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Jim Brown : 10/27/2006 12:31:49 AM

Reader Challenge - If I missed anyone please email me ASAP. Several needed further qualification and I have emailed the reader asking for instruction. If your play is not here check your email.

Good luck to everyone and I am looking forward to watching these plays progress.

If anyone has any questions about any of these plays just email me (jim@optioninvestor.com) and I will try to answer.

Jim Brown : 10/27/2006 12:28:10 AM

Reader Challenge Play from reader JB

BUY TIE NOV 30 CALL TIE-KF

Timet is a manufacturer of titanium and specialty metal products. ATI, another company in their sector blew away earnings on Wednesday. Earnings of $1.58 compared to .87 in the prior year and 1.36 estimate by analysts. TIE has heavy insider buying and will report earnings sometime in the next week.

I can't find the exact date but it should be any day. With TIE at 32 the 35 call is too far out of the money for me. I would rather buy the ITM call and get full delta.

Jim Brown : 10/27/2006 12:27:50 AM

Reader Challenge Play from reader DW

BUY CME NOV 480 PUT CNM-WP

Due to extreme overbought condition across all markets as well as a possible sell the news event post FOMC I believe the markets as well as most stocks will have some profit taking/corrections.

CME posted good earnings on Tuesday, but not blow out. Prior earnings have resulted in sell offs rather than rallies. That in combination with the stock at or above most analysts price targets, and a planned acquisition of CBOT (BOT) could put downward pressure on the stock. In addition, the recent breakout of previous all time highs around the $508 level was reversed with rather large volume back below the break out point. Stock has been weak relative to other issues the last couple of days and had increasing selling volume into the close on Wednesday after the FOMC meeting.

Initial target of approximately $450-$455, with a possible target of even $420-$425 depending on the severity of the market pullback.

Jim Brown : 10/27/2006 12:27:33 AM

Reader Challenge Play from reader SB

BUY PCU NOV 50 PUT PCU-WJ

Despite strong copper prices PCU has been hit with a month long strike at Mexico's largest copper mine, Cananea, and a 3-month strike at another mine called La Caridad. Both are now over but the impact should hit their Q3 earnings due out any day now.

Jim Brown : 10/27/2006 12:27:13 AM

Reader Challenge Play from reader JS

BUY AMZN NOV 40 PUT ZQN-WH

The Amazon earnings bounce was way out of proportion to the news and was prompted by surprised short sellers scrambling to exit their shorts on the surprise beat. Earnings continue to slow while sales are growing. You can't be everything to everybody and make a profit. $19 million in profits, down from $30 million in Q3-2005, is not very much profit when compared to the $2.31 billion in sales. That is .008%.

Eventually Amazon is going to fail and the +$6 bounce this week is going to be a tempting target if the market rolls over. $39 is strong resistance and a possible failure point. I am using the in-the-money November puts to get 100% of any decline while my risk is only $2.15 at Thursday's close.

Jim Brown : 10/27/2006 12:26:42 AM

Reader Challenge Play from reader KK

BUY SYY NOV 35 CALL SYY-KG

My reasoning is:

1) The overall market trend is strongly bullish, and I think it would be difficult to turn the battleship around in one week;
2) It's a big-cap name, which is very much in favor these days;
3) Sysco is only modestly higher than it was at the beginning of September;
4) Since gasoline prices have come down sharply in the last couple months, the consumer probably feels like Howard Hughes and wants to go out and spend some of it at restaurants and ball games;
5) A catalyst is preferred, so I chose a company that reports earnings next week;
6) I am looking for maximum volatility, so I chose a front-month, out-of-the-money strike;
7) That knucklehead Cramer mentioned them very briefly yesterday, and he seems to love buying the tops--so if they have good earnings, I'm betting he'll be all over it !

Jim Brown : 10/27/2006 12:26:24 AM

Reader Challenge Play from reader WL

SELL QQQQ DEC 43 CALLS QQQ-KQ

My option play for the challenge is: sell 10 lots QQQQ 43 calls (QQQ-KQ) --try to sell at target of 55 to 65 cents. I sold some at 65 cents at 3:50 on Thursday, October 26th. I believe the market will pull back to around 42 back by next Friday.

Jim Brown : 10/27/2006 12:26:12 AM

Reader Challenge Play from reader NM

BUY US Steel (X) DEC 55 PUT X-XK

Motive: Q3 earnings due Oct 31. Expecting downturn. $70 is strong resistance.

Jim Brown : 10/27/2006 12:25:56 AM

Reader Challenge Play from reader WO

BUY BOOM NOV 35 CALL QCB-KG

Trade: Buy BOOM Nov 35 call (QCBKG) This is a very aggressive, short-term trade intended to parlay an earnings run and short squeeze on Dynamic Materials Corp (BOOM).

BOOM has a niche and near monopoly position in the business of explosion-welded clad metal plates for use in the construction of corrosion resistant pressure vessels and heat exchangers. Its products are used in the oil and gas industry as well as shipbuilding, power generation and industrial refrigeration.

BOOM has a very small float with about 20% sold short. It reports earnings on November 1. A good report could drive this stock up to the level of $37.00.

From a technical perspective, the short-term stochastic (5,3,3) is moving up, but still has plenty of upside room before becoming overbought. OBV is also moving up but not near a top.

Jim Brown : 10/27/2006 12:25:39 AM

Reader Challenge Play from reader AW

BUY OEX NOV 660 CALL OEY-KL

Well, since we are going for percentages here, I am suggesting a lottery play on the OEX looking for a 10 plus point spike up before the election. Buy Nov 660 call OEYKL, now $.90. This has 5x potential. This would equal an SPX top of 1400-1405.

Jim Brown : 10/27/2006 12:25:24 AM

Reader Challenge Play from reader WR

BUY Ford (F) NOV $9.00 CALL F-KL

Ford Motor Car Co. (F) is about to fill its gap down on Sept 15th. The stock's recovery since then has not been hampered by poor earnings results and has received a Goldman upgrade to boot. The quarter's bad news is out and the stock refuses to retreat, a good sign. I prefer the Nov $9.00 calls, F-KL, currently asked at $.15. Look for a quick run to above $9.50 for the stock and more than a triple on the call.

