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  Jeff Bailey   3/12/200,  4:59:27 PM
This week's MM trades at this Link

  Jeff Bailey   3/12/200,  4:46:49 PM
Closing Internals at this Link

  Linda Piazza   3/12/200,  3:59:26 PM
Speaking of Keltner channels, the OEX is breaking over the mid-channel Keltner resistance, but other Keltner resistance has moved right above it, to 550. Maybe the OEX can hit that upper channel boundary after all, but we're going to have to wait until Monday to see if that's possible, as it's ending the day at a neutral spot with regard to the Keltner channels.

  Linda Piazza   3/12/200,  3:55:50 PM
My chart today on divergence produced by the Keltner channels proved confusing to some. Most of us are used to watching divergence between price and oscillators, but maybe some newer readers aren't, so we need a little background first. Price/oscillator divergence happens when oscillators don't mimic the price highs: both making equal highs, lower highs, or higher highs. Pring makes discussions of divergence easy in his book: any divergence that happens as prices are making swing highs is bearish divergence. Remembering that makes it really easy to identify bearish divergence. I remember when I first studied divergence, getting confused all the time, but that's easy to remember. Price makes an equal high, but oscillator makes a lower one: that's bearish divergence. Price makes a higher high, but oscillator makes an equal one: that's bearish divergence, too. Price makes an equal high, but oscillator makes a higher one: that's bearish divergence. (One caveat: Some oscillators have maximum values of 100, such as stochastics. They can't go higher than 100, no matter how high price goes, so you can't consider that bearish if they don't reach over 100.) According to Pring, any divergence made at swing lows is bullish, but other authors differ on this.

So if bearish divergence is any difference seen at swing highs, we can use Keltner channels, too, to find bearish divergence. See my 14:18 chart. Don't get all caught up in the colors of the channels or what each means. Instead, the idea is that when one channel swings up high enough to touch another, wider channel on one price high, but doesn't swing high enough to touch it on the second swing high, that's a difference from the way it acted in that first touch. That's divergence. That's bearish divergence. Prices won't always go down afterward, but it's a warning.

  Linda Piazza   3/12/200,  3:42:47 PM
The OEX spent all day creeping up to the mid-channel resistance on the Keltner channels, but hasn't been able to break above it, reinforcing my conviction this morning that today wasn't a good day for a long play despite my thought that the OEX would likely test that mid-channel resistance and might even be slung all the way to the upper channel line. On a Keltner channel basis, the OEX has a free ride from that mid-channel resistance, now from 549.38-549.91, all the way up to the upper channel resistance, now at 553.71, but first it has to soar above the mid-channel line and it just hasn't been able to do that yet. Perhaps Monday, although we have to see what today's close and the weekend bring us first. I thought earlier today that the OEX might dawdle around until that upper channel boundary had descended to 552.50-553 (see my 14:07) post, and that looks like what's happening.

  Linda Piazza   3/12/200,  3:33:20 PM
While some indices breached their 100-dma's yesterday and some never touched theirs (the Wilshire 5000 and Russell 2000, for example), the OEX came to rest on its 100-dma yesterday, stopping its descent less than 20 cents above that important MA. Today it climbed off that average. I'm not sure how much to make of that, however, since the SPX, Dow (retesting it now), COMPX, NDX, and SOX all violated their 100-dma's.

  Jeff Bailey   3/12/200,  3:08:35 PM
03:00 Internals at this Link

  Linda Piazza   3/12/200,  3:07:39 PM
That OEX drop is testing the bottom of the rising wedge I mentioned in my 14:39 post, saying that it was possible that a breakdown could occur at about 3:00 EST, when the OEX was about 2/3 of the way in to that bearish rising wedge. This testing comes after the OEX had again risen to test the mid-channel support. The OEX still clings to that bottom support, however, and I don't know that I'm entirely convinced that a breakdown will occur. TRIN isn't rising, for example. When I turn to Donchian channels, they suggest that the OEX will hold support at 547. Mixed evidence here, but that's what happens during countertrend moves.

  James Brown   3/12/200,  3:02:14 PM
Another quick observation...JNPR is turning bullish. Short-term oscillators are already bullish and its MACD is hinting at a fresh buy signal soon. The stock is breaking out today above its 7-week descending trendline of lower highs (not counting the Feb. 6th aberration). JNPR is also breaking out over its 50-dma.

  Jeff Bailey   3/12/200,  3:01:29 PM
Stillwater Mining (SWC) $13.63 +6.25% .... June Palladium futures (pa04m) 278.55 traded another contract high today at 284.

  Jeff Bailey   3/12/200,  2:53:38 PM
S&P Banks Index (BIX.X 350.16 +0.93% juuuust sitting above its WEEKLY S2 of $350.06.

  Jeff Bailey   3/12/200,  2:51:05 PM
QQQ $35.37

  Jeff Bailey   3/12/200,  2:48:17 PM
Bearish day trade stop alert ... QQQ $35.48.

I record the loss in my trade blotter, but if not using hard stop, I'd look to cover back near $35.37.

  James Brown   3/12/200,  2:44:59 PM
just a quick observation but LMT looks like a short if it breaks support at $44.00. The stock is failing to bounce with the rest of the market today.

