&S look to that 30-minute chart, however, although the formation is so malformed that I'm not giving it much credence. A dip much below the current level would be a dip below the right-shoulder level, too.

  Jeff Bailey   2/24/200,  1:57:50 PM
Day trade short alert .... Indust. Services of Amer (IDSA) $21.00 (current bid) +14.69% here, stop $21.50, target $20.25.

  Jeff Bailey   2/24/200,  1:56:41 PM
Rather quick decline for the major indices in last minute or so.

  Linda Piazza   2/24/200,  1:55:45 PM
An OEX drop below 564.09 will confirm the lower high just reached.

  James Brown   2/24/200,  1:50:56 PM
Afternoon Sector Update...

XAU gold & silver: +3.41%
OSX oil services: +1.93%
DJUSHB homebuilders: +1.34%
SOX semiconductors: +0.96%

DFI defense index: -0.79%
XBD broker-dealers: -0.79%
UTY utilities: -0.42%

  James Brown   2/24/200,  1:26:19 PM
Keep an eye on GLW. It may provide another chance to buy the dip to its rising trendline again. See the chart: Link

  Linda Piazza   2/24/200,  1:23:12 PM
After breaking out of the bull flag on the OEX five-minute chart, the OEX traded sideways, then dipped to retest that flag, to see if it then would provide support. Now the OEX rises to test 566 again, with a move over the previous high of the day, if that should occur, giving a bullish bias to the day according to Jeff's MRT system applied to the first two-minute range. Bears instead want to see a lower high.

  James Brown   2/24/200,  1:16:32 PM
Sealed Air Corp (SEE) is up a strong 5.79% in a sharp bullish reversal that has placed the stock back above its 200-dma. The high-volume move was sparked by an upgrade from CSFB from "neutral" to "out perform" claiming SEE's recent weakness was a good entry point for long-term investors. Technical oscillators, which were all oversold (like the stock) have reversed sharply as well, but SEE still has overhead resistance at its declining 50-dma.

  Linda Piazza   2/24/200,  1:14:23 PM
While the SOX maintained an equal low, the GSO, the GSTI Software Index, did not. Yesterday saw an intraday dip below the early February low, but when the index scrambled up before the close, leaving only a candle shadow below that early February dip, it might have been possible for some to consider the low an equal low. Today, the GSO dipped further, confirming that it really did mean to print a lower low, but it's trying to spring back above that 153.24 level that has been both S/R for several months. The trouble (for those who interpret the action as bearish) is that RSI and 21(3)3 stochastics are both at higher levels than they were when the early February low was hit, perhaps hinting at bullish divergence forming. MACD is not at a higher low, however, although the histogram value is. My suspicion is that if the GSO does pull itself up and move higher, those MACD lines will redraw themselves, looking as if they were showing bullish divergence all along, too, just as the histogram values did. That's far from settled yet, however, as it's still possible for all those oscillators to continue downward while price does, too, wiping out the possible bullish divergence. The 100-sma is at 151.10, and that's where we should watch for strongest support or else a sign that the GSO is failing beneath that support.

  James Brown   2/24/200,  1:07:22 PM
Boulder, Colorado-based Wild Oats Markets, Inc (OATS) is down 7.7% to $13.29 after reporting earnings that missed estimates by 2 cents. Revenues did rise more than 6% but missed analysts' estimates of $242.7 million. Merrill Lynch downgraded the stock from a "neutral" to a "sell" citing a rich valuation for a company that's continuing to struggle with supply chain issues and execution.

Investors and analysts are also disappointed with the 9.9% gain in same-store sales, which falls behind larger rival Whole Foods (WFMI) same-store sales of 14.7% gains.

  Linda Piazza   2/24/200,  1:06:37 PM
In case I wasn't clear in my 13:03 post, for the time being, until and unless the SOX can climb above the 30-minute 100/130-pma's, I'm viewing any such effort by the SOX as a technical or countertrend bounce, expected when the SOX hit an equal low.

  Jeff Bailey   2/24/200,  1:05:16 PM
01:00 Internals at this Link

  Linda Piazza   2/24/200,  1:03:34 PM
The SOX still looks too far extended below its 30-minute 100/130-pma's to me. Although it can become more extended, and it's not showing particular strength today, I wasn't surprised by the attempt to bounce from the equal low on its daily chart. I'm wondering if it might trade sideways a while longer while those averages decline further or even rise up to close some of the distance, with the 100-pma now at 510.71. I'm not sure I believe the SOX can get quite that far even if it does rise, and instead expect the 504-506 resistance zone to prove a tough one to get through if the SOX rises instead of trades sideways. The danger here, as with all the indices, is that the bulls might begin to get scared and decide some of those hefty profits should be retained, deciding now would be a good time to bail.

