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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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THE PLAYS:
NEW PLAYS
Upside:
ABFS (Arkansas Best--$29.08; +1.49; optionable): Keep on trucking
http://biz.yahoo.com/p/a/abfs.html
STATUS: Breakout. Breaking out of a 9-month cup with handle base on news that ROAD was going to see business pickup in Q4 based on rising demand right now. That is some positive news; truckers move the goods for consumers and businesses, and if demand is again rising for trucks there is something going on in the economy (though most small businesses you talk to don't seem to agree!). In any event the truckers made strong moves. ABFS is one we like because of its outstanding accumulation (8 up weeks on rising volume to just 4 down weeks on rising volume. Relative strength is breaking out along with the stock and money flow is huge. Volume on the move was excellent.
Volume: 671.975K Avg Volume: 280.727K
BUY POINT: $29.18 Volume=421K Target=$33.45 Stop=$27.14
POSITION: FDQ LE - Dec. $25c (76 delta, low OI) and/or Stock
http://www.investmenthouse.com/ct/abfs.html
Downside:
LH (Laboratory Corp.--$32.07; +1.07; optionable): Medical labs
http://biz.yahoo.com/p/l/lh.html
STATUS: Put. Monday LH broke below the short term moving averages on a big volume spike. Tuesday it tested those levels again (18 day MVA at 32.34) but fell off of the intraday high (32.80) on lower volume (though still above average). We are looking for this test to fail and the stock to start to fall once again.
Volume: 2.931M Avg Volume: 1.911M
BUY POINT: $31.78 Volume=2.5M Target=$27.75 Stop=$33
POSITION: LH WG - Nov. $35p (-61 delta)
http://www.investmenthouse.com/ct/lh.html
CONTINUING PLAYS:
GDW (Golden West Financial--$61.58; -1.3; optionable): Savings and loan
Play Date: 09/21/2002
http://biz.yahoo.com/p/g/gdw.html
STATUS: Put. Tested the 10 day MVA once more on the high (63.40) and turned over on a big jump in volume. This comes after a lower volume move back up to that level following the high volume selloff. This is the weak test, the 'kiss goodbye', and we are looking at more positions on further selling.
Volume: 952.6K Avg Volume: 677.227K
BUY POINT: New positions: 61.45 (orig. $62.29). Volume=675K Target=$58.55 Stop=$63.85
POSITION: GDW WM - Nov. $65p (-55 delta)
http://www.investmenthouse.com/ct/gdw.html
STJ (St. Jude Medical--$35.66; -0.74; optionable): Medical appliances
http://biz.yahoo.com/p/s/stj.html
STATUS: Put. STJ started to fall Tuesday, dropping from a test of the 18 day MVA (36.53). Volume was not strong, back below average. Still ripe for more downside action from here.
Volume: 846.1K Avg Volume: 1.261M
BUY POINT: New positions: 35.45 (orig. $35.95) Volume=1.9M Target=$32.05 Stop=$37.35
POSITION: STJ MH - Jan. $40p (-54 delta)
http://www.investmenthouse.com/ct/stj.html
WEN (Wendys International--$32.22; -0.31; optionable): Burgers and fries
http://biz.yahoo.com/p/w/wen.html
STATUS: Put. Showing a doji below the 10 day MVA (32.60) on some rising though still below average volume. Second doji in a row and it looks as if WEN is ready to roll over. We were going to wait for a test of the 18 day MVA (33.32), but it does not look as if it will make that.
Volume: 1.293M Avg Volume: 1.363M
BUY POINT: 32.15. Volume=1.6M Target=$30 (initial) Stop=$33.33
POSITION: WEN XG - Dec. $35p (-57 delta)
http://www.investmenthouse.com/ct/wen.html
WATCHLIST/ CONTINUING:
Still looking good: GLG; CENT; RINO, RESP (ready to fall).
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.
ABFS 09/24 BO 29.08 +1.49 29.18 33.45 672K 421K 27.14
New.
AET 09/23 Put 36.75 -2.21 38.65 35.85 1.5M 1.7M 40.25
AGY 09/14 Put 22.89 -0.25 25.55 22 208K 500K 23.55
Took the gain.