Jim Brown : 10/27/2006 12:25:06 AM

Reader Challenge Play from reader GR

SPX PUT Debit Spread

Buy   SPX NOV 1390 PUT SXY-WR $14.20
Sell SPX NOV 1350 PUT SXY-WJ $2.70

Strategy is the market is very overextended and expect some retracement, the long put delta will increase as the SPX drops thus increasing the long put value. The short Put is placed for protection in case the SPX doesn't cooperate but will also limit the gains although not as much since it has a lower delta.

The problem with shorting this market is everyone has been expecting a reasonable correction since summer and I am becoming more convinced it will not happen this year, especially in front of the elections.

Jim Brown : 10/27/2006 12:24:47 AM

Reader Challenge Play from reader DB

SELL SPX NOV $1350 CALL SXY-KJ

Sell naked 10 of the Nov SPX 1350 Call SXY KJ.

The market has had good news and "gooder" news for three months and is 6% above its 200 DMA. Due for a 2% pull back at any bad news.

Election posturing of the market should end before the election, i.e. next week. Any bad news is going to send some over stuffed bulls to the exits with as much cash as they can carry.

This should be good for a quick gain for this naked position. It is far enough ITM that a drop of 25 points will yield about 50%. If market continues up the risk side is about 10 points. I would stop it at a negative 10.

Normally I would not do this trade naked but would buy insurance at 1410. With the market going as hot as it is I might not do this trade at all but this is my game trade.

Just call me the last short standing. Uh-Oh is that a bull horn I feel in my back?

Jim Brown : 10/27/2006 12:24:26 AM

Reader Challenge Play from reader GG

Buy NEM JAN $45 PUT NEM-MI

Jim, as you know I trade gold frequently. I like the NEM JAN 45 PUTS as the P&F chart is showing a P.O. of $26.00. Symbol is NEMMI. The stock is facing heavy resistance at 45-46, and support at 40-43, and 38. I would trade it down to 39.00 with a stop at 47.50.

Jim Brown : 10/27/2006 12:24:20 AM

Reader Challenge Play from reader MT

Buy SPX Bull Call Spread Weekly at the offer

SPX 1385 Call JXD-JQ 3.30 3.70
SPX 1400 Call JXD-JU 0.10 0.40

1385/1400 Call spread 4.10 net debit

SPX has broken over short-term resistance and a continued run could easily pass 1400.

Jim Brown : 10/27/2006 12:21:25 AM

Reader Challenge Play from reader FP

Buy SanDisk (SNDK) JAN-07-$50 Call SWF-AJ

The stock got hit badly on it earnings release on Oct 19th. I believe the stock is oversold based on the revenue and guidance the CEO gave us. The charts have bottomed and are turning up. I believe the stock will move back up to the resistance level around $55 in the near future.

Jim Brown : 10/27/2006 12:20:46 AM

Reader Challenge Play from reader JK

Buy Google (GOOG) NOV-$500 Put GOP-WO

I believe the post earnings rally is way overblown. Even if Google eventually does hit that $600 target I think the risk in the short term is for some profit taking. The market is also over extended and selling in the broader market could pressure Google even more. In the money puts provide good leverage but that leverage works both ways. If GOOG does more higher the premium will evaporate quickly. This is not a fire and forget position.

Jim Brown : 10/27/2006 12:19:19 AM

Reader Challenge Plays - The following are the plays submitted by readers for this weeks challenge. The prices listed are for reference only. The actual prices we will use in the contest will be the closing prices for this Friday and next Friday. I will update all the entry points this weekend to reflect the official prices.

I congratulate everyone that submitted plays. It takes extra effort to step out from the crowd and put your bias and ego on the line even if it is on an anonymous basis. Now you know how the Option Investor staff feels every time they pick a play knowing thousands of readers could invest their hard earned money on it.

The plays are listed in no particular order.

Keene Little : 10/26/2006 10:41:39 PM

Friday's pivot tables: Link and Link

OI Technical Staff : 10/26/2006 9:59:59 PM

The Market Monitor has been archived. You may view it and any previous days here: Link

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

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

Tab Gilles : 10/26/2006 8:50:57 PM

Mid-day today just when it looked like the market had run out of momentum, turned around and continued to rally.

I posted at 3:03PM today to sell 1/2 positions on both the UOPIX & UAPIX. Although my indicators have not given a definitive sell signal...I felt that taking some money off the table is prudent. After all the UOPIX is up 26.54% and UAPIX a nice 22.95%. I'm letting the remaining positions ride 'til the charts say sell.

The XLE position has performed nicely, especially with XOM reporting the 2nd highest Q # ever. It is trading in a range with $59 as resistance. Link

To the charts.....

Open Positions Portfolio & Stock Watch List Link

$NAHGH/$NALOW/$NDX Link

$NDXA50 & $NDXA200 Link Link

Bullish Percentage ($BPNDX) Link

Nasdaq Summation ($NASI) Link

Nasdaq High/Low $NAHL daily-ema Link

Profunds UltraOTC (UOPIX) & UltraSmallCap (UAPIX) Link Link

Jim Brown : 10/26/2006 5:45:15 PM

Reader Challenge Alert - Get those charts out and send those plays in before 10:PM ET tonight. There is no risk to you and you will remain anonymous unless you win. Don't think your play won't have a chance. Many times the biggest winners are those most people would not expect. Send them to jim@optioninvestor.com before 10:PM tonight. If you already sent a play and want to update it you can do that also.

Tab Gilles : 10/26/2006 5:08:52 PM

Jim, I agree with your 4:08 comments...one of the reasons I recommended taking some profits on the Profund holdings.

Marc Eckelberry : 10/26/2006 4:32:59 PM

Here is the SEC link. Please join me and others in filing a complaint: enforcement@sec.gov.