  Ray Cummins   2/24/200,  12:59:56 PM
Spreads/Combos -- E-mail Replies: OEX Spreads - Part IV

The second part of the question is probably more important since it relates to the fact that success with a low profit/high probability approach to the options market is based on limiting losses to a minimum. There are never any big winners to offset the big losers, so there simply can't be any big losers. All option trading strategies, including OTM credit spreads, need to have some type of exit (or adjustment) point or signal in case the underlying moves in the opposite direction from that which is expected. Obviously, a gapping issue will occasionally wipe out a portion of previous gains and there is nothing you can do about it. At the same time, you must manage the remaining positions effectively or there will be no profits to offset the (rare) large losers. My point is, the key to success with a strategy such as OTM credit spreads is the position management that follows the initial trade and in all cases, you should remember the popular adage: Traders become successful when they learn to take small profits regularly and they don't let losing plays significantly erode capital. Good Luck!

  Ray Cummins   2/24/200,  12:55:36 PM
Spreads/Combos -- E-mail Replies: OEX Spreads Part III

The basic questions related to position (strike) selection are: How much downside are you willing to risk in return for the (relatively small) profit achieved, and are you the type that manages his plays more aggressively, with a focus on limiting losses before they become substantial? In addition to defining the fundamental style of your trading, the first question also relates directly to option pricing theory because we know that prices are determined from historical and statistical data, and that in all but the most unique cases, the market trades inside the 2nd standard deviation of a normal distribution. Strangely, that area is generally equivalent to the 3%-5% monthly (annualized) return in strategies such as deep-OTM credit spreads. So, if you want to have a high probability of making a low profit (simply one way, but not necessarily the best method of option trading), target positions that are in that range.

  Linda Piazza   2/24/200,  12:55:06 PM
There was at least a minimal upside break of the possible bull flag on the OEX five-minute chart, but the OEX sure isn't going anywhere after that upside break. Although this may merely be a hesitation or gathering of strength before the OEX zooms up, we have seen a change in tenor lately from the days not so long ago when the first upside break of any potential bullish formation would be immediately followed by a strong climb. Back then, downside breaks of bearish formations resulted in sideways trade, and then a strong relief bounce as the downside failed to materialize. Are the tables turning now? While I don't know that to be true, it's good to watch these sorts of things to measure underlying strength or weakness.

  James Brown   2/24/200,  12:52:30 PM
UTX was a big decliner in the Dow yesterday over concerns of the Pentagon's cancellation of the $38 billion Comanche helicopter program. UTX came out this morning and said there would be no material impact on their numbers based on the cancellation but investors aren't listening and the stock is down another 1.7% to $92.20 - just under the bottom edge of its recent trading range. Given the recent trajectory the stock appears ready to test the $90.00 level and its 100-dma.

  Ray Cummins   2/24/200,  12:48:35 PM
Spreads/Combos -- E-mail Replies: OEX Spreads Part II

As I mentioned earlier, it is considered very beneficial for the credit spread trader to use index options rather than equity options. A gap in one component of an index will not unduly affect that index, while an individual stock that moves sharply in the wrong direction (such as often occurs after an earnings report) offers you much less ability to manage risk in equity-based option positions. To be successful in this strategy, you must master a number of skills: First, you must correctly assess the direction of movement and magnitude of the underlying stock or index. With credit spreads, the only objective is for the sold option to stay "out-of-the-money." This means you can be far less precise in your forecast for the underlying, but it does not relieve you of sound judgment about the overall character of the market and the potential for volatility. If you are using bullish positions, make sure there is technical support above the sold put (such as a moving average, the bottom of an established trading range, or a commonly recognized trend-line) to increase the probability that both options finish "out-of-the-money." Of course, the opposite would be the case for a bearish credit spread utilizing calls: solid overhead resistance or supply, or a technical "top" formation below the strike price of the sold option. Second, it is important to establish spreads that are sufficiently distant from the current price of the underlying, so the position can withstand a substantial (unexpected) market movement without undue risk. If excess volatility is a concern, you should consider establishing a larger cushion than normal (a greater margin for error) to avoid getting "whip-sawed" out of the position.

  James Brown   2/24/200,  12:48:25 PM
LOTR: Return of the King just crossed $1 billion in sales in 10 weeks. A new record.

  Linda Piazza   2/24/200,  12:48:07 PM
As the BIX was recently equaling its 1/28 high, daily oscillators were reaching lower highs. Is this a time when bearish divergences are finally going to matter again? That's far from certain yet, as the BIX clings to its 21-dma and historical support between 349-351. Right now, the BIX is testing its 60-minute 100-pma, with that average or the 130-pma being a bounce point every time they've been tested since early January. In those other cases, the BIX usually lingered near that average until the 21-pma descended within a couple of points of the 100-pma, and then the BIX bounced. The averages are at that configuration now, and so if the BIX is to follow its previous pattern, it's soon time for a bounce. So far, the 60-minute oscillators do not show any proclivity to bounce, but we all know how oscillators can lie, don't we?

