Lower Into Key Support
The
market once again looks set to open lower
(Hewlett-Packard, Disney, cut forecasts), and I don’t think Q3 revised
productivity has enough juice to turn it around, so we should be smack dab into
a confluence of trendlines, pivot points, moving averages – a technical
smorgasbord! I would expect some buying as the various indices hit these
“zones,” and remember that we will have some European rate cuts tomorrow
morning, and Intel’s mid-quarter update tomorrow evening. Key levels we are
watching:
DJI:Â Â Â 8670 (low from 11/26), 8651 (20 day moving average, short-term trend
line support.
S&P:Â 912 (low from 11/26, 20 day moving average), short-term trend line at 927
taken out yesterday.
COMP: 1444 (low from 11/26, short and intermediate trend line), 1420 -1430 (gap
from 11/20 -21 and site of the August high–1426.7), 1418 (20 day moving
average).
NDX:Â Â Â 1088 (short and intermediate trend line — we’re there), 1084 (low from
11/26), 1071 -1081 (gap from 11/20 -21), 1064.86 (20 day moving average), and
1052.49 (August highs).
Although I am still a long term negative on this market, shorts might want to
take a little something off the table near these levels. My favorite scenario is
for a bounce off of these levels, a little rah-rah out of Intel, and a weak
rally back up into resistance followed by a semi-collapse. That’s a tough
scenario this time of year, but I like it.
Currently, DJI futures are down 62.0, S&P futures are off 7.70, and Nasdaq 100
futures are lower by 16.00. In Europe, the FTSE 100 is down 40.00 points or
.98%, the DAX is slightly higher, up 8.97 points or 27%, and the CAC 40 is down
8.98 points or .28%. In Asia, the Nikkei is getting back to its old ways,
dropping 198.38 points or 2.16%, and the Hang Seng fell 231.28 points or 2.26%.
Interest rate futures are higher, the dollar is sharply lower, crude is off a
tad, and gold is up about $1.30.
We have been pretty much sitting on the sidelines while the market sorts itself
out, and I think we’ll stay there for another day or two. I have a long and one
or two shorts I’m looking at, but I’m not comfortable with the levels of either
yet, so we wait. I think we get our answer real soon…
Volatility
Maybe they knew something after all. Â The buyers of vol last week look
prescient. If it was a large player being forced to buy calls to hedge index
shorts, he should be getting healthy now! Does that mean there will be a seller
of calls as the market breaks and the short futures are reeled in? Interesting.
Yesterday the VIX gained 1.71 to 31.76 (back through its 200 day moving
average– 31.46), the VXN rose 1.83 to 51.99 (back through its 200 day moving
average –51.39 ), and the QQV also jumped 1.40 to 45.42. Are the volatility
indicators now temporarily overbought signalling a bounce? Could be, but I’ll
pass on this one.
Update: Tuesday  (12/03/02)
Nothing yesterday.
New Recommendations:
QQQ – If Last Tuesday’s lows ($26.90 — close today!) are not taken
out by Friday, we will cover the short January 23 /26 call spreads.
Working Orders (Old Recommendations):
QQQ- Subscribers short the January 23 /26 call spread at $1.50 (25%),
leave an order in the market to purchase the spread at $1.50 to close the trade.
Recap of open
trades:
Long-term
Reverse
Collars:
None
Buy-writes:
None
Proxy buy-writes:
DYN – long the January 15 calls at $3.20 – left over from proxy buy-write
(50%). Left for dead.
Complex Strategies:
None
Directional Positions:
None
Short-term
Call Positions:
GILD – Long the January 40 calls at an average price
of $1.60 (50%).
Call Spread Positions:
CIEN – Long the January 5 / 7.5 call spread at $.05 (25%).
DIA- Long the December 80 /84 /86 /90 call condor at $1.20 (25%).
QQQ – Short the January 23 /26 call spread at $1.50 (25%).
Put Positions:
None
Put Spread Positions:
BAC – Long the January 60 /70 put spread at $2.90 (25%).
KSS – Long the January 50 /60 put spread at $2.475 (50%).
Stops
GILD – $34.50 closing
only.
KSS – Two consecutive closes over $74.00
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