Thursday’s Options Alerts

• May 29, 2002
• TradingMarkets Editors

The major averages ended lower for the
third consecutive session, with volume finally picking back up. Despite trying to
rally on several occasions during the day, the averages ended near the lows of
the day. An unimpressive mid-quarter update from Novellus, more accounting
woes, looming terrorists threats, and a downgrade on AT&T’s debt was too
much for the market to handle. Tech stocks such as semiconductor and networking
issues led the decline after yesterday’s late report from Novellus.

Even gold
stocks
(
$XAU.X |
Quote |
Chart |
News |
PowerRating) gave up 3%, after hitting another new three-and-a-half
year high earlier in the day. This came after Goldman Sachs downgraded both AngloGold
(
AU |
Quote |
Chart |
News |
PowerRating) and Barrick Gold
(
ABX |
Quote |
Chart |
News |
PowerRating) on concern over demand for physical
commodity.

Sectors that escaped the carnage today included health care
(
$HMO.X |
Quote |
Chart |
News |
PowerRating),
airlines
(
$XAL.X |
Quote |
Chart |
News |
PowerRating), and oil
(
$OSX.X |
Quote |
Chart |
News |
PowerRating). For more information on today’s action, please refer to
the market
recap.

The VIX
(
$VIX.X |
Quote |
Chart |
News |
PowerRating) again gapped up and opened
near the highs of the day, it closed just under its open. This does show a small
decrease in fear. The VIX triggered a CVR I buy signal
today. The VIX has gone to a new two-week high as renewed corporate accounting
worries, threats of terrorism, and mixed economic data put uncertainty back into the marketplace. The VXN
(
$VXN.X |
Quote |
Chart |
News |
PowerRating) also gapped
up and opened near the lows of its range and closed below its open. This shift in intraday sentiment suggests a decrease in
fear. Today’s action triggered another CVR
I buy signal and a CVR V buy signal.

Points of Significance:

Dollar General
(
DG |
Quote |
Chart |
News |
PowerRating) gained 6% on
more than double its average volume. Shares of Home Depot and other retailers
were hit today as Wall Street feared lower consumer spending. Home Depot has
come under pressure lately with competitor Lowes
(
LOW |
Quote |
Chart |
News |
PowerRating) knocking on their
doors. Shares of Home Depot were also downgraded to “hold” from UBS
Warburg.

Telefonos De Mexico
(
TMX |
Quote |
Chart |
News |
PowerRating)
fell almost 5% on double its average volume. The stock has been under pressure
after receiving a negative court verdict concerning five areas in
telecommunications. TMX gapped below its 200-day average today and broke below
its .50 retracement level from its September 2001 lows. There is heavy activity
in the June 32.50 and 35 puts.

Novellus
Systems
(
NVLS |
Quote |
Chart |
News |
PowerRating) dropped 7% on heavy volume and was the biggest loser
among semiconductor issues. Late Tuesday, the company came out with a mid
quarter report in which they boosted earnings but not revenue. The CEO also did
not go farther than next quarter in their outlook. Shares of Novellus look
poised to retest its 200-day moving average.

Abnormal Options Volume With Price Movement
—
Abnormal options volume (calls and puts) with stock price movement

Stocks With Biggest Spikes in Implied
Volatility — Stocks with biggest increases or decreases in implied
volatility compared to previous day

Spike Up

Spike Down

Please use stops on every trade!