  Ray Cummins   2/24/200,  12:42:26 PM
Spreads/Combos -- Follow-Up E-mail Reply: OEX Credit Spreads

Ray, Thanks for the timely response. Any suggestions on how best to avoid losses with the OEX spread play? I plan to trade options atleast 3-4 strikes out and I generally close a spread when it goes past the inside strike. Any other ideas? Thanks Again! WR

Hello WR, It sounds as if you have already studied the basics of the strategy and are knowledgeable of the common exit/adjustment techniques used with credit spreads. The truth is, losses cannot be avoided in any type of trading, but they can usually be minimized, through adept position management, to the extent that they do not cause catastrophic damage to your portfolio balance.

  Jeff Bailey   2/24/200,  12:41:16 PM
Swing trader lower stop alert .... Sears (S) $46.20 +1.11% ... lowering stop to $46.35 (just above 4-days of resistance) from $46.52. Stock has been sideways for days. Looking to move on.

  James Brown   2/24/200,  12:41:14 PM
Guidant (GDT) is up strongly today (+7.3% to $68) to a new 3-year high after announcing a pact with Johnson & Johnson's Cordis unit to market their drug-eluting stent. This comes as a surprise considering GDT and JNJ had been fighting a patent dispute over stent design. The two companies are going to collaborate on new designs but more importantly it gives GDT immediate access to the very lucrative $3 billion-a-year stent market. GDT was believed to be two years behind its rivals in stent design. This is great news for GDT, who also recently settled patent issues with rival Boston Scientific (BSX). Guidant believes that the drug-coated stent market will reach $6 billion by 2006. (source: Associated Press)

Merrill Lynch upgraded GDT to a "buy" from "neutral" on today's developments.

Bullish traders tempted to chase today's breakout may do better waiting for a pull back. A bounce from $65 could work.

  James Brown   2/24/200,  12:30:24 PM
One of tech land's biggest decliners today is Synopsys Inc (SNPS), a producer of electronic design automation software. The stock gapped down and is trading near $29.35 for a 15% loss. The company announced earnings last night that managed to beat estimates by 2 cents with 33 cents a share. Revenues came in at $285.3 million, above analyst estimates as well. However, the company warned for the second quarter. SNPS now expects to earn 31-35 cents a share versus consensus estimates at 39 cents. On top of the earnings news SNPS announced a $432 million acquisition for Monolithic Systems (MOSY).

  Jeff Bailey   2/24/200,  12:29:46 PM
Dow Industrials (INDU) 10,588 -0.2% ... didn't make it back to DAILY Pivot of 10,605.

Somewhat negative in my opinion as INDU has been a strong index.

  Jeff Bailey   2/24/200,  12:28:48 PM
QQQ $36.53 +0.19% ... also at its DAILY Pivot here.

  Jeff Bailey   2/24/200,  12:25:53 PM
SPY $114.72 +0.11% ... trying to reclaim DAILY Pivot of 114.67. Has been either side.

  Linda Piazza   2/24/200,  12:25:15 PM
The OEX continues to keep us in suspense, holding above 564, the midpoint of this morning's rise, but not able to break to the upside out of that possible bull flag on the five-minute chart, either, although it's trying to do so as I type. On a daily basis, it's again hugging the 30-dma today, with that average at 564.53. On a 30 and 60-minute basis, the pullback also looks like a possible bull flag just beneath the 100/130-pma's on those charts. Oscillators on those charts continue to point upward, which signals dangers to bears, but it signals danger to bulls, too, since if the OEX continues consolidating while those oscillators cycle all the way up and then roll down again, the downside might be presumed to have more oomph than the upside did.

  Jeff Bailey   2/24/200,  12:24:03 PM
Cancel swing trade long alert for Placer Dome (PDG) $16.77 +3.32% entry of $16.68.

  Ray Cummins   2/24/200,  12:23:25 PM
Spreads/Combos -- More E-mail Replies: Trading Strategies

(condensed) Attn: Combos Editor, I was hoping for some info on spreads with the OEX -- now that earnings season is mostly over and the market seems destined to stay in a range. I looked at credit spread prices and with March options, you can go 25 pts. in either direction for a decent profit. What's your thoughts on this approach? WR

Hello WR, Traders often write (out-of-the-money) credit-spreads on the S&P 100 Index (OEX) and this technique is probably one of the safest strategies for "premium-sellers" because OEX options:

1) Are liquid -- they have good open interest and active daily volume, even in the OTM options.

2) Have robust option premium (excellent "time value" in the front-month calls and puts)

3) Have small bid/ask spreads to reduce slippage

4) Are (generally) not prone to "gapping" prices because the OEX has relatively controlled directional movement that allows for timely exit and adjustment trades.

Many of our readers favor selling OEX options both uncovered and in credit spreads, as well as in credit-spread strangles, which involves the simultaneous sale of an OTM call-credit spread and an OTM put-credit spread. This type of position is high probability/low risk with correspondingly low profit, and it is generally initiated with 1-2 months remaining until expiration when the OEX exhibits a technical support area near the sold puts and a resistance area near the sold calls. Good Luck!