  Linda Piazza   3/12/200,  2:39:35 PM
Today's OEX climb is narrowing, reforming on that five-minute chart from a flag pattern with parallel rising trendlines to a possible rising wedge with two ascending trendlines that will narrow to their apex sometime Monday morning. Since a breakdown (these are called bearish rising wedges) usually occurs sometime about 2/3 of the way into the formation, that breakdown could come anytime or at about 3:00 EST this afternoon. That would fit with the test of the mid-Keltner channel resistance and that resistance holding (if it continues to do so) and a turndown from that resistance. I'm just not sure, though, as nothing I'm seeing with the TRIN or VXO (still dropping) or advdec yet supports the idea of an imminent drop. That drop could happen at mid-channel resistance, however, so keep a watch, especially if you're in bullish positions.

  Jeff Bailey   3/12/200,  2:33:01 PM
QQQ bearish entry alert $35.40

  Jeff Bailey   3/12/200,  2:29:38 PM
day trade short alert ... QQQ $35.36 ... on a bounce back to $35.40, stop $35.48, target $35.22.

  Linda Piazza   3/12/200,  2:27:56 PM
Interested in a new career? How about as a manufacturer of rubber and leather mitts for dogs' paws? An AP article comments that a few irresponsible contractors repairing streets in cities such as New York, Chicago, and Boston have left exposed wiring beneath manhole covers and utility box covers. Dog owners and their dogs have been electrocuted while the dogs are being walked. Dogs often usually suffer the most casualties because their owners are somewhat protected by rubber and leather-soled shoes. Several dogs have died since January, and one pet owner was also electrocuted in mid-January. Apparently sales of those rubber and leather mitts for dogs have increased.

  Linda Piazza   3/12/200,  2:18:01 PM
Remember this weekly OEX Keltner chart from last Friday mentioning that the OEX was at a channel line that it had last touched in March, 2000? I've left my original annotations from last Friday on the chart: Link

  Jeff Bailey   3/12/200,  2:16:43 PM
02:00 Internals at this Link

  Linda Piazza   3/12/200,  2:07:12 PM
The OEX is now less than a point away from central Keltner channel resistance at 549.60-549.71. It should at least pause at that level (although it sometimes overshoots these Keltner channels a bit and then gets tugged back). It's only after that pause that we'll know whether a move up to the other side of the Keltner channel will be likely. As I mentioned earlier today, I think there's a better than 50/50 chance since the OEX spent so much time violating the lower Keltner channel that it will likely get slung all the way back up to the upper one, now at 554.21, but still descending. I wouldn't be surprised to see it near 552.50-553 before it's tested, if it is.

  James Brown   3/12/200,  2:03:25 PM
Hah! As if doing your taxes wasn't stressful enough I just noticed one website had a countdown clock.

Currently we have 34 days, 11 hours, and 51 minutes until April 15th.

  Linda Piazza   3/12/200,  2:00:00 PM
Reader Question: Sorry....I'm new at this. What does the 'stop running time' mean??

Response: Great question, and I'm really happy to hear from some of our newer readers. If you've observed the market for very long, you'll notice certain rhythms to the trading day. On a broad scale, you usually notice more volatility early in the morning as markets first open than you do at 12:00 EST, during the lunchtime lull, for example. No day is ever exactly the same as others, but certain rhythms do become familiar.

I noticed long ago when I was still using a broker I had to call to place orders that I was frequently giving him a call exactly at 1:45 EST. I'd call him, place my order to buy or sell, and then the market would either immediately take off my direction or turn around on a dime and head away from my direction. I can't tell you how many positions I sold at 1:45 EST for a small profit as my (then mental) stop was being hit, only to see the market reverse immediately afterward. I'm a fairly quick learner, so it didn't take too long for me to begin to notice this was a repeating pattern.

From about 1:35-1:55 EST, there's often a strong push. It may be a push higher or a push lower. If a push higher is met with immediate selling, prices getting slapped back, then the market often reverses and heads down again. Those prices couldn't be sustained, and so market participants now have that information at hand. They don't want to add to bullish positions. In the meantime, some stops were sure to be hit: either stops to sell bearish positions or stops to buy bullish ones or cover shorts. Hence, stops were run (or hit), only to have the market reverse. If there's only a brief pause and then another push higher, then the sellers weren't able to overcome the buyers, and the market often moves higher the rest of the afternoon. That push was a test to see if the markets could sustain higher prices. If a push lower is met with immediate buying, market participants will be watching closely, too, with the result either dip-buying or renewed selling.

The idea is that it's not the initial move that's so important during that push but rather the reaction to the move. I don't attribute the push to some sinister attempt by market makers to cheat us all out of our money, either, but as a legitimate test to see what the market will sustain. Well, on my better and more charitable days, that's what I attribute it to, but I'm a fairly charitable person, so most days, that's what I think.

It's always a quandary about what to do during that stop-running time of day. Do you widen your stops so that you won't get taken out only to have the markets reverse right after you are? Do you adhere to your original stop? It's usually wisest to adhere to your original stop, knowing that you can jump right back in if the market does reverse, but occasionally if the TRIN, volume patterns, known support/resistance levels or other such measures do not support a move in the direction of the push during that time of day, I might widen a stop a little. Often, I wish I hadn't.

