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Jeff Bailey : 2/22/2006 1:38:32 AM

PREM / OEX/ XOM chart montage from Friday at this Link (in addition to 12:51:58) ... Not a big move from XOM during Friday's "sell program premium," but the stock's price was impacted. XOM is currently #1 market capitalization in OEX. Then GE, MSFT, C, PG, WMT, PFE, JNJ, AIG, MO.

Jeff Bailey : 2/22/2006 12:51:58 AM

Question: ...Hi Jeff:

I recently subscribed to MM and would like to know how I can better understand how program trading and fair value for S&P could help me - a small options trader - in better decision making.

E.g. today, options expiration Friday, how would I use the following info posted at the HL Camp website, to trade the S&P or OEX? Perhaps this info is more relevant to the big traders and not relatively new or small traders like me?

For Friday, HL Camp had Fair Value for the SPX at $+2.39. Their computers were set for program buying at $+3.67 and set for selling at $+1.09.

Reply:

I believe it is important for all traders, big and small, to have a general understanding of Fair Value (what it is, how it is calculated), for this is a building block for then comprehending how a buy, or sell program PREMIUM is generated.

In SIMPLISTIC terms, a buy/sell program PREMIUM is simply an alert to index arbitrage between the cash (SPX.X) market and futures market (S&P 500 December, March, June, September) depending what the current month futures are (at the time of this writing, March is the current month futures contract).

Many day traders will use the information from buy/sell program PREMIUMS to be alert to what BIG MONEY is doing.

Should "new or small traders" be concerned?

ONLY if we care what BIG MONEY is doing.

For the most part, but NOT the ONLY PART, traders use the buy/sell program premiums for DAY TRADING. Swing traders may ALSO use the buy/sell program premiums for entry/exit points.

I had closed out an OEX 585 NAKED CALL play on Thursday. Here's an example of how a late session SELL PROGRAM PREMIUM (only buy/sell premium of the day), combined with conventional WEEKLY Pivot Levels had that OEX 585 finishing "no bid." $PREM.X (top), OEX.X (middle), OEB-BQ (bottom) Link

Jeff Bailey : 2/21/2006 11:15:32 PM

Program Trading Levels for Wednesday ... HL Camp & Company has their computers set for program buying at $+3.12 and set for program selling at $+0.69.

Wednesday's Fair Value for the S&P 500 is $2.01.

What is "Fair Value?" Link

OI Technical Staff : 2/21/2006 9:59:59 PM

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Jeff Bailey : 2/21/2006 5:20:22 PM

Current OPEN MM Profiles found at this Link

Today's Activity ... swing trade bullish for the Sunoco SUN Aug $85 Calls (SUN-HQ) at $6.50. No stop at this time and targeting $114.

Jeff Bailey : 2/21/2006 4:47:06 PM

Closing Internals found at this Link

Jeff Bailey : 2/21/2006 4:36:05 PM

Closing U.S. Market Watch found at this Link

Jeff Bailey : 2/21/2006 4:24:46 PM

02:12 PM EST Temperatures with March Nat. Gas and Heating Oil futures settlements at this Link

March Unleaded settled down 1.79% at $1.4757.

March Crude Oil settled up 2.04% at $61.10.

June Unleaded settled down 0.14% at $1.6823

June Crude Oil settled up 2.12% at $64.49.

Jane Fox : 2/21/2006 4:04:43 PM

Dateline WSJ President Bush said Tuesday that the deal allowing an Arab company to take over six major U.S. seaports should go forward and that he would veto any congressional effort to stop it.

"After careful review by our government, I believe the transaction ought to go forward," Mr. Bush told reporters who had traveled with him on Air Force One to Washington. "I want those who are questioning it to step up and explain why all of a sudden a Middle Eastern company is held to a different standard than a Great British company. I am trying to conduct foreign policy now by saying to the people of the world, 'We'll treat you fairly.'"

Jonathan Levinson : 2/21/2006 3:39:14 PM

QQQQ's short cycle has enterest overbought but might have room to run further. 30/60 min channel resistance line up at 41.95 currently. Link

Jeff Bailey : 2/21/2006 3:24:22 PM

Current OPEN MM Profiles found at this Link

Jeff Bailey : 2/21/2006 3:17:58 PM

03:00 Internals found at this Link

Jonathan Levinson : 2/21/2006 3:12:27 PM

Volume breadth is up to -1.35:1 on the NYSE, -3.25:1 on the Nasdaq.

Jonathan Levinson : 2/21/2006 3:10:18 PM

Session low for ten year bonds here at 107 29/32 as QQQQ pokes above the 72 SMA for the first time today. The short cycle indicators are rising toward oversold, but so long as the price holds above 40.72, the intraday bias favors teh bulls. Link

Jeff Bailey : 2/21/2006 3:04:18 PM

03:00 Market Watch found at this Link

Jonathan Levinson : 2/21/2006 2:49:40 PM

Another test of the 72 SMA here from below: Link . Still no traction in the short cycle upphase, however.

