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us stock market, understanding the stock market
Begin Part 2 of 2
Support and Resistance
Nasdaq: Closed at 1182.17
Resistance: Price support from 1190 to 1200 (the July intraday low is 1192.42) is now acting as resistance, pushing the index back twice Tuesday. 1230 and 1250 are more price resistance points. 1270 is still more price resistance from the September lows. The 10 day MVA (1236.31). The August down trendline at 1240. The 18 day MVA (1262.26). Price resistance at 1300. 1316, an early August interim high. The March/May downtrend line at 1315. The 50 day MVA (1322.16). The late July high (1354.48) and 1357.09, the October 1998 bear market low. There is another downtrend line from the March and May highs at 1378. 1418, the interim test after the September low. That is followed by price resistance at 1500.
Support: The Nasdaq is now down to 1996 levels. There is price support from 1080 to 1100. Then there is a big shelf of support at 1050 down to 1000.
S&P 500: Closed at 819.29
Resistance: The first bottom channel line in the March downtrend (833). 850 to 855 (the October 1997 and Q2 1998 lows). The 10 day MVA (858.51). 875 is price resistance of some significance along with the March downtrend line at 875 and the 18 day MVA (874.46). July and August interim highs at 911.64. The 50 day MVA (905.31). The September 2000/May 2001 downtrend line at 924. The downtrend lines from the March and April highs (938) along with price resistance at 950. 965, the September 2001 closing low. Then 1000 is psychological resistance.
Support: The lowest channel line in the March downtrend channel (797) along with price support at that level. Then the July low at 775.68 and marks the culmination of the short head and shoulders pattern. 750 to 760 with an intraday touch to 730.
Dow: Closed at 7683.13
Resistance: The lowest bottom channel line of the March downtrend (7905). The August lows (8043) and the September 2001 intraday low (8062). The 10 day MVA (8083.99). The September closing low at 8235.81. The 18 day MVA (8244.64). 8250 acted as resistance before after acting as support. The March down trendline at 8300. Some price resistance at 8500. The 50 day MVA (8554.28). The late July interim high at 8762.14 (8745 closing). A range of resistance from 9000 on up to 9050. Then 9250 and then 9500.
Support: The July low (7532.66). The October 1998 lows are at 7400 and 7467. After that is 7000, some 1997 lows and highs.
Economic Calendar
9-23-02
Leading Economic Indicators, August (10:00): -0.2% actual, -0.1% expected, -0.1% prior (revised from -0.4%).
9-24-02
Consumer Confidence, September (10:00): 93.3 actual, 92.4 expected (prior 95.0 expected), 94.5 prior (revised from 93.5).
FOMC meeting results, 2:15: No change in rates, bias, worried about war.
9-25-02
Existing home sales, August (10:00): 5.35M expected, 5.33M prior.
9-26-02
Durable goods orders, August (8:30): -1.8% expected, 9.2% prior.
Initial jobless claims (8:30): 420K expected, 424K prior.
New home sales (10:00), August: 990K expected, 1.017M prior.
FOMC minutes, 8-13 meeting (2:00)
9-27-02
GDP Q2 final (8:30): 1.2% expected, 1.1% prior.
Michigan Sentiment revised (9:45): 86.2 expected, 86.2 prior.
SUBSCRIBER QUESTIONS
Q: Do you ever short stocks, as opposed to buying puts?
A: Yes if we see a really good short with no option chain or if we really like the short but the options do not have a good price/delta/anticipated fall mix (i.e., given the price and delta and how far it could fall, the return is not good enough for the risk). One of the reasons we like buying put options is that our risk is defined heading into the play. If something bad happens the worst we can do is lose the investment. With shorting stocks in theory your potential downside is unlimited. Of course you would take the money off the table on a move against you, but it is still a potentially unlimited risk.