Marc Eckelberry : 10/26/2006 4:26:50 PM

This is what they saw, but of course, the real story could be bullish. But when you steal a glimpse, you don't get the whole picture:

Microsoft said profit for the quarter that started Oct. 1 will be 22 cents to 24 cents a share on sales of $11.8 billion to $12.4 billion. Bellini, who lowered her estimates because discount coupons Microsoft announced for Vista this week, had expected 28 cents and $11.9 billion. Thirty analysts surveyed by Thomson Financial anticipated 34 cents and $12.9 billion.

Marc Eckelberry : 10/26/2006 4:18:35 PM

Every futures traders saw that. I even made 25 YM points on it. But these arrogant crooks are once again proving the game is rigged and they cheat big time.

Marc Eckelberry : 10/26/2006 4:14:59 PM

I hope someone investigates that YM drop 10 mns before the MSFT release. It might not have done them any good (these things are impossible to predict), but they saw something they were NOT supposed to see before us.

Jane Fox : 10/26/2006 4:14:50 PM

Economic Reports for tomorrow include.

8:30a.m. 3Q Advance GDP. Previous: +2.6%.

10:00a.m. End-Oct U Of Mich Consumer Sentiment Index. Previous: 92.3

Jeff Bailey : 10/26/2006 4:13:46 PM

MSFT ... Earnings Press Release Link

Jeff Bailey : 10/26/2006 4:12:55 PM

Microsoft (MSFT) $28.35 +0.14% ... extended session low/high so far ... $27.68 to $28.60

Jeff Bailey : 10/26/2006 4:10:53 PM

Good gravy! ... MSFT in extended. Good luck!

Jim Brown : 10/26/2006 4:10:42 PM

I closed my ER long at 779.50 and reversed to a short at that same level. Just in case Microsoft does disappoint I wanted to pocket those profits. If MSFT surprises there will be plenty of opportunity to reverse back to a long for tomorrow.

Jim Brown : 10/26/2006 4:08:30 PM

Don't forget that the year end for mutual funds is next Tuesday. We are probably seeing year end profit chasing by those funds.

Keene Little : 10/26/2006 4:06:24 PM

Maybe someone leaked some news? Looked a little suspicious.

Jim Brown : 10/26/2006 4:05:07 PM

Probably fear of MSFT due out shortly

Keene Little : 10/26/2006 4:01:29 PM

OK, who laid the stink bomb after the close?

Jeff Bailey : 10/26/2006 3:54:39 PM

Garmin Ltd. (GRMN) $54.91 +3.78% Link ... navigates to an all-time high after yesterday's break of "right shoulder"

Jane Fox : 10/26/2006 3:53:14 PM

This is what a normal 50 TICK chart of the Qs looks like. Link

Here is what it looks like this afternoon. Link

Jim Brown : 10/26/2006 3:51:26 PM

Looks like the bulls are running out of steam with the Dow stalled at its opening high. With the week rapidly coming to a close we could be nearing that proverbial top everybody keeps searching for. However, with the S&P well over 1380 and the Nasdaq peeking over 2375 we are right on the edge of what could be a monster breakout. This is definitely an inflection point that could produce a monster move in EITHER direction.

Jeff Bailey : 10/26/2006 3:50:15 PM

Wild Oats Markets (OATS) $18.70 +5.05% Link ... trades right on downward bar chart trend from 07/03/06 relative high to recent 10/20/06 relative high.

Company's CEO resigned yesterday.

WFMI $65.43 +0.66% ... reports next week.

Keene Little : 10/26/2006 3:37:49 PM

We've got another ascending wedge playing out for price action from Monday's low and SPX just hit its head on the top of it. That could be it for the run higher but it would look better at this point, now that we've had a new high today, for a pullback and then a final high to finish off this pattern. An A-B-C move up from October 11th, which in the larger pattern it should be, would have two equal legs up at SPX 1392.29. Link

Jeff Bailey : 10/26/2006 3:31:23 PM

Now that's a "Big Picture"

Jeff Bailey : 10/26/2006 3:30:53 PM

S&P 500 Index (SPX.X) 1,388.42 +0.44% ... on a weekly interval chart, SPX now retraces 80.9% of its all-time weekly close of 1,527.46 to prior recession low weekly close of 800.58.

Jeff Bailey : 10/26/2006 3:16:48 PM

Fossil Inc. (FOSL) $21.98 +0.59% Link ... Hmmmm... speaking of clocks, perhaps watches.

Keene Little : 10/26/2006 3:11:26 PM

You're right Jeff. Even a broken clock is correct twice a day ;-)

Jeff Bailey : 10/26/2006 3:10:10 PM

No worries Keene! ;)

But your persistent bearishness will eventually come to fruition if you maintain that bearishness long enough.

Marc Eckelberry : 10/26/2006 3:10:07 PM

SPX reached my second high target, 1389 (Dec 2000), also 10% projection September. ES 1395.

Keene Little : 10/26/2006 3:09:47 PM

ES high so far is 1395. Only 3 more points to hit that "fat-fingered" trade to 1398 during overnight trading last Sunday.

Jim Brown : 10/26/2006 3:04:20 PM

Reader Challenge Alert - Change in ending time for submissions. I am changing the deadline for entries to 10:PM ET tonight instead of the market close today. I know many readers have a day job and read the monitor when they get home from work. I want everyone to have a chance to submit a play.

Anyone who has already submitted a play can modify that play up until 10:PM. Given the rally today in the techs there may be some strike price changes in order. (grin)

Keene Little : 10/26/2006 3:03:36 PM

The brokers have rallied up to a potential turning point. The old broken uptrend line from May 2005, which XBD briefly climbed back above in October, is currently at about 236.30 which is where it has rallied to. Link

It has also achieved the level, at 236.04, where it has two equal legs up in its bounce off the October 11th low. The first drop from its high on October 10th looks impulsive and the bounce looks corrective. If it's a small 1-2 wave count to the downside from that Oct 10th high then get ready for a fast drop as the next move, probably for a test of its 50-dma at 223.59 currently. That's not a prediction Jeff so don't worry about saving this chart to show me later how it didn't work out. As Jane said, I'm playing the probabilities.