  Jeff Bailey   2/24/200,  12:21:35 PM
Buy/sell program premium alerts multiple and offsetting buy/sell program premium alerts were found between 10:00 and 10:15. Last premium alert was a buy at around 10:30 AM EST.

  James Brown   2/24/200,  12:19:21 PM
Good news for put players in the AVID play. The stock dipped to $38.43 this morning, within our target range of $38.00-38.50. Unfortunately we were holding out for a move to $38.00 to close the play. Shares bounced strongly from the $38.50 level and are now trading at $40.00. This may be a good time to re-evaluate your stops.

  James Brown   2/24/200,  12:15:35 PM
This may be a new entry point on OI call play Phelps Dodge (PD). The stock bounced from the $80 level of support on Friday and we're starting to see some follow through. Short-term oscillators have turned bullish as well.

  James Brown   2/24/200,  12:11:52 PM
Sector update...

XAU gold & silver: +3.38%
OSX oil services: +1.67%
DRG drug index: +0.60%
HMO healthcare: +0.55%

DFI defense index: -0.83%
UTY utilities: -0.77%
XBD broker-dealer: -0.87%

  Jeff Bailey   2/24/200,  12:08:25 PM
12:00 Internals at this Link

Today's trade looking more like an August 7 trade than it is an August 11 trade if looking for any type of similarity from the COMPX.

Full day internals for 08/11/03 looked like this...

NYSE A/D and NH/NL 1924:1271 and 98:14

NASDAQ A/D and NH/NL 1973:1181 and 107:10.

Will note that on 08/11/03, A/D lines were positive all session. Not today!

  Ray Cummins   2/24/200,  12:03:50 PM
Jane, Thanks for the generous comment...but that knowledge isn't worth much without the wisdom of the OIN/MM crew to know which direction the market is going! :-)

  Jeff Bailey   2/24/200,  11:54:40 AM
Randgold Resourses (GOLD) $20.26 -0.63% ... there's something "wrong" with this gold stock isn't there? Outperforms to the downside in a decline, and vastly underperforms in an advance.

NEM, PDG and BGO are better trading stocks that move more with the sector and dollar action.

  Jane Fox   2/24/200,  11:52:24 AM
Ray I find your comments on spreads and combos extremely informative and you never cease to amaze me as to how much you know about them.

  Linda Piazza   2/24/200,  11:51:18 AM
That try for OEX 566 didn't last long, but the pullback has just taken the OEX back to mid-channel support on the Keltner channels. If this support holds, from 564.31-564.40, then I wouldn't be surprised to see another attempt at 566, with perhaps an upside breakout of the possible bull-flag pullback on the five-minute chart. If 564 falls, however, then the OEX has retraced more than 50% of this morning's bounce, giving a bearish cast to the short-term action. I think there's a bearish cast to the intermediate-term action already, but there's just a question of how much bouncing around occurs first on a short-term basis.

  Ray Cummins   2/24/200,  11:49:44 AM
Spreads/Combos -- E-mail Replies: Trading Strategies - Part III

For example, it is rare to find an in-the-money put debit spread that will provide the same risk to profit ratio as the equivalent out-of-the-money call credit spread. The same situation exists with in-the-money call debit spreads and out-of-the-money put credit spreads. The reason is that in-the-money options have very little extrinsic value (premium), when compared to out-of-the-money options, which are generally all premium, and also because the bid/ask spreads are larger, which means you pay more money for long options and sell short options for less money.

The moral of the story? Traders who favor low risk/high probability (vertical) spread strategies will almost always find better profit potential in OTM credit spreads than in the equivalent debit spreads. Hope that helps!

  Ray Cummins   2/24/200,  11:47:36 AM
Spreads/Combos -- E-mail Replies: Trading Strategies - Part II

One advantage of credit spreads is they can be funded with portfolio collateral (stocks on margin) while debit spreads need an investment of actual cash. In addition, credit spreads have lower commission costs because both options (in a successful position) are simply allowed to expire. However, some traders favor positions that have no margin requirement and that's why I try to list at least one (bullish and one bearish) debit spread each week. The primary disadvantage to in-the-money debit spreads, which are equivalent to out-of-the-money credit spreads, is the potential profits are slightly lower at the same cost basis, due to the characteristics of option pricing.

  Ray Cummins   2/24/200,  11:44:23 AM
Spreads/Combos -- E-mail Replies: Trading Strategies - Part I

Ray, It seems to me that a credit (put) spread and a debit (call) spread achieve the same purpose. Why would you ever choose the debit spread over the credit spread? The amount of money risked is the same, or seems slightly favorable on the credit put spread. JL

Hello JL, Your comments are correct...there are two types of vertical (price) spreads -- credit and debit.

Credit Spreads: The bear-call (bearish) and the bull-put (bullish)
Debit Spreads: The bull-call (bullish) and the bear-put (bearish)

Both debit and credit spreads have the same (theoretical) risk-reward outlook.