Q: Your newsletter states that the Put/Call ratio has been over 1.0 for the past 5 sessions and this is usually an indicator (contrarian) of a possible bottom. Is it possible for the ratio to be so high, not as a sign of a bottom, but as a sign of overall failing confidence in the market in general. Thanks for your time and for the great newsletter
A: You could very well be right at least in part. There is an awful lot of selling ongoing, but there is also hedging always taking place. A lack of confidence that the market will go up can result in selling (either long term positions or selling short) or hedging to cover long term positions. This protects long positions from downside as money is earned on the puts. Big institutions do this frequently.
The psychology of the put/call ratio is that while there are funds hedging their positions, there are also a lot of options speculators out there that tend to guess on which way the market is going, taking short term, out of the money positions. With speculation as a whole, when the crowd moves predominantly in one direction, that usually means the move is ready to reverse.
Given that the high put/call ratio has yet to deliver a strong reversal, the idea that there are other forces at work such as larger than usual hedging is not off the mark. Ultimately, however, if all of the market loses confidence, that is the usual recipe for reversals. Thus we keep watching all of the indicators to see if they all line up.
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and look for the link to the CD seminars or the next live series dates where you can learn and ask questions from the comfort of your home without having to incurr costly travel expenses and time away from work, costs and time that very few can deduct from their taxes . This is Jon Johnson's internet site for online seminars and they get you up to speed on how to deal with up or down markets. Hope you check it out.
THE PLAYS:
Tuesday plays:
SYK: Never gave the buy, tanking on massive, massive volume. That is why we look for the breakout.
WEN: Looks ready to roll over with that doji on rising volume below the 10 day MVA.
CNMD: Moved up on low volume. May test 50 day MVA (19.79)
Best Plays:
1) OVER: Looks ready to roll up in its range.
2) CVTX: Looks ready to roll down.
3) Continuing: WEN looks ready to fall. COH looks good in the handle. CCCG showing a volume spike on the 10 day MVA. AMGP showing a doji on the 10 day MVA as well.
NEW PLAYS:
Upside:
OVER (Overture Services--$20.95; +0.93; optionable): Internet information
http://biz.yahoo.com/p/o/over.html
STATUS: Rolling. OVER is in a 3-month rolling range from roughly 20 to 25. We like these rollers (Dell back in July) when they show up and have good accumulation (OVER has 5 up weeks on rising volume to 3 down weeks on rising volume during the roll) and a good, playable range. Tuesday OVER started off the bottom of the range at 20 on a good shot of volume. This comes a day after selling down to that level on strong volume, and the stock closed well off of the Tuesday high (22.10). In a market upside move, however, OVER can make this roll up in a week to two weeks. Not bad for a 15% move on the stock and even better on the options.
Volume: 3.238M Avg Volume: 1.372M
BUY POINT: $21.11 Volume=2M Target=$24.25 Stop=$19.63
POSITION: GUO BD - Feb. $20c (66 delta) and/or Stock
http://www.investmenthouse.com/cd/over.html
Revisited upside:
AEM (Agnico-Eagel Mines--$16.85; +0.49; optionable): Gold mining
Play Date: 09/19/2002
http://biz.yahoo.com/p/a/aem.html
STATUS: Cup w/handle. Moving in a 4-month base, forming the handle in the last two weeks. Tuesday it tapped the 10 day MVA on the low (16.35) and rallied to close at the session high as volume moved above average. Looks ready to make the breakout. Solid accumulation at 5 up weeks on rising volume to 3 distribution weeks (down weeks on rising volume). Relative strength continues to breakout on the move.
Volume: 807.3K Avg Volume: 750.272K
BUY POINT: $17.05 Volume=1.2M Target=$20.55 Stop=$15.75
POSITION: AEM BC - Feb. $15c (75 delta) and/or Stock
http://www.investmenthouse.com/cd/aem.html
Downside:
CVTX (CV Therapeutics--$19.83; +0.67; optionable): Drug manufacturer
http://biz.yahoo.com/p/c/cvtx.html
STATUS: Put. CVTX formed a head and shoulders pattern from mid-July to Monday, more or less completing the pattern that day as it tested down to 18 intraday. It was up Tuesday, but on lower, below average volume as it tested the 10 day MVA (20.48) on the high and fell back. There is resistance at 20, and we are looking for CVTX to roll over here and move down to near the July low.