Jonathan Levinson : 2/21/2006 2:27:56 PM

Volume breadth down to -1.5:1 on the NYSE, -3.4:1 on the Nasdaq, still a tale of two markets.

Jeff Bailey : 2/21/2006 2:13:34 PM

Federated Dept. Store (FD) $70.53 -1.53% Link ... Retailer reported net income of $699 million, or $2.52 a share. EPS from continuing operations, excluding merger costs (from May Dept. Stores), was $2.74, which was well above analysts' forecast of $2.62.

Revenue climbed 87% to $9.57 billion.

Jonathan Levinson : 2/21/2006 2:13:23 PM

QQQQ still struggling below 72 SMA resistance: Link

Jonathan Levinson : 2/21/2006 2:03:23 PM

Headlines:

FOMC unanimous in decision to hike rates on Jan. 31

FOMC: Some members saw core inflation as too high

FOMC still concerned about upside risk of inflation

FOMC: Future rate path can't be prejudged

FOMC: Economy likely to "bounce back" from weak Q4

FOMC: Staff forecasts some rise in core inflation in '06

FOMC to discuss delinking statement from vote on policy

Jonathan Levinson : 2/21/2006 2:01:22 PM

Fed minutes at this Link

Jeff Bailey : 2/21/2006 1:56:43 PM

Home Depot (HD) $41.95 +0.21% Link ... Dow component and home-improvement retailer posted quarterly net income of $1.29 billion, or $0.60 a share, which was $0.04 above consensus. The company said sales rose a higher-than-expected 16% to $19.49 billion. Company's CFO said he sees fiscal 2006 revenue rising 14%-17%.

Jonathan Levinson : 2/21/2006 1:55:17 PM

Volume breadth -1.2:1 on the NYSE, -3:25:1 on the Nasdaq.

Jonathan Levinson : 2/21/2006 1:45:20 PM

Another attempted short cycle upphase here off the low- 72 SMA resistance is down to QQQQ 40.80, a break above which would be the first of the day and a confirmation of a new short cycle upphase. Link

Jeff Bailey : 2/21/2006 1:37:26 PM

Wal-Mart (WMT) $45.64 -0.99% Link ... World's largest retailer said it earned $3.59 billion, or $0.86 a share, helped by higher sales and a $103 million tax benefit, which boosted earnings by $0.02 a share. Consensus was for $0.83 a share.

Wal-Mart said Q4 sales rose 8.6% to $89.27 billion.

The retailer forecasted full-year earnings below Wall Street forecasts with company saying interest expenses will be as much as $500 million higher in 2006 than 2005.

Jonathan Levinson : 2/21/2006 1:23:20 PM

Volume breadth -1.2:1 on the NYSE, -3.3:1 on the Nasdaq.

Jeff Bailey : 2/21/2006 1:14:29 PM

01:00 Internals found at this Link

Jonathan Levinson : 2/21/2006 1:09:37 PM

Foreing central banks took 8.8B of today's 38B treasury auction. The 13- week bills set a high-rate of 4.45% yielding 4.563%, the bid-to-cover 2.16. The 26-week bills set a high-rate of 4.545% yielding 4.716%, the bid-to-cover 2.05.

Jeff Bailey : 2/21/2006 1:03:16 PM

01:00 Market Watch found at this Link

Jonathan Levinson : 2/21/2006 1:01:53 PM

QQQQ bonked its head on the 72 SMA, back to just below Wednesday's low. The 30 min keltner channel has support at 40.60, the short cycles again rolling over prematurely. Link

Jonathan Levinson : 2/21/2006 12:39:45 PM

Volume breadth -1.2:1 on the NYSE, -2.8:1 on the Nasdaq.

Jeff Bailey : 2/21/2006 12:21:05 PM

June Unleaded PnF chart from Dorsey/Wright at this Link ... Today's floor trade high at NYMEX has been $1.716, so I've charted X to $1.71.

Jonathan Levinson : 2/21/2006 12:19:35 PM

The Fed has announced a coupon pass, more permanent monetization of debt, today's operation in the amount of 1.248B.

Jonathan Levinson : 2/21/2006 11:50:40 AM

So much for QQQQ's short cycle upphase, stalling here below overbought as the wavelet runs lower. Bears need a break of the session low- bulls need a higher low: Link

Jeff Bailey : 2/21/2006 11:26:48 AM

Current OPEN MM Profiles found at this Link

Jonathan Levinson : 2/21/2006 11:25:35 AM

Tomorrow's 4-week treasury auction will be in the amount of 19B, raising new cash of 7B- effectively a net drain to the markets. Currently, TNX +1.8 bps to 4.559%, IRX +2 bps to 4.447%. This week's 13- and 26-week bill auction will be announced at 1PM today.