  Linda Piazza   2/24/200,  11:40:17 AM
Finding support at this morning's opening level, the OEX gears up to make another assault on the 566 level.

  Jonathan Levinson   2/24/200,  11:36:32 AM
Coupon pass of 660M, for a net drain today of 665M.

  Jim Brown   2/24/200,  11:31:09 AM
EU has banned all poultry product from the US. Chickens, turkey's, eggs, etc.

  Linda Piazza   2/24/200,  11:24:58 AM
After piercing the 60-minute 100-pma, the OEX fell back below that average and the 130-pma, with such action supposedly constituting a sell signal. I'm not sure the OEX is through testing those averages, however, although there's a danger that the bottom could fall out at any moment. As this morning began, I thought we might see a steadying, which didn't appear that it was going to happen but finally did, and then a rise to test those averages while 30- and 60-minute oscillators burnt off some of their oversold pressure. I thought the OEX might have difficulties moving much above those averages, with the topmost of them now at 566.58, but I'm just not sure how long that testing might go on before bulls get scared and take profits or bears get scared and start buying to cover.

  Jeff Bailey   2/24/200,  11:16:20 AM
SPY 114.72 +0.10% back to test its DAILY Pivot.

  Jeff Bailey   2/24/200,  11:15:04 AM
Swing trade long alert .... Placer Dome (PDG) $16.75 +3.20% ... let's look for bullish entry on an intra-day pullback to $16.68, stop $16.55, target $16.85.

This would be a pullback to BLUE #2, target BLUE #5 on 5-MRT

  Jeff Bailey   2/24/200,  11:11:26 AM
11:00 Internals at this Link

  Linda Piazza   2/24/200,  11:08:56 AM
In order to watch the OEX today by Jeff's MRT system, I switched to the first two-minute range since the first five-minute range was so large. That two-minute range was from 564.58 to 563.21, and it shows fairly good correlation with today's action. First, the OEX declined exactly to the bearish #2, where it found support, refusing to confirm a bearish outlook, and then it climbed to the bullish #2, pushing slightly above that level before retreating slightly. That level is at 566.02, and the daytraders' target would then be 570.60. I don't often trade using this system, but I do use it to confirm the bias for the day. For example, I'd be hesitant to jump into a long play today since resistance is possible ahead of that 570.60 level, but it is useful to know when things look more bullish than bearish on a short-term basis. So far, the OEX trades within the neutral zone as depicted by this system.

  Jim Brown   2/24/200,  11:04:02 AM
IBM announces $4 billion stock buyback

  Jeff Bailey   2/24/200,  11:02:27 AM
OEX perhaps tightest trade withing the DAILY levels. Did trade DAILY S1 of 562.38 with session low of 561.79. Current trade 565.36 just off high of 566.19, which was shy of DAILY R1 566.45.

My current thoughts as to work we did last night is a move back below the DAILY Pivots in the INDU/SPX/OEX would be viewed as an intra-day reversal lower.

NDX/QQQ session lows would be the point for weakness.

  Linda Piazza   2/24/200,  10:56:51 AM
The SOX has made it back above 500 again, but is still within the testing range of that level, not yet tugging free of central Keltner channel resistance. If it does manage to tug free, it next faces 504-506 historical resistance and then the 508.60 zone that the Keltner channels show as next strongest resistance.

  Jeff Bailey   2/24/200,  10:54:31 AM
Dow Industrials (INDU) 10,626.74 +0.16% ... session low of 10,564.00 came just under DAILY S1 of 10,565.05, where current session high of 10,637.11 was just shy of DAILY R1 of 10,649.57.

I do not currently see any of the major indices having traded their DAILY R1's at this point.

Day trade bears may look to short these levels, with stops just above DAILY R1's, with targets back toward the pivots.

  Jonathan Levinson   2/24/200,  10:51:48 AM
The Fed has announced a coupon pass, a permanent market op, but no amount released yet. That 1.25B drain seemed a little out of place given the weak con-con data this morning.

  Linda Piazza   2/24/200,  10:50:59 AM
This morning the TRAN dipped as low as 2836.66, just below the weekly S2, before bouncing. It's now at 2867.18. Today's bounce has been strong enough so far to hook up the RSI, a fickle oscillator that sometimes gives false signals, but also one that sometimes gives leading indications of moves to come. This bounce still comes in the context of a possible decline to retest the 2815.66 low from 2/04, but we should be on the watch for the possibility of a higher low, too.

  Linda Piazza   2/24/200,  10:45:44 AM
Keltner lines are trying to catch up to the current OEX position, trying to tug it back within their grasp. Unless the OEX falls back quickly, however, they'll just serve as support lines, with that support now at 565.54.

  Jonathan Levinson   2/24/200,  10:44:00 AM
The p/c ratio has declined to .73, a neutral reading. VXO is down to 16.08.