Volume: 540.08K Avg Volume: 654.863K
BUY POINT: $19.65 Volume=750K Target=$16 Stop=$21.25
POSITION: UXC WD - Nov. $20p (-67 delta)
http://www.investmenthouse.com/cd/cvtx.html
MEMBER PORTFOLIO: CUB, EBAY, HOTT; LOW, NOC, PG, QLGC, RCII, SRCL, WM
These are the stocks that our subscribers vote to put in a 'portfolio' to track their progress and comment upon when they reach buy points, sell points, or levels to write some covered calls on. They are not covered every report, but when something interesting is developing we take note.
PG 09/21 Test 18 88.04 -2.7 91.55 103 5.1M 5.5M 89.45
Tanked to the simple 50 day MVA with many of the cyclicals.
CONTINUING/WATCHLIST: These are stocks that are current plays (the buy point hit), waiting for the buy point to be hit (buy not hit), or buy not made for various reasons (buy alert not issued). The date references the date the play first appeared on the report. Pivot is the buy point.
Stock Date Play Close +/- Pivot Tgt Vol TgtV Stop
$OEX 09/21 Bounce 410.87 -6.51 424.45 438 17M 0 419
Current. Bleeding away on us and perhaps have overstayed the position. Still believe a good bounce is coming.
ADLR 09/21 cup hdl 13.96 -0.14 14.74 17.74 131K 161K 13.65
Buy not hit. Still in the handle and looking solid.
AEM 09/19 cup hdl 16.85 +0.49 17.05 20.55 807K 1.2M 15.75
Buy not hit. Looks ready with good volume move.
ALLY 09/07 cup hdl 14.76 +0.26 15.86 18.25 393K 675K 14.55
Current. Held the 50 day MVA with a good bounce. Some resistance at 15.
AMGP 08/28 cup hdl 29.98 -0.19 30.32 34.94 149K 350K 28.65
Current. Holding the 10 day MVA with 2 doji's on low volume. Looks ready to move up as it is holding at support at 30.
AMMD 09/05 cup hdl 20.75 -0.35 23.57 27 241K 420K 21.92
Buy not hit. Falling below the 50 and 200 day MVA.
CARS 08/30 cup hdl 24.45 +0.11 25.18 28.95 137K 400K 23.42
Buy not issued. Holding above the 50 day MVA on low volume. Waiting.
CCCG 09/12 Cup 13 +0.09 13.45 16.15 82K 51K 12.41
Buy not hit. Still in the handle, showing a big volume spike Tuesday. Looks ready.
CNMD 09/23 Put 19.13 +0.45 18.49 16 161K 220K 19.25
Buy not hit. Moving up for another test.
COH 08/22 cup hdl 26.76 -0.74 27.55 33 836K 1.4M 28
COH 08/13 BO 26.76 -0.74 25.55 30 836K 1.4M 28
Current. Test of the 50 day MVA with a hammer doji on some rising volume. Could be ready.
CUB 09/18 Put 17.86 -0.79 18.98 16 77K 85K 21
Current. Selling below 18 day MVA finally.
CVTX 09/24 Put 19.83 +0.67 19.65 16 540K 750K 21.25
New.
FTN 09/14 Put 34.05 -0.79 36.59 32.85 490K 500K 36.35
Took the gain.
GLG 09/18 cup hdl 9.85 -0.05 10.59 12.75 1.1M 1.3M 9.45
Buy not hit. Looking good in the handle over the 18 day MVA.