Jeff Bailey : 2/21/2006 11:19:52 AM

11:00 Internals found at this Link

Friday's Internals found at this Link

Jeff Bailey : 2/21/2006 11:02:39 AM

11:00 Market Watch found at this Link

Jonathan Levinson : 2/21/2006 10:58:31 AM

QQQQ's wavelet bounce off the low is maxxing out here, just starting to turn up the short cycle indicators on a new buy signal. Bulls need to regain 41.00 for starters, but the 30/60 min channels remain bearish below the 72 SMA currently at 41.20. Link

Jonathan Levinson : 2/21/2006 10:41:24 AM

Crude oil down to a .90 gain here at 62.20, off a high of 62.90.

Jeff Bailey : 2/21/2006 10:41:03 AM

Sunoco (SUN) $78.59 +1.93% ... updated daily interval bar chart at this Link

Jonathan Levinson : 2/21/2006 10:39:10 AM

Volume breadth is down to -1.1:1 on the NYSE, -2.25:1 on the Nasdaq.

Jeff Bailey : 2/21/2006 10:34:34 AM

Bullish swing trade call filled alert ... with SUN $78.60 +1.93% ... filled on the SUN-HQ $6.50

Jonathan Levinson : 2/21/2006 10:28:26 AM

QQQ blows through Wednesday's low, but still could throwunder and bounce back- at current levels, buyers from Wednesday through Friday are under water. Link

Jeff Bailey : 2/21/2006 10:16:31 AM

Sunoco (SUN) option montage at this Link ...

Jonathan Levinson : 2/21/2006 10:13:44 AM

Next QQQQ support appears at Wednesday's low, in the 40.78-.80 zone: Link

Jeff Bailey : 2/21/2006 10:12:54 AM

Bullish swing trade call alert for one (1) of the Sunoco SUN August $85 Calls (SUN-HQ) for $6.50. Currently bid/offer $6.80 x $7.10.

SUN $79.60 +3.24%.

Jonathan Levinson : 2/21/2006 10:08:51 AM

Tale of two markets, volume breadth +1.44:1 on the NYSE, -1.7:1 on the Nasdaq.

Jonathan Levinson : 2/21/2006 10:05:27 AM

QQQQ fails at gap support, the short cycle downphase starting to trend in oversold. Volume breadth down to -1.55:1 on the Nasdaq: Link

Tab Gilles : 2/21/2006 10:05:10 AM

Murphy Oil (MUR) Watch 200 -mas. Follow up to 2/13 12:36PM post. Link

Jonathan Levinson : 2/21/2006 10:02:29 AM

LEI +1.1% vs. .5% exp., prior revised from .1% to .3%.

Jeff Bailey : 2/21/2006 10:01:39 AM

Continuous Unleaded vs. Continuous Oil at this Link ... Gets a relative strength "buy signal." Near-term positive for the refiners.

Jonathan Levinson : 2/21/2006 9:57:50 AM

Awaiting Leading Indicators in 2 minutes, est. .5%.

Jeff Bailey : 2/21/2006 9:57:07 AM

Oil Service HOLDRs (AMEX:OIH) $141.27 +3.50% Link ... strong out of the gate.

VLO $56.45 +3.59% Link

SUN $79.88 +3.60% Link

Jonathan Levinson : 2/21/2006 9:56:01 AM

The Fed announces a 7.75B overnight repo with no expiries, for a net add in that amount. The stop out rate held at 4.47%, 3 bps below the overnight target rate.

Jonathan Levinson : 2/21/2006 9:53:18 AM

QQQQ breaks below Thursday and Friday's low, testing gap support here. Link

Jonathan Levinson : 2/21/2006 9:39:04 AM

Volume breadth +1.66:1 on the NYSE, +1.25:1 on the Nasdaq.

Jonathan Levinson : 2/21/2006 9:37:34 AM

QQQQ retesting Friday's low here. Link

Jonathan Levinson : 2/21/2006 9:31:29 AM

QQQQ's 72 SMA is at 41.37, 30/60 min channel resistance at 41.48-.51, support at 41.20.

Jonathan Levinson : 2/21/2006 9:22:40 AM

QQQQ's 30 and 60 min cycles are turning up from overbought territory, within what is so far a hesitant daily cycle upphase. Bulls need a break of last week's high to get it moving, and so today's combined 30/60 min cycle upphases are key. I will update the intraday levels when they refresh at the bell.

Jeff Bailey : 2/21/2006 9:21:02 AM

Program Trading Levels for Tuesday ... HL Camp & Company has their computers set for program buying at $+3.18 and set for program selling at $+0.94.

Jonathan Levinson : 2/21/2006 8:49:57 AM

Bonds hold their fractional losses, TNX quoted +.2 bps at 4.543%, flatter against IRX which is up 1.5 bps to 4.442%.

Jonathan Levinson : 2/21/2006 7:33:05 AM

Equities are up, ES trading 1293.25, NQ 1684.5, YM 11160 and QQQQ +.1 to 41.31. Gold is up 1.70 to 556.30, silver is +.111 to 9.525, ten year notes are down 3/64 to 108 1/16, crude oil is up 1.275 to 62.575 (basis April contract), and natgas is up .175 to 7.355.

We await the 10AM release of LEI, est. +.5% and at 2PM, the FOMC minutes from the January 31 meeting.

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