AMGN 09/04 Put 42.07 +2.06 43.94 40 22M 15M 45.25
AMLN 09/18 cup hdl 14.53 +0.89 13.55 16.25 965K 750K 12.45
APOL 08/15 A Wedge 42.23 -0.64 40.65 48 2.1M 3.3M 39.94
AXP 09/03 Put 30.96 -0.31 33.18 29.25 5.3M 8.5M 33.55
BDK 09/16 Put 40.4 -0.36 42.81 38.45 1.1M 850K 43.55
BLC 05/25 Flat 22.71 -0.59 24.25 30 276K 342K 22.55
BMS 08/21 BO 49.93 -1.82 52.02 56.94 458K 450K 50.85
BRCD 07/17 BO 9.73 -0.17 19.8 25 13M 17M 19
BRCM 08/17 CCall 12.77 -0.44 19.2 19.8 10M 9M 17.25
CENT 09/12 BO 15.8 -0.03 16.15 18.15 136K 300K 14.94
CLE 09/07 DB hdl 21.46 +0.17 22.41 25.94 337K 365K 20.84
CTSH 09/05 A Wedge 53.7 -2.89 60.35 67.94 890K 348K 56.75
Tanking.
CUB 09/18 Put 17.86 -0.79 18.98 16 77K 85K 21
FTN 09/23 Put 34.05 -0.79 34.45 32 490K 500K 36
Took the gain.
GDW 09/21 Put 61.58 -1.3 62.29 58.55 953K 675K 63.85
GDW 09/14 Put 61.58 -1.3 63.54 60 953K 675K 64.55
GLG 09/18 cup hdl 9.85 -0.05 10.59 12.75 1.1M 1.3M 9.45
GSK 09/21 Put 35.51 -0.05 35.95 32 702K 1.5M 37.35
HD 09/16 Test 50 28.41 -1.47 34.55 38 14M 10M 32.13
LEXR 09/21 cup hdl 4.05 +0.2 4.31 5.15 220K 650K 3.95
LH 09/24 Put 32.07 +1.07 31.78 27.75 2.9M 2.5M 33
New.
MMSI 09/23 A Wedge 18.66 -0.31 19.51 22.55 172K 150K 17.88
MSFT 09/07 Put 45.68 +0.45 47.41 44.15 52M 45M 48.05
Took the gain.
MSTR 08/31 Test 50 9.72 -0.37 11.55 14 441K 255K 10.74
PDCO 09/21 cup hdl 50.63 -1.56 53.21 61.25 567K 557K 49.49
PENN 09/14 cup hdl 17.62 0 20.25 24.35 299K 480K 18.65
PEP 09/11 Put 36.77 -0.43 39.35 36 5.7M 7M 39.05
Took the gain.
PFE 09/07 Put 28 -0.64 30.55 27 21M 25M 30.25
PIXR 08/30 Test BO 46.46 -0.18 50.25 56.55 669K 580K 48.15
POS 09/19 Put 27.49 -0.14 29.15 26 152K 265K 29.45
PRX 08/20 cup hdl 26.84 -0.59 28.91 34.65 265K 525K 26.89
PSS 09/11 Test BO 56.07 +0.66 58.08 64 241K 500K 55.45
RESP 09/19 Put 31.87 +0.15 30.98 28 145K 250K 32.55
RINO 08/28 cup hdl 15.12 +0.57 13.8 16.75 538K 300K 13.75
SHRP 09/14 cup hdl 19.26 -0.14 20.85 25 140K 200K 19.39
STJ 09/21 Put 35.66 -0.74 35.95 32.05 846K 1.9M 37.35
STT 09/17 Put 37.51 -1.51 39.59 35.75 2M 1.5M 40.97
SY 09/19 Put 11.5 -0.25 12.75 10 445K 680K 13.55
SYK 09/23 cup hdl 55.43 -3.83 60.55 69.63 2.2M 1.1M 57.65
TCB 09/17 Put 41.68 -0.32 44.65 40.75 541K 375K 44.25
TEVA 08/12 DB hdl 67.87 +0.26 68.25 77.85 744K 1.2M 66.50
TIER 09/04 cup hdl 19.3 -0.61 20.21 23.25 180K 239K 18.65
TTWO 08/24 cup hdl 26.78 +1.1 26.61 31.94 1.2M 1.5M 24.75
TTWO 08/17 cup hdl 26.78 +1.1 24.75 29.85 1.2M 1.5M 24.75
UNTD 09/21 Test 50 9.52 -0.78 11.03 13.35 320K 800K 10.26
WEN 09/21 Put 32.22 -0.31 32.75 30 1.3M 1.6M 33.33
Good Investing!
Jon L. Johnson and your Technical Traders Report Team
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 in 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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