  Jeff Bailey   3/12/200,  1:59:58 PM
Put selling a lot of put selling today. VXN.X is down 4.17% and most active QQQ options (in order) are Mar $35 puts (68k), April $35 puts (57.5k), March $36 puts (36k) and March $35 calls (28k).

  James Brown   3/12/200,  1:59:29 PM
Current OI call play EBAY is bouncing from its simple 50-dma, up 1.95% to $68.76. More aggressive players might want to use this bounce as an entry point. I'm more inclined to wait for EBAY to climb back above resistance at $70.00.

  James Brown   3/12/200,  1:57:42 PM
Current OI call play Aetna Inc (AET) is up 5.32% to $83.89 on better than twice the average volume after pre-announcing an upside surprise for its Q1 earnings. Analysts were expecting $1.53 per share but AET is now guiding in the $1.58-1.73 range.

  James Brown   3/12/200,  1:53:41 PM
A.G.Edwards initiated coverage on a handful of homebuilders. Garnering a "buy" rating are DHI, TOL, SPF, PHM and LEN. Starting with a "hold" rating are RYL, NVR, CTX, and KBH.

  James Brown   3/12/200,  1:50:39 PM
Observation... Caterpillar (CAT) and rival Deere Co (DE) are bouncing strongly today (like everything else) but CAT remains under previous support at $75-76 and DE remains under its simple 50-dma.

  James Brown   3/12/200,  1:46:23 PM
Semiconductors are enjoying a boost from Oppenheimer who has upgraded FCS, INTC, MU and BRCM to a "buy" today while reiterating their "buy" on TXN, MRVL, CY and AMD.

  Linda Piazza   3/12/200,  1:43:55 PM
I've talked about what I'm seeing on a Keltner channel basis on the OEX five-minute chart. How about more traditional methods of technical analysis? Here are a couple of things I see: Link

  James Brown   3/12/200,  1:42:45 PM
Heads up for bullish traders... Lexmark Intl (LXK) is making a move today, up 4.71% with a strong bounce off its 50-dma and the rising trendline of support. Its technicals are bullish with a fresh buy signal on the MACD. A trigger over $86.00 might work. See the chart: Link

  Linda Piazza   3/12/200,  1:41:31 PM
Careful, we're in a prime stop-running time of day.

  Linda Piazza   3/12/200,  1:20:21 PM
The OEX is still winding its way up toward mid-channel Keltner resistance at 549.64-550.

  Jeff Bailey   3/12/200,  1:13:27 PM
01:00 Internals at this Link

  Jane Fox   3/12/200,  1:10:18 PM
Economists may be stumped as to why the expanding U.S. economy isn't creating new jobs, as it did 1990s, but a survey of 55 economists shows that most agree "outsourcing" isn't the prime culprit. They believe that the movement of jobs overseas has played a role in the labor market's slow rebound but only 16% said they felt outsourcing has been a "significant" factor.

Most economists, though, remain fairly confident that job growth eventually will kick in and that the recovery will stay on course. The survey, conducted late last week and early this week, showed that they haven't reduced their economic growth forecasts for the year. The average forecasts for the annual rate of inflation-adjusted growth in gross domestic product, the nation's total output of goods and services, were unchanged from a month earlier at 4.5% for the first quarter, 4.4% for the second quarter, 4.1% for the third quarter and 4% for the fourth quarter.

  Jane Fox   3/12/200,  1:03:50 PM
MADRID (Reuters) - The Basque separatist group ETA has denied responsibility for the train bombings that killed at least 199 people, Basque public television reported on Friday, citing a message it received from the armed group.

  Jeff Bailey   3/12/200,  12:57:13 PM
I'm looking around for a trade in stocks, but having a hard time finding much.

  Linda Piazza   3/12/200,  12:54:42 PM
The OEX has again come to rest at the bottom of the shortest-term Keltner channel that I watch, again preparing to rise toward the top of that channel. However, Keltner support has spaced out beneath the OEX, so it's no longer as clear that it (and that channel) will continue traveling upward. Central Keltner resistance is joined by other Keltner resistance, between 549.77-550.22, and that's looking stronger than support right now, but there's nothing definitive either direction. Lowest Keltner support on the five-minute chart has risen to 545.49. The price pattern still looks like a bear-flag rise into resistance, vulnerable to a downside breakdown at any time. That "any time" could be in the next two minutes or early next week.

  Jim Brown   3/12/200,  12:37:28 PM
This volume is horrible. BUT, up volume is now 4:1 to down volume and advancers have risen to 4356 to only 2013 decliners. Still not breaking out the bubbly to celebrate but we will take any good news we can get. Still only 1.9B shares traded so far.

  Linda Piazza   3/12/200,  12:32:31 PM
Also in reference to Jim's post of 12:06, it's interesting that volatility and its impact on options prices can work the opposite way. I believe that it was Larry McMillan in Options as a Strategic Investment who related the anecdote that some index call holders actually profited when the markets crashed in 1987 because the volatility shot up so high. Interesting story. Although there are other books that focus more specifically on options pricing, McMillan's book is also a great resource for options traders.