  Linda Piazza   2/24/200,  10:35:02 AM
Keltner channels show that the OEX is pulling away from last resistance ahead of 567.98, which would be echoed by the fact that a climb above 564.84 confirms (yet another) double-bottom formation on the five-minute chart, with an upside target near the upper Keltner target. Now we have to see if it has the strength to meet upside targets. I rather suspect that the OEX will have difficulty moving much above the 30- and 60-minute 100-pma's, with the topmost of those at 566.63. However, we'll have to see. As I've said before, Keltner channels have surprised me before by indicating that there's no resistance where I thought there ought to be, and it turning out that the OEX just zoomed past that supposed resistance.

  Jeff Bailey   2/24/200,  10:33:39 AM
NDX ... 1,471.29 +0.51% ... session low of 1,452.49 came just above DAILY S1, now moving above DAILY Pivot of 1,469.17.

  Jeff Bailey   2/24/200,  10:32:33 AM
SPY $114.87 +0.2% ... moves back above DAILY Pivot of $114.67.

  Jeff Bailey   2/24/200,  10:30:25 AM
10:00 Internals at this Link

Yesterday's internals at this Link

  Linda Piazza   2/24/200,  10:17:19 AM
Any attempts to steady the markets haven't been particularly successful today, but I'm not sure the attempt is yet finished. Today's OEX open was just below the rising trendline off the 1/13 low, so I do view the action as bearish, of course. There was a slight penetration of Friday's and Monday's lows, but only a slight penetration so far. This still looks to me as if the OEX is working its way down to a test of the 557.36 confirmation level for the double-top formation, although we can't preclude some bounces along the way. The OEX this morning touched a descending supporting trendline that can be drawn off the lows beginning 2/13, so unless it's going to plummet this morning, this would be as good a place as any for a bounce to begin this morning. I do still consider any such bounce a countertrend move, especially since the OEX opened below that that two-month ascending trendline mentioned at the beginning of this post.

  Jeff Bailey   2/24/200,  10:14:33 AM
Day trade stop alert ... QCOM $61.26

  Jeff Bailey   2/24/200,  10:06:10 AM
Lower day trade bearish stop alert .... lower bearish stop in QCOM to $61.26.

Session low now $60.74, but couldn't get a 5-minute close below RED #2.

  Jonathan Levinson   2/24/200,  10:05:30 AM
Put to call ratio .80, VXO up 3.58% to 16.50.

  Linda Piazza   2/24/200,  10:05:30 AM
The OEX just tested the 38.2% retracement of the bear-market decline, at 561.23. Keltner channels suggest that the OEX will work its way down at least to 560.80, but that line is descending toward the 559.50 level that proved stronger S/R when the OEX first moved through that zone, but right now, the OEX looks due for a bounce up toward next resistance, at 563, then 563.44, 563.88, and stronger at 564.28. That bounce was beginning as I began typing.

  Jim Brown   2/24/200,  10:02:03 AM
Text of Greenspan speech on FRE/FNM: Link

  Jim Brown   2/24/200,  10:00:10 AM
Greenspan saying FNM/FRE pose risks to the financial system.

  Jim Brown   2/24/200,  9:59:31 AM
Consumer Confidence = 87.3 (est 93.0, last 96.8)

  Jonathan Levinson   2/24/200,  9:57:18 AM
2B overnight repo just announced against 3.25B expiring, net drain 1.25B.

  Jeff Bailey   2/24/200,  9:54:45 AM
Day trade lower stop alert ... Lower bearish trade stop in QCOM to $61.62

Sesson low of $60.81 came right to 5-mrt RED #2 of $60.83. RED #1 at $61.50.

  Linda Piazza   2/24/200,  9:45:58 AM
The BIX tests its 21-dma at 352.05, with the BIX currently at 352.41, but having seen a low of 352.12. Friday's low was 352.19, confirming the potential of the BIX to bounce from the current level, but also highlighting the weakness if this level fails. The 50-dma has proven the strongest support over the last months, and that average now les down at 344.32, so a failure of the 349-351 support range may portend a dip down to the 50-dma. That won't be good news for the OEX.

  Jeff Bailey   2/24/200,  9:38:33 AM
Day trade short alert ... Qualcomm (QCOM) $61.49 here, stop $62.25, target $60.42.

Just looking for some backfilling of yesterday's gap higher. Not trying to call a top in the stock.

  Linda Piazza   2/24/200,  9:35:54 AM
During the first five minutes of trading, the OEX traded in a range from 564.58 to 562.97, with a midpoint at 563.78, and with the OEX obviously currently below that midpoint. Be careful ahead of this morning's economic numbers, however.

  Jeff Bailey   2/24/200,  9:33:41 AM
Swing trade bearish stop alert.... Newmont Mining (NEM) stopped on lowered stop at $42.70.