Tab Gilles : 10/26/2006 3:03:17 PM

Sell 1/2 position on both Profund UltraOTC (UOPIX) and Ultra SmallCap(UAPIX).

Since these funds trade on closing NAV get orders in. The $NDX is nearing the 1750 level and is overbought onnsome indicators. Although my charts haven't signaled an outright sell...I believe that taking some profits off the table is prudent at this time.

I'll recap later.....

Jane Fox : 10/26/2006 2:53:15 PM

TICKS +1000 Yawn!!

Marc Eckelberry : 10/26/2006 2:46:59 PM

The VIX is not a good market timer but it can warn you of a steep sell-off in the days or weeks to come. See 12/15, 3/15. We have a triple bottom since September low, all three at 10.50, I would recommend lightening up on longs on each one of these rallies. It could be imminent, election or no election. I would argue that this VIX read is the most dangerous of the year as it has a triple bottom, if today's low holds. Sub 10, should it occur, has brought about 5 to 10% corrections (1994 and 2005).

Keene Little : 10/26/2006 2:38:42 PM

That VIX is slowly working its way lower toward sub-10. Will it get there? Here's an update to the daily chart I showed last week which shows its bullish descending wedge. Is it predicting a bullish outcome? I'd say it is, but that's only a higher probability as Jane correctly stated. Link

And of course a bullish resolution out of this wedge would mean exactly the opposite for the stock market. The thing to remember about these wedges is that they typically retrace relatively quickly. This pattern suggests that the stock market will drop to the lows in June/July faster than it took to get to these highs.

Jane Fox : 10/26/2006 2:29:19 PM

VIX is supporting ES's new daily highs. Like I said follow the ... - Ok enough Jane.

Jeff Bailey : 10/26/2006 2:25:46 PM

Disclosure: I currently hold bullish position in LEH.

Jeff Bailey : 10/26/2006 2:25:25 PM

Swing trade long alert for a full position in Lehman Brothers (LEH) $78.60 +1.55% ... Stop $76.00, target $82.00.

Jeff Bailey : 10/26/2006 2:24:08 PM

"Pointy finger" ... LOL.

Catch the wave! XBD.X 235.66 +1.36% ...

Jane Fox : 10/26/2006 2:23:40 PM

If I may interject here - indicators give us highest probability of where the market will go and that is all we can hope for.

Keene Little : 10/26/2006 2:21:19 PM

Jeff, it's why we use indicators like pointy finger charts. My point is we've also seen many double and triple top breakouts on those charts suddenly turn around and head south. Those indicators help us trade AND set stops. They don't predict with certainty what the market will do or where it will get to. To tell readers anything different is to set someone up for failure.

Jeff Bailey : 10/26/2006 2:18:37 PM

Remember this Keene? at -580? Its first "buy signal" since late spring at -40? Jog your mind? Or are you the one that has been smoking the weed? (to stick with your theme.) ;)

NASDAQ Summation ($NASI) currently 260 Link

Keene Little : 10/26/2006 2:06:06 PM

We know this market can turn on a dime and against all the indicators. Happens all the time. The indicators show us current momentum, not when the move will end.

Jeff Bailey : 10/26/2006 2:05:00 PM

NASDAQ Composite (COMPX) alert 2,371.10 +0.61% ... challenges its 04/19/06 multi-year high close!

Keene Little : 10/26/2006 2:04:55 PM

Jeff, you disagree that the technical indicators show you where the market has been? You think they're predictive? If so I'd like to share a little bit of that wacky weed you're smoking.

Jim Brown : 10/26/2006 2:03:42 PM

Reader Challenge Update - I am receiving some really good plays for this weeks reader challenge. There are quite a few gunslingers out there with some high risk suggestions! This should be an interesting week. The options being suggested cover a broad range of options. Don't miss out on the chance to win. Get those entries in today and let's all make some money next week! Details below:

I am going to ask everyone to submit a play for next week. The person whose play makes the most money will win a copy of an Option Investor Seminar on video. This is the seminar package we sold for $1,995 several years ago. There are videos of numerous Option Investor traders including myself, Jeff Bailey, Austin Passamonte and about a dozen others. There is a huge workbook with all the power point slides from three days of presentations. While the charts will be old the option training is still 100% the same.

Here is how this will work:

I want you to submit a potential option play to me by email at jim@optioninvestor.com before the close on Thursday. I will organize them and then list them in the monitor on Friday. The starting price will be Friday's closing price. Monitor readers can follow along with any plays they choose. The play that gains the most on a percentage basis by next Friday's close (11/3) will be the winner.

You can't say "short the QQQQ" or "buy Google". You have to give a specific option like a "QQQQ $45 Call option QQQ-LS." You need also to give a two or three sentence reason why you are recommending the play. Nothing fancy but before readers blindly put on money on it they will want to know why. Equity options plays only, no futures.

I will list the plays on Friday 10/27 but without names. I don't want anybody to not play because they are afraid of being embarrassed if the play does not work. Been there, done that! I will disclose the names on the top 3 plays at the end of next week. I will also give number 2 and 3 a prize but I have not decided yet what it will be.

Put on those thinking caps and fire up your chart programs. Let's make some money next week!

Jeff Bailey : 10/26/2006 2:01:26 PM

I would have to disagree entirely with Keen's 01:52:55.

If you were short, or put this market, you might also disagree.

Keene Little : 10/26/2006 1:52:55 PM

I completely agree with you on the internals Jane. The tough part with those is that they tell us what just happened and not what's coming. That is of course true for just about all the technical indicators we follow.

Jeff Bailey : 10/26/2006 1:52:02 PM

U.S. Oil Fund (USO) alert $53.95 -1.37% ... see yesterday's MM commentary.

Jane Fox : 10/26/2006 1:50:55 PM

NQ is the market on fire today. I do see that ES has now made a new daily high.

Jane Fox : 10/26/2006 1:49:15 PM

Keene, the internals are not showing any indication of selling - at least not yet.