  Jim Brown   3/12/200,  12:30:21 PM
In response to my earlier question about brokerage companies that do not charge fees for dormant accounts readers have responded with these suggestions.


I would check with them before transferring any account.

  Jim Brown   3/12/200,  12:28:28 PM
Today is looking a lot like yesterday with a small bounce at the open, small fade, larger bounce and then larger drop. The difference of course is yesterday we had a serious news event at 1:00 with the Al Qaeda claims to push us back over the edge. Link

  Jonathan Levinson   3/12/200,  12:27:41 PM
Readers are confirming my comments on optionsXpress and suggesting that Scottrade is also maintenance-fee-free.

  Linda Piazza   3/12/200,  12:24:32 PM
In reference to Jim's post of 12:06, I mentioned in my 12:41 post yesterday that one of my reasons for being reluctant to advise any long plays on the OEX was the "possibility that volatility will collapse on any climb, deflating options prices." That's always an issue after a steep drop.

  Jonathan Levinson   3/12/200,  12:16:16 PM
Or at least, not on a dormant account I've held with some Rydex fund in it.

  Jonathan Levinson   3/12/200,  12:15:45 PM
OptionsXpress doesn't seem to charge a fee, and provides free Prophetcharts as well.

  Jeff Bailey   3/12/200,  12:14:32 PM
12:00 Internals at this Link

  Jim Brown   3/12/200,  12:13:43 PM
I have a reader asking if I know of any brokerages that do not charge a maintenance fee for dormant accounts. He has a portfolio of stocks but does not trade. He had this account at Suretrade with no maintenance fees but they were bought out by AmeriTrade which charges a quarterly fee just to hold the account. Anybody have any suggestions? Every broker I know has a fee.

  Jonathan Levinson   3/12/200,  12:10:12 PM
Jim's reader would have been better off selling puts instead of buying calls, to take advantage of the swelling premium at the bottom of the fast drop yesterday.

  Jim Brown   3/12/200,  12:06:27 PM
You know, I picked up some OEX 550 calls at the close yesterday for 4.6 and the price has barely moved so I sold at 4.8 -- what kind of crock of s@#t is that -- does that sound right to you?

Yes, the volatility was huge, near 22.0 at the close. It has decayed to 19.40 already today. This removes premium from the price. The speed of the rebound today is so slow that no expectation premium is being built into the price. Also, buying calls at the bottom of a fast dip like that with spiking high volatility is risky as the prices have not had time to settle. Existing call holders are still clinging to the hope they will recover and the price is artificially higher than it would be once the market has traded flat for a couple hours. The rapid drop also escalates the volatility and inflates prices. Sorry.

  Linda Piazza   3/12/200,  12:04:35 PM
Here's where things get dicey on the OEX. I felt pretty comfortable with the idea that the OEX would at least test the mid-channel Keltner resistance, now at 550.64, but will it then retrace all the way to the top of the channels, currently at 555.64 or is that the limit of its bounce? If I ignore all the negative sentiment and just look at charts, then I come away with the impression that there's probably a better than 50/50 chance that the OEX will test upper channel resistance, too. (The upper channel will probably continue declining as the OEX moves up, at least for a while, so I expect upper channel resistance to be hit lower than 556.) Why do I think there's a better than 50/50 chance? Well, I don't know if I believe it today because I can't totally ignore all that negativity, but in the usual case, when the Keltner channels were violated so far to the downside and for so long, the usual reaction is to sling it back all the way to the opposite side of the channel. That's why I think the rest of the day is harder to predict than this part has been.

  Linda Piazza   3/12/200,  11:47:59 AM
Central Keltner resistance on the OEX five-minute chart has now declined to 550.73, with top Keltner channel resistance now at 555.79. If this consolidation continues, the OEX won't actually have to climb in order to test that resistance! The resistance will just decline to meet the OEX. The OEX is testing Keltner resistance now at 548.20, but stronger resistance lies at 550.02 and 550.73. Support is trying to firm beneath the OEX but it looks vulnerable to a fall down to 546.83, too.

  Linda Piazza   3/12/200,  11:28:18 AM
In my 11:13 post, I mentioned "any bounce today." Actually, a glance at the daily chart shows the possibility that a bounce, once begun, could continue past today. You don't even need to look at the chart, because common sense tells you that such deep losses accomplished so quickly might need to be consolidated. Could continue might be the operative words, however, because unless and until the OEX could move back at least above the 559.50 level, the possibility exists that such a rise was merely a measured distribution rise into resistance and was always vulnerable to a breakdown. However, if the rise is a measured distribution rise, it would likely take the form of some kind of overlapping formation, such as a bear flag or a rising wedge, with some up and some down days, perhaps taking several days to reach the strongest resistance. Again, playing the long side remains a risky business, however. If the move is more impulsive . . . well, we'd just have to see.