HOTT 07/06 Test 50 18.73 -0.22 0 0 702K 1M 0
JP 08/30 Put 39.07 -0.82 41.72 38.55 445K 700K 41.35
Current. Falling on rising volume.
KKD 09/21 Put 30.6 -1.6 32.4 29.65 1.1M 875K 33.75
Current. Tanking on rising, above average volume.
KMG 09/12 Put 40.5 -0.96 43.74 40 748K 700K 43.45
Took the gain.
LOW 07/06 Test 50 40.61 -0.69 0 0 5.2M 0 0
Not doing it, testing the simple 50 day MVA on the low.
NCC 09/17 Put 27.4 -0.54 28.96 25.95 1.4M 14M 29.75
Current. Broke below 28 and falling on average volume.
NOC 07/06 Test 50 126.33 -0.86 0 0 1.3M 1.7M 0
OVER 09/24 BO 20.95 +0.93 21.11 24.25 3.2M 2M 19.63
New.
PEP 09/11 Put 36.77 -0.43 39.35 36 5.7M 7M 39.05
Took the gain.
PETM 08/26 cup hdl 18.13 -0.07 17.04 20.45 1.6M 2.8M 17.25
Current. Tested the 18 day MVA on the low again. Holing up well in a weak market.
PG 09/21 Test 18 88.04 -2.7 91.55 103 5.1M 5.5M 89.45
Tanked to the simple 50 day MVA with many of the cyclicals.
QLGC 08/17 CCall 28.1 +0.74 36.48 0 18M 12M 33.55
Current. Bounced up on strong volume.
RCII 08/24 Test 18 50.7 -0.92 58.02 66.45 395K 701K 53.96
SCSS 09/21 cup hdl 6.04 +0.19 6.02 7.25 561K 200K 5.61
Current. Making the nice move on strong volume.
SKO 08/27 Put 13.4 +0.17 14.59 12.25 293K 300K 14.75
Took the slight gain.
SY 09/19 Put 11.5 -0.25 12.75 10 445K 680K 13.55
Showing a hammer doji at 11.50. May bounce up to test 12 here.
SYK 09/23 cup hdl 55.43 -3.83 60.55 69.63 2.2M 1.1M 57.65
Buy not hit. Tanked.
TT 09/19 cup hdl 13.5 -0.09 13.71 16.55 15K 50K 12.71
Buy not hit. Doji above the 10 day MVA. The handle is wedging higher, not the best action.
UPC 09/17 Put 26.67 -0.73 28.32 26 635K 615K 28.95
Current. Now it is tanking on some better volume.
VMI 09/10 BO 23.59 +0.76 24.23 26.85 71K 120K 22.53
Buy not issued.
VMI 08/30 BO 23.59 +0.76 22.38 26.85 71K 120K 23
Current. Nice recovery off the 50 day MVA on rising, above average volume.
VRTS 08/19 CCall 13.72 +0.25 19.76 20 14M 8.5M 17.45
Current. Modest move up on above average volume.
VWKS 08/30 cup hdl 7.4 -0.4 8.45 10.25 381K 890K 7.86
Buy not hit. Looked better, but then broke below the 50 day MVA on rising, average volume.
WEN 09/21 Put 32.22 -0.31 32.75 30 1.3M 1.6M 33.33
Ready to fall lower with the doji below the 10 day MVA.
Good Investing!
Jon L. Johnson and The Daily Staff
All of the foregoing is commentary for informational purposes only. All statements and expressions are the opinion of Online Investment Services, LP or its paid consultants and are not meant to be a solicitation or recommendation to buy, sell, or hold securities. We are not licensed or registered in the securities industry. The information presented herein and on our related web site has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. The security portfolio of Partners of Online Investment Services, LP or its paid consultants may, in some instances, include securities mentioned herein and on our web site. Estimates, assumptions and other forward-looking information are subject to the limits of forecasting. Actual future developments may differ materially due to many factors.
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us stock market
understanding the stock market
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