Keene Little : 10/26/2006 1:41:37 PM

Either that Jane or they're pushing it back up to sell into it. It's a very tough call here.

Jane Fox : 10/26/2006 1:40:40 PM

Ad long as the AD volume is making new daily highs and the VIX new daily lows, the bulls are in control.

Jane Fox : 10/26/2006 1:39:48 PM

DO you get a feel that we are getting setup for a late day rally?

Jane Fox : 10/26/2006 1:20:50 PM

ES is testing its PDH as support and I think there is very good probability it will hold up as support because the VIX is falling. (follow the VIX)

Jeff Bailey : 10/26/2006 1:19:11 PM

NYSE 3Q PROFIT MORE THAN TRIPLES

DJ- Firm earns $68 million, or 43c a share, as revenue grows by one-third to $602.9 million amid Archipelago takeover. Analysts expected EPS of 41c. Company still aims to hold shareholder meetings in December on Euronext deal.

NYX $74.23 -1.46% Link ...

Jane Fox : 10/26/2006 1:17:52 PM

* NYSE VOLUME 958.4M
* NYSE HAS 1,886 ADVANCERS
* NYSE HAS 1,236 DECLINERS
* NYSE HAS 177 ISSUES UNCHANGED
* NYSE HAS 266 ISSUES SETTING 52-WEEK HIGHS
* NYSE HAS 9 ISSUES SETTING 52-WEEK LOWS
* NASDAQ VOLUME 1.33B
* NASDAQ HAS 1,720 GAINERS
* NASDAQ HAS 1,196 LOSERS
* NASDAQ HAS 158 ISSUES UNCHANGED
* NASDAQ HAS 122 ISSUES SETTING 52-WEEK HIGHS
* NASDAQ HAS 23 ISSUES SETTING 52-WEEK LOWS

Keene Little : 10/26/2006 1:14:44 PM

ES has retraced 78.6% of this morning's decline (at 1391.25) and YM has retraced a little more 62%. ES can't retrace anymore than that without telling us it's probably headed to new highs. At that point it will be pretty clear that this is not a market to be shorted until at least after the elections.

After that very bearish looking NYSE chart it too is very close to making a new high. It's currently pressing the top of its channel again so I don't like the long side here but it sure hasn't paid well to short this market, unless of course you've been willing to take just a couple of points at a time.

But, if you're short ES or YM this morning, it takes a new high to prove the trade wrong. NQ and ER are in a different pattern (much choppier to the upside) so a new high in either of them is not necessarily bullish. We're close to finding out on ES and YM.

Jane Fox : 10/26/2006 1:10:35 PM

LOS ANGELES (MarketWatch) -- Symantec Corp.'s stock tumbled by as much as 7% on Thursday after the security- and storage-software giant's quarterly results came up shy of Wall Street's hopes amid a disappointing performance in Europe.

Symantec, late Wednesday, said it improved to a quarterly profit as revenue jumped 20%, led by strong demand from consumers for its software. Yet the fiscal second-quarter results came in at the low end of Symantec's own expectations and short of analysts' average estimate.

Shares of the Cupertino, Calif., company, which makes the Norton line of antivirus software, dropped on the news. In early afternoon trading, the stock fell $1.36 to $19.42. The shares' slump retraced part of a 19% gain enjoyed for the year by Wednesday close, ahead of the quarterly results.

Equity analyst Daniel Ives, of Friedman, Billings, Ramsey & Co., said that "'one step forward, two steps back' has been a key theme for Symantec during the past year."

Keene Little : 10/26/2006 1:03:12 PM

They just keep pressing it higher. It's certainly looking like the big prop is still underneath the market.

Jane Fox : 10/26/2006 12:59:48 PM

NQ to new daily highs. Link

Jeff Bailey : 10/26/2006 12:40:43 PM

RAYTHEON 3Q NET JUMPS 41%

DJ- Defense contractor posts net income of $321 million, or 71c a share, which includes 1c loss from discontinued operations. Sales increase 7% to $5.69 billion. Analysts expected EPS of 64c. Firm boosts 2006 earnings view by 10c a share to $2.70-$2.80.

RTN $48.85 -1.27% Link ...

Keene Little : 10/26/2006 12:36:23 PM

NQ is close to testing its overnight high while ES and YM are pushing the limits of a "normal" retracement. So we can see where the strength is today. But even the more bullish NQ's pattern over the past several days shows a bearish pattern in that it has been very choppy and barely making new highs on each push to the upside. This looks like a classic ending pattern (distribution). I still prefer the short side from here but obviously they're making me nervous.

Jeff Bailey : 10/26/2006 12:28:48 PM

KELLOGG NET UP 2.5%, RAISES VIEW

DJ- Nation's biggest cereal maker earns $281.1 million, or 70c a share, as sales climb 7.6% to $2.82 billion. Analysts forecasted EPS of 65c on sales of $2.76 billion. Kellogg raises 2006 earnings outlook to $2.48-$2.50 a share.

K $50.52 +1.77% Link ...

Jane Fox : 10/26/2006 12:24:13 PM

TICKS +800

Jane Fox : 10/26/2006 12:23:39 PM

These two are in sync and are bullish. Link

Keene Little : 10/26/2006 12:12:43 PM

A 62% retracement for ES is at 1389.75.

Keene Little : 10/26/2006 12:11:02 PM

Nice litle jab to the upside. Easy to do during the lower volume environment during lunch. ES is tagging its 50% retracement just under 1389 and YM is close to its 62% retracement at 12176. As I noted earlier, these are the typical retracement levels for a 2nd wave bounce.

Keene Little : 10/26/2006 12:03:15 PM

This morning NYSE jumped up above the top of its parallel up-channel for price action since mid September and then collapsed back down. It left a very bearish looking shooting star doji (more like a gravestone doji) on this 60-min chart. Oscillators are rolling over. If it manages to make it back up and continue higher then we'll have a pretty good idea that we're dealing with a market that's got a huge prop underneath it. In the meantime this is a chart begging to be shorted. Link

Jeff Bailey : 10/26/2006 11:49:35 AM

SHELL NET FALLS 34% ON COSTS, UNREST

DJ- Oil major posts 3Q net income of $5.94 billion, which includes nearly $1.7 billion in divestiture gains. Continued Nigeria unrest, higher U.K. taxes and cost pressure more than offset a rise in oil prices.