  Jim Brown   3/12/200,  11:27:34 AM
The weak internals continue to be a problem for today's market. After a prolonged bout of selling like we have had this week traders want to see a strong recovery. To convince them the selling is over they want to see aggressive buying, 2:1 advancers to decliners or better. Strong volume and strong up volume of at least 3:1 or 4:1. They want to see improving internals as the day progresses. So far today we are not seeing a convincing balance to those factors. Up volume is 3:1 over down and that is good but volume for the day across ALL markets is only 1.3B, very light. Advancers are slightly less than 2:1 over decliners which is ok but the light volume suggests a possibility of future weakness here. More than anything else there is no aggressive buying. If anything we are only seeing a little bargain hunting and no real conviction.

  Jeff Bailey   3/12/200,  11:21:39 AM
Bearish day trade stop alert .... QQQ $35.34.

  Linda Piazza   3/12/200,  11:19:16 AM
The TRAN continues to climb and is currently at its high of the day, at 2828.74.

  Jeff Bailey   3/12/200,  11:14:35 AM
11:00 Internals at this Link

  Linda Piazza   3/12/200,  11:13:41 AM
The downside target on the OEX H&S on the three-minute chart has not yet been met. The OEX again tests the neckline. On the five-minute Keltner chart, support lines are again snaking below the current OEX level. This thing is trying to rise, but the formation of this H&S shows me some underlying weakness. That still supports the thesis that any bounce today would likely be a countertrend bounce.

  Linda Piazza   3/12/200,  11:10:06 AM
I know we have some new subscribers and maybe some are wondering how to calculate downside targets for H&S formations. Here's a chart: Link (Note: This is not an up-to-date chart. I've scrolled back to the point at which the neckline break occurred.)

If you have a Fib retracement tool on your charting service, you don't even have to make the calculations. Here's the first step: Link Here's the next step: Link

  Jeff Bailey   3/12/200,  11:02:13 AM
Randgold Res. (GOLD) $18.13 -3.51% ... this thinly traded gold miner continue to get pounded.

  Jeff Bailey   3/12/200,  10:59:53 AM
AMEX Gold Bugs ($HUI.X) 216.39 -2.96% ... session lows and breaking below an upward trend from the 02/02/04 relative low of 207.75. to recent pullback low found on 02/03/04 of 215.81.

  Linda Piazza   3/12/200,  10:55:20 AM
The actual downside target for the miniature H&S on the OEX three-minute chart is about 544.08, slightly above yesterday's low and closer to this morning's opening level. The setting up of the formation shows us weakness, the confirmation of the formation by a neckline break confirms the weakness, and now the meeting/not-meeting of the downside target would show us more about weakness and strength. The neckline now crosses at about 546.50, so the OEX might rise up to retest that neckline before continuing any decline, if it's going to fall further.

  Jeff Bailey   3/12/200,  10:51:47 AM
Day trade lower stop alert .... for QQQ $35.18 +0.88% to $35.34

  Linda Piazza   3/12/200,  10:48:16 AM
The OEX is slipping below Keltner support, either overshooting it a little or else preparing to dive again. There's now a miniature well-formed H&S on its 3-minute chart, with a neckline break having been confirmed, suggesting that support will not hold. The downside target is near yesterday's low.

  Jeff Bailey   3/12/200,  10:46:24 AM
Forest Labs (FRX) $69.40 -4.67% .... now news I can find to explain today's trade lower.

I do like the FRX $70 call LEAPS at current levels

Disclosure: A family member of mine (brother) is an employee of FRX

Quick check of Max Pain for March expiration shows $70.00

  Linda Piazza   3/12/200,  10:44:34 AM
Yesterday's inverted umbrella candlestick on the TRAN (long upper shadow, small real body) could serve as a possible reversal signal. Today, the TRAN rises again, trying once again to push above and maintain levels above the early February low. Daily oscillators try to turn up again with RSI already pushing above the level indicating oversold conditions, but with stochastics having made a bullish kiss without having yet turned fully higher. MACD has yet to have produced a bullish cross and histogram levels are near the flat-line level, but higher than they were earlier this week. It looks as if a bounce might be beginning, but we should now be skeptical of any such bounce, watching for a possible failure at the phalanx of MA's moving down toward 2875 or from the former supporting trendline of its symmetrical triangle, with that trendline in the same area.

If the TRAN continues today's bounce, it throws that whole H&S theory into question. Yesterday, the TRAN broke through the neckline of that H&S, but a glance at the weekly chart shows the current bounce leaving only a shadow below that neckline with the weekly candle forming (so far, depending on today's close) entirely above the neckline. I tend to trust the weekly view more than the daily one, so think that we have to wait to see what happens at the end of the day, and also as a bounce tests broken support. If the TRAN should close near its current position, the weekly view would be that there's a potential H&S that hasn't yet been confirmed--so a bearish outlook without confirmation coming yet.

  Jeff Bailey   3/12/200,  10:36:01 AM
10:00 Internals at this Link

Yesterday's Internals at this Link

  Jeff Bailey   3/12/200,  10:30:57 AM
S&P Banks Index (BIX.X) 349.16 +0.58% ... session high has been 350.14.

QQQ $35.25 here.

  Linda Piazza   3/12/200,  10:28:30 AM
So far, five-minute Keltner support is holding on the OEX, with the OEX having retraced nearly to the bottom of its shortest-term Keltner channel on my charts and looking ready to rise again, perhaps after slipping a little further, to about 545.90. We'll see, as its rising channel is a possible bear-flag formation, so any rise must be viewed as vulnerable to breaking down out of that flag. It's still possible that the OEX will retrace to mid-channel resistance, just below 552 but dropping. That retracement would bring the OEX up to retest the 72- and 78-ema's that Jim and I watch.