  Jane Fox   2/24/200,  9:31:38 AM
Here is an excerpt from the WSJ on the Russian Government news. MOSCOW President Vladimir Putin on Tuesday dismissed Prime Minister Mikhail Kasyanov and his cabinet, saying in a statement on national television he made the move in order to reshuffle the cabinet ahead of the March 14 presidential elections.

"This decision bears no relation to any assessment of the performance of the former composition of the government. It was dictated by my desire to once again delineate my position on the issue of what development course the country will take after March 14, 2004," Mr. Putin said.

However, speculation had percolated for months that Mr. Kasyanov, the last major government holdover from Boris Yeltsin's years as president, was on his way out.

Mr. Kasyanov had said that the intense government probe of the Yukos oil giant, including the jailing of its head Mikhail Khodorkovsky, had set a bad precedent for the country's recovering economy.

The Yukos probe is widely believed to have been Kremlin-driven and Mr. Kasyanov's criticisms likely irritated Mr. Putin and his aides.

The dismissal of the prime minister also means the dismissal of the rest of the government ministers, although any of them potentially could be reappointed.

  Jim Brown   2/24/200,  9:29:13 AM
TASR - trading down -2.50 in premarket. They are scheduled to speak at a conference at 9:30 this morning.

  Jeff Bailey   2/24/200,  9:25:58 AM
SPY $114.23 ... pre-market low came at $114.09, which is today's DAILY S1.

  Jeff Bailey   2/24/200,  9:24:58 AM
QQQ $36.29 ... pre-market low has been $36.17.

  Jeff Bailey   2/24/200,  9:19:54 AM
09:00 Update at this Link

  Jonathan Levinson   2/24/200,  9:08:28 AM
Note that Al Green is scheduled to testify before the Senate Banking Committee on Government Sponsored Enterprises at 10:00.

  Linda Piazza   2/24/200,  9:04:03 AM
Two days in which the OEX hugged its 30-dma and the two-month ascending trendline flattened the always-quick-to-react RSI. It had been descending. The OEX closed back above the 563.50 level that marked the top of a recent consolidation zone, although this week intraday levels have dipped below that support level. Yesterday's late-day climb relieved much of the short-term oversold pressure, with the five-minute nested Keltner channels I watch showing the OEX having risen up to test mid-line channel resistance, and to have come to a stop at that level. Five-minute oscillators were showing a tendency to produce bearish kisses as the day ended, but the stochastics haven't completely turned down out of territory indicating overbought conditions yet, and still might trend in that territory. That midline resistance will be at 464.49 as trading opens this morning. The late-day rise was also enough to send the OEX up toward the 60-minute 100/130-pma's, currently at 565.25 and 566.07, with the 30-minute versions just above that, and to hook up the 60- and 30-minute oscillators. Those can be turned right back down again, as might happen if the declining futures this morning follow through with markets opening down and soon violating important nearby support levels seen across many indices. The Nikkei's and DAX's performances in Tuesday's trading certainly present that possibility.

However, if markets try to steady early on, I'm wondering if those 30- and 60-minute oscillators show that there's still some slight upside pressure to be expended this morning as the OEX rises enough to test those overhead averages, or perhaps trades sideways while those averages descend and oversold pressure is further expended. In addition to what we know about the other major indices, the SOX, the TRAN, and the BIX are all at or just above levels that might be considered support levels, so it's possible that each of these could attempt bounces or consolidation, adding to the impression that markets might attempt to steady early this morning. However, at this point, I would consider any rise or steadying to be a countertrend move, and one that's likely to fail at any moment. The OEX looks as if it's being inexorably drawn down to test the 557.36 confirmation level of a double-top formation, for example, even if we don't know what's going to happen as that test occurs and even if it has a few days of bounces interspersed with the declines. However, as Jonathan mentioned in a great futures article this week, it hasn't paid to be too smug about one's conclusions this last year. I'm not feeling smug about any conclusion and remain aware of the possibility that the markets could surprise and reach for higher highs again. Not so surprising and also a possibility is a straight plummet today without more than a slight attempt at steadying, especially if weakness in Asia and Europe catches up with the U.S. markets. The bourses of the number two and three economies in the world--Japan's and Germany's--have plummeted, and there's no reason to expect that ours can't, either.

  Linda Piazza   2/24/200,  8:18:18 AM
The DAX is diving, down 76.30 points or 1.88%, to 3992.41, below 4000 for the first time since mid-January when it hit some sub-4000 days on an intraday basis. The DAX's daily chart shows a possible H&S formation (two right shoulders) that has been confirmed by today's trade. I'm having difficulty with charts this morning, but just by eyeballing the chart, it appears that the downside target would be somewhere near 3800-3850.

  Jonathan Levinson   2/24/200,  8:00:49 AM
We await consumer confidence for February, with estimates ranging from 92.3 to 102, prior reading 96.8. The report is scheduled for release at 10AM.