RDS.A $68.92 +1.89% Link ...

Keene Little : 10/26/2006 11:46:39 AM

Assuming this bounce is a 2nd wave bounce (after wave-1 down from this morning's high), then the next decline should be a strong decline. That's what the bears want to see. The bulls want to see this continue to press higher. Even if it's a choppy move higher it can still make it to new highs. It would continue to look like an ending move but that's nothing new. Any break to a new daily low though and it should accelerate lower.

Jeff Bailey : 10/26/2006 11:43:39 AM

APACHE 3Q EARNINGS FALL 5.8%

DJ- Oil and gas firm posts net income of $647.1 million, or $1.94 a share. Revenue increases slightly to $2.26 billion. Results include gain from asset sale in China. Analysts expected EPS of $1.89 and revenue of $2.18 billion.

APA $68.12 -1.14% Link

Jeff Bailey : 10/26/2006 11:40:10 AM

GREENSPAN POSITIVE ON 4Q GROWTH

DJ- After a fairly weak 3Q due to an "accelerated decline" in housing and lower inventory accumulation, former Fed chairman says 4Q growth should be "reasonably good."

Jeff Bailey : 10/26/2006 11:34:26 AM

EXXON 3Q NET CLIMBS 5.7%, TOPPING ESTIMATES

DJ- Oil giant earns $10.49 billion, or $1.77 a share, while revenue slips to $99.59 billion from $100.72 billion a year ago. Wall Street analysts were expecting earnings of $1.59 a share. Exxon's capital expenditures climb 15% to $5.1 billion and it buys back 126 million shares at a cost of $8.4 billion.

XOM $71.24 +0.32% Link ...

Keene Little : 10/26/2006 11:32:22 AM

I've got Fibs lining up at NQ 1738.50 as a level to watch for a short entry. That's 62% retracement and two equal legs up.

Jane Fox : 10/26/2006 11:30:20 AM

Rescue teams are arriving. TICKS +800

Keene Little : 10/26/2006 11:29:34 AM

This correction looks like it might be one that uses time instead of amplitude to correct this morning's decline. Fibs line up at a 38% retracement for ES at 1388 as a level I'd watch for a shorting opportunity. For YM I'll be watching 12164 which is between a 38% and 50% retracement.

Marc Eckelberry : 10/26/2006 11:25:38 AM

Distribution.

Marc Eckelberry : 10/26/2006 11:20:46 AM

55 is spot price. Should equal about 60 for Dec contract.
61 is what is keeping bulls at bay today in equities.

Jeff Bailey : 10/26/2006 11:13:48 AM

Venezuela: OPEC Should Cut Extra 300,000 B/D At December Meeting

Venezuela Min: Seeks $55 Price Floor For OPEC Crude

Venezuela: Orinoco To Cut More Than 4% Of Crude Production

Keene Little : 10/26/2006 11:00:58 AM

Watch for a bounce into the 38-62% retracement zone of this morning's decline. Typically this bounce (2nd wave) will be 50-62%. If it's weaker than that then it'll be bearish.

Keene Little : 10/26/2006 10:54:57 AM

We should be getting very close to seeing a stronger bounce if this leg down is completing a 5-wave move down from this morning's high.

Jeff Bailey : 10/26/2006 10:54:33 AM

iShares Brazil (EWZ) $42.06 -0.84% Link ...

Jeff Bailey : 10/26/2006 10:51:20 AM

UBS Cuts Brazil Stocks To Neutral From Overweight

DJ- UBS bank on Thursday revised its Latin American stocks recommendations, downgrading Brazilian stocks to Neutral from Overweight and leaving Mexican stocks as the only overweight portion in its portfolio.

UBS said Brazilian stocks were nearing fair value after a significant rise in recent weeks. The bank said Mexican stocks still presented strong earnings momentum.

The bank also said its view had turned "more positive" on stocks in the Southern Cone and Andean regions of South America.

Keene Little : 10/26/2006 10:44:16 AM

Getting the new low. The risk for a long play is that this could accelerate lower (as part of a 3rd of a 3rd wave down) so don't let a play go much against you since it won't come back.

Jane Fox : 10/26/2006 10:43:38 AM

My new mantra is going to be "Follow the VIX." Link

Keene Little : 10/26/2006 10:42:18 AM

If the current small bounce/consolidation is followed by another new daily low then that will give us a 5-wave move down, another potential indication that the trend has turned down. It will also mean we should see a bigger bounce that could spike back up and knock a lot of shorts back out. If you're scalping to the short side, take profits at a new low and try a long play.

Jeff Bailey : 10/26/2006 10:37:12 AM

Current OPEN MM Profiles that I've made and Watch List found at this Link

Jane Fox : 10/26/2006 10:34:07 AM

I see Nat Gas has fallen so I guess the inventories came in strong. Still looking for that report.

Keene Little : 10/26/2006 10:32:41 AM

First support for ES is its uptrend line from Monday, currently 1383.25. YM is closer to its uptrend line at 13137 (low so far is 12140).

Jane Fox : 10/26/2006 10:30:58 AM

... however, all these ducks are in a row. Link

Jane Fox : 10/26/2006 10:29:45 AM

These have not turned bearish yet. Link

Keene Little : 10/26/2006 10:28:38 AM

Strong selling hitting. Just the opposite of short covering--new longs are jumping back out. There are mulitple levels of support though and the bears have a huge job in front of them. So far this is all within the realm of normal profit taking, albeit some quick profit taking at the moment.

Jane Fox : 10/26/2006 10:27:46 AM

Well my goodness I get my charts back and see that the bears are finally able to take a little control here.