  Jeff Bailey   3/12/200,  10:14:00 AM
Day trade lower stop alert .... QQQ $35.27 ... lower stop to $35.43.

  Linda Piazza   3/12/200,  10:13:19 AM
The OEX five-minute chart show Keltner lines now snaking beneath the current OEX position, offering support between 546.25-546.30 as I type. (They can change quickly.) The shortest-term channel has turned up again, slanting up toward mid-channel resistance, currently at 552.16 and the top of the channel, currently at 557.54. Resistance lines are thinning out while support lines are grouping together, as sometimes happens when support is temporarily stronger than resistance. Resistance lies at 548.60-549.19 and then much stronger at 551.83-552.17 and then at 557.54. Of course, we saw that short-term channel slant up yesterday and the OEX look as if it was going to bounce, only to have it fall through the floor. That's what I mean when I say that during any bounce there's going to be vulnerability to the downside. So far, though, the OEX looks as if it's in bounce mode this morning, heading up to at least test that mid-channel resistance.

  Jeff Bailey   3/12/200,  10:12:43 AM
S&P Banks Index (BIX.X) 350.05 +0.84% ... testing WEEKLY S2 of 350.06 as resistance here. If the BIX.X breaks higher, could see another lift for the major indices on intra-day basis.

  Jeff Bailey   3/12/200,  10:10:18 AM
AMEX Gold bugs ($HUI.X) 218.77 -1.88% .... the Q4 Current Account number wasn't friendly to the gold bugs.

  Jeff Bailey   3/12/200,  10:08:39 AM
QQQ .... $35.35 .... post-Michigan low has been $35.33, and finding some DAILY R1 support.

  Linda Piazza   3/12/200,  10:06:06 AM
A couple of weeks ago, I suggested the possibility that KO might be getting ready to bounce from the $48.40 level, but that such a bounce might be a countertrend bounce up to form a right shoulder in a possible H&S. I suggested that KO might find resistance near $51.00, the right-shoulder level. The bounce came, from just above $48.50, and the resistance held, with KO reaching a high of $50.60. I further suggested that it might take several weeks for KO to form that right shoulder, since the left shoulder had required several weeks to form and there's often some symmetry in the shoulder formations. However, yesterday, KO dropped through the neckline of the possible H&S, with that neckline now at about $48.50. Now the right shoulder appears so truncated, however, that it's difficult to tell whether KO just overshot a support level yesterday afternoon. Weekly oscillators support the idea that KO might see much more downside, but that weekly chart also points out a nearly year-long consolidation band from about $44-50, with that band forming in 2001. The weekly chart also shows KO approaching a trendline off the March 2003 low, with that trendline now at about $47.25. I had thought that a weeks-long consolidation at the right-shoulder level would allow that rising trendline to come up under KO, so that a neckline break and a trendline break would come at the same time, but yesterday's sell-off prevented that from happening.

Now, the truncated right shoulder and the still-not-breached long-term trendline leave me in a quandary. Is the H&S valid? Can we safely look to the downside target? Or is KO likely to bounce from that trendline or from the 200-dma just below it at $46.80 and maybe head up to finish forming that right shoulder? I tend to believe that second possibility is what may happen, but with likely resistance near $51.00 and with that incipient H&S on that chart, I don't know that I'd play the long side here on any potential bounce. KO can do some wild maneuvering for a staid old stock, especially near opex week.

  Jeff Bailey   3/12/200,  10:04:58 AM
QQQ since Mich. Sentiment, not seeing much giveback of early gains. May pressure some bears intra-day that may be thinking "it will backfill its gap" to $34.93 if strength lingers another hour.

  Jeff Bailey   3/12/200,  10:02:55 AM
NASDAQ-100 Volatility Index (VXN.X) 25.88 -2.63% .... Today I'm going to be looking for any unusual, or heavy volume action in the March contracts.

If I see VXN.X lower and heavy $35 put trade, with some March $36 call, might get a little suspicious for a rally into expiration of $36.00

  Jeff Bailey   3/12/200,  9:59:56 AM
QQQ $35.35 +1.37% .... session high after short entry has been $35.42.

  Jonathan Levinson   3/12/200,  9:58:49 AM
9B in overnight repos expired today, and was replaced by 9B in 6-day repos. There's still room for a short term repo to be added next, so I'll keep an eye on it.

  Jeff Bailey   3/12/200,  9:55:16 AM
Day trade short alert .... QQQ $35.38 here, stop $35.53 (ahead of sentiment) with target back at $35.06.

  Jonathan Levinson   3/12/200,  9:54:52 AM


  Jeff Bailey   3/12/200,  9:53:52 AM
QQQ ... intra-day chart with 5-MRT, and since we saw a gap above MONTHLY S2 and DAILY Pivot, I've stacked an upside 5-MRT in Pink. Link

  Jim Brown   3/12/200,  9:51:33 AM
Michigan Sentiment = 94.1 , est was 94.5

  Jonathan Levinson   3/12/200,  9:45:11 AM
Awaiting the U-Mich data.