  Linda Piazza   2/24/200,  7:14:19 AM
Good morning. By the close of the morning session on the Nikkei, the index had erased all of yesterday's gains, but the declines weren't finished. The Nikkei dropped though the early part of the afternoon session, and then held near the low of the day through the rest of the session. The Nikkei closed down 224.83 points or 2.07%, at 10,644.13. The loss was characterized as the worst one-day loss in two months. The exporters that had boosted the index on Monday were responsible for the declines on Tuesday, along with banking stocks. Mitsubishi Motors fell after news circulated that the company would sell its stake in Proton, Malaysia's state-owned carmaker, and the company also reported a 17.2% decrease in January's domestic sales. Other carmakers declined, too, despite reporting higher January domestic sales.

Many other Asian bourses also declined. The Taiwan Weighted lost 1.15% and South Korea's Kospi declined 1.47%. Singapore's Straits Times declined a more modest 0.32% and Hong Kong's Hang Seng was flat, down 0.06%. China's Shanghai Composite was also flat, but up 0.04%. President Bush's administration has apparently sent officials to China in a "technical cooperation program" as that country considers floating the yuan rather than keeping it tied to the dollar. While China agreed to host this working group, some doubt their willingness to untie the yuan from the dollar.

A CNBC Europe commentator's talking points this morning included the following headlines: "Ifo Index declines after 10 straight rises," "US consumer confidence seen falling," and "Why hasn't EU confidence been reflected in the GDP?" With those cheery headlines, it's perhaps no surprise that most European indices decline. In its first pan-German release, February's German Ifo Index had been expected to rise to 97.6 from January's 97.5, but instead fell to 96.4. Previously, separate numbers had been released for East and West Germany. A downturn in business expectations was cited as the reason for the lower Ifo number. In stock-specific news, KPN was subjected to several broker downgrades. Although the Dutch telecom had announced this weekend that it might launch a possible hostile takeover bid for British-based operator Mmo2, the company yesterday said it wouldn't do so unless a third company made the first move and that it reserved the right to make a friendly offer. Other European news focused on the chemical manufacturers. Swiss specialty chemicals group Clarian plummeted after announcing earnings and measures it will take as part of a restructuring effort. French specialty chemicals group Rhodia also declined, but did so after a French newspaper said the company was asking for more equity financing than it had previously planned because of improved stock market conditions. In London, insurer Prudential's earnings were considered disappointing as the company's operating profit before goodwill, exceptional items and short-term fluctuations in investment returns fell 27%.

As of this writing, the FTSE 100 has fallen 20.30 points or 0.45%, to 4504.00. The CAC 40 has declined 32.71 points or 0.88%, to 3698.44. The DAX has declined 55.99 points or 1.38%, to 4012.72.

  Jeff Bailey   2/23/200,  10:40:45 PM
Detailed NASDAQ Composite internals, and benchmarking to July/August trade per today's 03:15 PM EST Update. Link

Here is a look at what the COMPX internals looked like back from July 14, 2003 when the COMPX made a new high, then fell back to a relative low on August 8, 2003. Link

I'm limited by vertical axis, but an EXCELLENT time to check some things, as current technicals from the COMPX itself is VERY similar to that found in July/August.

Recent NSDQ NH/NL 10-day ratios do confirm bullish leadership, where on 01/21/04 the NH/NL 10-day ratio was 98.7%, which is almost identical to that found on July 16, 2003 and its 10-day average NH/NL ratio reading of 98.2%.

I'm "Benchmarking" the 07/31/03 date (where I attached downward trend) to 02/19/04 where I attached downward trend today. Again.... internals (bullish % and NH/NL indications) almost identical in strength.

I further use the COMPX's trade around the 50-day SMA as a benchmark. Yesterday, 02/20/04, the COMPX traded BELOW its 50-day SMA. Internals TODAY a little stronger than that found on 08/06/03.

OK... so internals and outward appearance look almost EXACT. Don't they? I think they do.

Now we have VERY good comparison test for next couple of days. Not ONLY the outward appearance, but the INTERNALS too.

Should time permit, I'm sure we could go back to the week of 08/04-08/08 Index Trader Wraps and DAILY/WEEKLY/MONTHLY Pivot matrix to see how the NDX/QQQ traded relative to the matrix, where that trade may also be used for a test of renewed strength.

Yes... this would be a good test and something I briefly discussed as it relates to DAILY R1 trade tomorrow. Here is the Pivot Matrix we put together on Friday evening, 08/08/03, Link where the next trading day (08/11/03) the NDX did trade its DAILY R1 of 1,221.70, and CLOSED above that level. On 08/12/03, the NDX followed through to the upside to then test its 50-day SMA from below.

Yes #2.... I quickly looked at an intra-day chart for 08/11/03. It does show that the NDX traded its DAILY R1 early in the session, and morning PULLBACK came to 1,212.23, which was JUST UNDER the DAILY Pivot of 1,213.00.

So... now we have a good test for STRENGTH and WEAKNESS with the DAILY Pivots.

  OI Technical Staff   2/23/200,  7:53:45 PM
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