Keene Little : 10/26/2006 10:23:05 AM

ES and YM now dropping to new daily lows. That was a liquidity push--jam it back up to get some buying going so that the Boyz could sell into it. It's not looking pretty for the bulls right here.

Keene Little : 10/26/2006 10:22:08 AM

Boeing is down pretty hard again today, -2.3%, which is a little strange when you think about the fact that the orders they received for aircraft was practically the sole reason for a positive durable goods number. I guess it was priced in. BA is dropping back down to its 200-dma though so it should find some support there. YM is definitely weaker today as compared to ES and NQ. ES is the strongest.

Keene Little : 10/26/2006 10:16:46 AM

NQ is getting a big spike back up. It's pretty obvious what they're doing here.

Keene Little : 10/26/2006 10:15:13 AM

ES closed its gap on that last bit of selling (YM and NQ are still below their gaps). It's time for the manipulators, er, I mean bulls, to step in and drive this back up. If, and that's a huge if, ES were to close down today, after its gap up, it would leave a very bearish engulfing candle and produce a key reversal day up at resistance. We've got lots of daylight left and we've seen too many times the buy programs scare the bears back into the woods.

First thing the bears need is for the bounce off gap closure for ES, which is in progress, to fail and head for new daily lows. Otherwise we could see ES at least press higher against the upper trend line, or fling itself over it, as it works its way higher towards at least 1398. NQ is getting the buying going and has pushed back to the flat line as I type.

Jane Fox : 10/26/2006 10:13:21 AM

I may not have realtime charts but I can work offline. Here is the chart of Nat Gas I promised earlier. Link

Jane Fox : 10/26/2006 10:08:54 AM

LONDON (MarketWatch) -- European shares hit new five-year highs on Thursday after some strong quarterly financial figures from Continental and U.K. companies, including Royal Dutch Shell and telecommunications provider France Telecom, boosted sentiment.

Germany's DAX Xetra 30 index (DX): rose 0.51% at 6,296.68 and the French CAC-40 index (FR) increased 0.48% at 5,448.31 as telecom stocks gained ground.

Jane Fox : 10/26/2006 10:07:32 AM

Without charts I can concentrate on the news at least.

Keene Little : 10/26/2006 10:05:39 AM

Let's see the bulls spin that news on home sales as bullish. Oh that's right, it means the Fed won't have to raise rates any further, yea, that's it.

Jane Fox : 10/26/2006 10:03:47 AM

WASHINGTON (MarketWatch) - The median sales price of a new home fell 9.7% in the 12 months ending in September, the fastest price decline in nearly 36 years, the government said Thursday.

The government reported that sales of new homes unexpectedly rose 5.3% in September to a seasonally adjusted annual rate of 1.075 million, the most in three months and well above the 1.05 million expected by economists surveyed by MarketWatch.

However, sales in June, July and August were revised down by total of 67,000 annualized, continuing a pattern of downward revisions to the originally reported data. August's sales pace was revised to 1.021 million from 1.050 million initially reported.

New-home sales are down 14.2% in the past year.

Inventories of unsold homes fell 1.9% to 557,000, representing a 6.4-month supply at the September sales pace. It's the second consecutive decline in inventories. The supply of inventory peaked at 7.2 months in July.

Inventories are up 14.4% in the past year.

Median sales prices dropped 9.7% in the past year to $217,100, the lowest price in two years. It's the largest percentage decline in median prices since December 1970.

Jane Fox : 10/26/2006 10:01:50 AM

* BIGGEST DROP IN MEDIAN NEW-HOME SALES PRICES IN 36 YEARS
* NEW-HOME SALES DOWN 14.2% YEAR-OVER-YEAR
* AUG. NEW-HOME SALES REVISED LOWER TO 1.02M VS. 1.50M
* SEPT. NEW-HOME MEDIAN PRICES FALL 9.7% YEAR-OVER-YEAR
* SEPT. NEW-HOME INVENTORIES FALL 1.9% TO 557,000
* SEPT. NEW-HOME SALES RISE 5.3% TO 1.075M PACE

Jane Fox : 10/26/2006 9:56:25 AM

New homes sales at 10:00.

Jane Fox : 10/26/2006 9:55:49 AM

Doesn't happen often but it does happen.

Jane Fox : 10/26/2006 9:55:29 AM

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Keene Little : 10/26/2006 9:53:03 AM

NQ and YM have closed their gaps and continue lower. ES is a point away.

Jane Fox : 10/26/2006 9:51:03 AM

My charts are down. Anyone else out there using TS who is having issues or are these issues just mine?

Keene Little : 10/26/2006 9:44:32 AM

Looking at price action for ES since mid September shows that this morning's pop higher banged right into the trend line along the highs. That trend line has been resistance for over a month now so we'll see if it's different this time. If it pulls back to close this morning's gap it will then be important to see whether it continues lower (a true gap n crap) or turns right around and heads back towards that trend line again. Link

Jane Fox : 10/26/2006 9:43:57 AM

Looks like PDHs will be support today. Link

Jane Fox : 10/26/2006 9:37:55 AM

Both TRIN and VIX open below their PDLs supporting the bullish AD line and volume.

Jane Fox : 10/26/2006 9:35:52 AM

AD line +963 and AD volume above 0 and climbing. The bulls have the ball this morning. Yawn!!!!

Keene Little : 10/26/2006 9:19:46 AM

It looks like we're getting the "one more high" that I thought the short term pattern needed. But now it will need to turn into a gap n crap for the market top scenario that I layed out in my post below (11:45 PM). If the early pop higher holds and runs higher then it will look like ES 1398 is a given. To say this rally is a bit overextended is an understatement. By just about any historical measure this rubber band has been stretched to the limit and when it breaks it probably won't be pretty. But until then the bulls clearly rule.

Jane Fox : 10/26/2006 9:07:08 AM

Dateline WSJ - Economists and investors may try to read the Federal Reserve for clues to whether its next move is a rise in the cost of borrowed money or a cut. But yesterday's monetary-policy statement suggests neither intention prevails, that Fed officials still hope interest rates are at the right level to reduce inflation, and that a verdict on future rate policy will depend on some pretty specific data.