  Linda Piazza   3/12/200,  9:44:12 AM
As the markets enter the time of the usual first reversal, the OEX faces first strong Keltner resistance, from the current level up to 548. Support is at 546.51 and 545, at least on a Keltner basis.

  Jeff Bailey   3/12/200,  9:43:27 AM
QQQ $35.27 +1.17% ... I see 5-mrt RED #3 at $35.05, which would be intra-day correlative with MONTHLY S2 and DAILY Pivot of $35.07, so this would be an early intra-day support level right now. BLUE #3 is at $35.32, which is correlative with DAILY R1.

  Linda Piazza   3/12/200,  9:35:09 AM
During the first five minutes of trading, the OEX spanned a range from 544.16 to 546.82.

  Jeff Bailey   3/12/200,  9:34:21 AM
QQQ $35.20 +0.91% .... I'm going to look for a day trade short setup if the QQQ will come up to the DAILY R1 of $35.33, where a target of MONTHLY S2 $35.06 and DAILY Pivot of $35.07 gives some room for profit.

  Jeff Bailey   3/12/200,  9:23:08 AM
09:00 Update at this Link

  Jonathan Levinson   3/12/200,  9:18:27 AM
ES and NQ are hitting descending upper 30 minute Keltner channel resistance. If bulls can just hold these levels through the cash open, we should see the channels begin to turn back up. YM has to make it to 10220 before reaching channel resistance. Recall that we're using the June M4 contracts.

  Linda Piazza   3/12/200,  9:08:29 AM
For the last several weeks, I've been noting that the OEX weekly chart and daily chart perhaps presented different pictures of the OEX, with the daily chart looking much more bearish than the weekly. The weekly depicted a series of small-bodied candles printing just above the 38.2% retracement of the bear-market decline. Those candles were small-bodied candles looking as if their hold on that support level was a precarious one. However, the OEX had a history of sideways consolidation over the last year, and if the OEX could hold above that level while oscillators cycled down, it might be able to start another leg up. I noted that such consolidation usually set up for 10-12 weeks, but suggested Monday that it looked as if the breakout, whichever direction it was going to occur, might come at any time based on what I was seeing on the daily chart. The triangle consolidation on that daily chart was narrowing and OEX moves were spanning the entire width each day, with trading beginning to appear more emotion based, as sometimes happens before a breakout.

The breakout came, with the OEX breaking through the confirmation level of the double-top formation and setting up a downside target of 541-542. I'd expected the 72-ema, near 553 yesterday, to at least provide a pausing place if not a place from which a bounce would begin, but that pause was of a few hours' duration only as the OEX traded back and forth across that average. Because December's rise was so steep, the OEX never did much backing and filling, establishing possible support levels at which bulls might feel comfortable stepping back in, so the drop has been precipitous. The volatility indices have broken out, with the VIX closing yesterday above 20, hinting that this could be the beginning of a new leg down in the markets, particularly frightening when you step back and realize that in the OEX's case, at least, this index has not been able to maintain a 38.2% retracement of the bear-market decline, much less a 50% retracement that would mark a new bullish phase. This isn't new information, but information many of us have worried over incessantly (and boringly?) over many months, and now we have to turn to that weekly chart again to see where strongest support might lie.

The 541-542 downside target of the double-top formation must be the first consideration of possible support, and the OEX paused its drop just ahead of that downside target yesterday. There is some slight historical S/R in that area, built up in the spring of 2002. An ascending trendline off last August's low now crosses at about 534-536, depending on how the line is drawn, but strongest historical support is in the 527-530 range. Will it hold if the OEX should plunge that far? There's no way to be sure, as this week's candle has already broken through a longer-term (but admittedly steeper) trendline off the March low.

Below 527-530, things get uglier because that will signal a failure of first strong support, but support does come in more frequent ranges and any descent should slow. The OEX did its work while it was climbing through those lower ranges, doing enough backing and filling to produce points at which bulls might feel comfortable stepping in. RSI, always the first to react and often a leading indicator, has already rolled down into full bear mode on the weekly chart, but 21(3)3 stochastics haven't yet been tugged out of territory indicating overbought conditions, and so are still trending, despite this week's ugly bearish candle. MACD has made a bearish cross, but from above signal and it hasn't really hooked down.

I'm not too discouraged yet, although I'm cautious by nature and have been voicing my cautions for a while, particularly when the TRAN failed to confirm the Dow's new February high, having plummeted. That was a clear sign that something was rotten in Denmark. That December climb in the markets was just unsustainable and a pullback was needed. We've all been saying so, frankly stumped when indices just kept climbing and climbing and climbing against all odds. Now we're getting that pullback and it seems excessive because there's so much ground to be retraced. The markets tried to cut corners and that never works. It's got to go back and re-do things a bit. Now we have to reserve judgment until we see what happens.