Jane Fox : 10/26/2006 9:05:28 AM

NEW YORK (MarketWatch) -- Aetna Inc. reported Thursday a 28% increase in third-quarter profit, helped by higher enrollment and fee rate increase, as the health-care benefits provider raised its forecast for the year.

Shares of Aetna moved up 8.8% in premarket trading.

The Hartford, Conn.-based company (AET) earned $476.4 million, or 85 cents a share, in the three-month period ended Sept. 30, compared with $372.8 million, or 62 cents, in the year-ago period.

On an operating basis, Aetna earned 78 cents a share. Quarterly revenue rose to $6.3 billion from $5.7 billion a year earlier.

Analysts polled by Thomson First Call had been forecasting a per-share profit of 72 cents on revenue of $6.3 billion, on average. -

Jane Fox : 10/26/2006 9:02:54 AM

Has anyone been watching Nat Gas lately? I will show a daily chart of this market later.

Crude was not able to break its PDH overnight but it sure looks like it wants to.

Gold broke its PDH overnight as did the TBonds. The bulls were alive and well everywhere overnight. Link

Jane Fox : 10/26/2006 9:00:17 AM

The relentless bull persists and all equity markets broke their PDHs overnight. The more this climbs without a correction the harder that correction will be. This is nuts! Link

Jane Fox : 10/26/2006 8:57:40 AM

WASHINGTON (MarketWatch) -- The number of newly laid-off workers filing claims for unemployment benefits rose by 8,000 in the latest week, Labor Department data released Thursday showed.

The government said 308,000 people filed unemployment claims the week ended Oct. 21. The report suggests a stable job market. Last week, 300,000 workers filed for unemployment benefits, while the week before, 309,000 filed. Meanwhile, continuing unemployment claims rose by 3,000 to 2.45 million.

Initial claims represent job destruction, while the level of continuing claims indicates how hard or easy it is for displaced workers to find new jobs.

The weekly jobless claims report comes one day after the Federal Reserve decided to leave interest rates steady at 5.25%. But the central bank left the door open for more rate hikes if inflation isn't kept under control. See full story.

The Fed said growth seems likely to expand at a moderate pace going forward. But economists were divided about whether the Fed's prediction about growth meant the central bank would raise rates or lower them

Jane Fox : 10/26/2006 8:56:58 AM

WASHINGTON (MarketWatch) -- Sprint Nextel Corp. on Thursday said third-quarter profit fell more than 50% as the company incurred costs from the spinoff of its local-phone business and lost nearly 200,000 premium wireless customers.

Reston, Va.-based Sprint, the No. 3 mobile operator in the U.S., said net income fell to $247 million, or 8 cents a share, from $516 million, or 23 cents a share.

Sales rose 34% to $10.5 billion from $7.82 billion a year earlier, lifted by wireless gains and the acquisition of Nextel in August 2005.

Adjusted to account for the Nextel and other one-time items, Sprint said it earned 32 cents a share. Revenue rose a lesser 8% on an adjusted, or pro forma, basis.

Sprint was projected to earn 33 cents a share on revenue of $10.5 billion, according to the consensus estimate of analysts surveyed by Thomson First Call.

Although Sprint added 233,000 net customers, the company lost 188,000 highly valued "postpaid" subscribers -- those on yearly plans who pay their bills at the end of each month.

Jane Fox : 10/26/2006 8:55:46 AM

WASHINGTON (MarketWatch) -- Demand for U.S.-made durable goods soared 7.8% in September, the biggest jump in six years, as orders for new aircraft nearly tripled, the government said Thursday.

Outside transportation, however, new orders rose just 0.1%, marking the first increase in three months.

The jump in last month's new orders for big-ticket items far exceeded the 2.9% gain expected by economists surveyed by MarketWatch. It's the first gain in three months.

The increase came almost entirely from a jump in orders booked by Boeing Co. (BA) , which recorded 175 orders in September compared with 30 in August, and from demand by the Pentagon for defense capital goods, the Commerce Department reported.

Jane Fox : 10/26/2006 8:50:15 AM

Dateline WSJ - The Securities and Exchange Commission has launched an investigation of 27 mutual-fund companies that the agency says have accepted kickbacks totaling hundreds of millions of dollars in recent years.

The investigation centers on alleged arrangements in which independent contractors agreed to pay rebates to mutual-fund companies in order to win lucrative contracts for jobs like producing shareholder reports and prospectuses. The probe stems from a $21.4 million settlement the SEC reached last month with Bisys Fund Services Inc., an administrative-services provider owned by Bisys Group Inc.

Regulators say Bisys, which is based in Roseland, N.J., paid a total of $230 million in kickbacks between July 1999 and June 2004 as part of an effort to win work from mutual funds. Bisys settled the civil charges without admitting or denying wrongdoing

Jane Fox : 10/26/2006 8:47:43 AM

Dateline WSJ - Exxon Mobil Corp.'s profit rose to $10.49 billion, its second highest total ever, despite a slight decline in revenue at the oil giant.

The profit figure, equal to $1.77 a share, is also believed to be the second largest ever reported by a public U.S. company. It is eclipsed only by the $10.71 billion profit posted by Exxon in last year's fourth quarter, which saw then-record oil prices because of hurricanes Katrina and Rita.

Exxon's profit was up slightly from a year earlier, when the company reported net income of $9.92 billion, or $1.32 a share. The company said it bought back 126 million shares during the quarter at a cost of $8.4 billion. Revenue slipped to $99.59 billion from $100.72 billion a year ago.

Jim Brown : 10/26/2006 4:42:04 AM

Reader Challenge - I have some really good plays coming in from readers and I am going to start posting them late Thursday evening. If you are considering submitting a play please do it! You will remain anonymous unless you end up one of the top three winners. You have nothing to lose and everything to gain. Send those plays to me as soon as possible. The price today does not matter since we will be using the closing price on Friday as the benchmark for the start. Send them to jim@optioninvestor.com.

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