But what about today? Unfortunately, I have the same warning I had yesterday, for an event that never materialized: all intraday charts show the OEX deeply oversold and in danger of a bounce, but such a bounce would be a countertrend one and one I wouldn't recommend trading it. Despite my feeling that the more oversold the OEX gets, the more likely it is to be catapulted to the other extreme (which would be 552.65 or 558.05 now, on a Keltner chart basis), vulnerability to another quick drop would exist the entire time. My advice is the same as yesterday then: those in bearish positions should protect profits by following the OEX down with their stops. Only the most aggressive traders should be considering longs, and they should do so only if basing their entries on a trigger point that can be identified so that they can quickly exit if it is breached again, and only if they trust themselves to exit. Not my kind of play. Yesterday, I put up a chart identifying several such trigger points, including the 72-ema I watch and the 78-ema Jim does. Those following those trigger points might have entered a long only to be quickly stopped when the OEX fell below the 78-ema again.

  Jonathan Levinson   3/12/200,  8:32:19 AM
U.S. Q4 current account gap falls to $127.5 billion

  Jonathan Levinson   3/12/200,  8:30:15 AM

Inventories +.1%

  Jonathan Levinson   3/12/200,  8:09:36 AM
The PPI won't be released again today. We await business inventories at 8:30, est +.3%, the Current Account for Q4, est. 136.2B, and at 9:45, Preliminary Michigan Sentiment, est. 95.

  Linda Piazza   3/12/200,  7:20:38 AM
Good morning. The Nikkei opened more than a hundred points underwater, flopped around in the morning session, and then plummeted again when the afternoon session opened. During the early part of the afternoon session, it fell to 11,045.94, more than 250 points below Thursday's close, but it spent the afternoon climbing and halving those losses. It closed down 134.29 points or 1.19%, at 11,162.75. A five-day chart shows the Nikkei declining steadily all week, following a descending trendline down.

Almost all sectors traded lower in the aftermath of Spain's terrorist attack, weak U.S. markets, and a downward revision in January's Japanese industrial production number, down to 3.3% from the previous 3.4%. Even the banking sector finally succumbed to profit-taking just after some banking stocks bucked the downward trend yesterday and hit new yearly highs, with the four major banks each dropping today more than 3%. Airlines fell on fears that consumers would curtail travel plans in the wake of the newest terrorist attack. Automakers traded lower. Not even Toyota's plans to sell hybrid versions of Camry, joining other hybrids Toyota plans to introduce over the next year, including a hybrid Highlander SUV, could build any excitement. Although International Data Corp said PC shipments should increase more than 11% this year and next, many PC makers still declined. Most tech stocks fell, some hit by the broad sector losses and some by specific news. Sony declined after its Sony Ericsson mobile phone joint venture lost market share in 2003, down to 5.1% from the previous year's 5.4%.

Other Asian bourses turned in mixed performances, but most of the ones we typically watch declined. The Taiwan Weighted fell 1.15%. With South Korea's parliament impeaching President Roh Moo-hyun for election law violations, the Kospi declined 2.43%. Singapore's Straits Times fell 0.69% and Hong Kong's Hang Seng fell 0.71%. China's Shanghai Composite gained 0.18%, however.

Most European bourses trade lower this morning, too, although the ones we typically watch have moved off their day's lows. Headlines proclaim that the techs are responsible for pulling the European bourses off those lows. One reason for the tech improvement might be STMicroelectronics' announcement that it would increase its dividend by 50%, but Oracle's reassuring guidance this week coupled with SAP's upbeat outlook during a road show last week also helped. Other stock-specific news saw Swiss drugmaker Novartis dropping after the management confirmed it had considered becoming Aventis's white knight, saving it from a hostile bid from Sanofi-Synthelabo, although the company told a French market regulator that it hadn't made a decision yet.

The early declines in Europe came as January's French industrial production surprised to the downside, falling 0.5% when a rise was expected. Yesterday, ECB member Erst Welteke added to the gloom engendered by the attack on Spanish commuters by worrying that economic deterioration might be a more likely event than economic improvement.

As of this writing, the FTSE 100 is down 9.20 points or 0.21%, at 4436.00. The CAC 40 is down 15.47 points or 0.42%, to 3630.96. The DAX is down 31.95 points or 0.82%, to 3873.00. As of this writing, Spain's Madrid General is down 1.36%.

  Jeff Bailey   3/11/200,  1:27:58 AM
Per my 23:07:10 post ... I'm making note of today's (FRIDAY) SPX DAILY S2 of 1,092.78.

Could it be that the recent late session selling is largely an influence of computers selling stock in the final hour to get things "squared up" before the close as they manage inventory? Is 1,092.78 some type of pre-defined destiny tomorrow?

If you or I am an options market maker, how can I try and "mess with retail traders" an influence their options trade? Get you to buy a March or April contract on Friday, get some time decay over the weekend, the get your recent purchase in a losing position real fast and get you to close it out for a loss, or hang onto a March contract that expires in just a few days and watch it go poof?

Best way I can think is to get their emotions running high. Maybe get a little rally going early, then let the "bottom fall out" then take it back higher into expiration?

  Jim Brown   3/11/200,  11:42:39 PM
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  Jeff Bailey   3/11/200,  11:07:10 PM
Last look at my e-mini March futures contract with fitted retracement. Looks like Jim and Keene looking for some support around the 1,090 level. Link

  OI Technical Staff   3/11/200,  10:51:31 PM
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