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Strategies & Market Trends : Technical analysis for shorts & longs

SPY 660.19

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To: Johnny Canuck who wrote (34789)	10/18/2001 3:25:58 AM
From: Johnny Canuck	Read Replies (2) of 68092

The Expected Retrace By Magician 10/17/2001 Well Mr. Bear returned from vacation today to feast on some absurd valuations. Supposed "good" news from INTC and IBM was shrugged off by the market today as finally Bulls came to their senses again. Actually, today's move down had more to do with options expiration on Friday than with anything else but don't expect the talking heads on TV to say that. The market gapped open as expected but quickly fell into the red in the first hour. Poor trading action in SUNW was a signal that all was not well with the market on the open. Very rarely does SUNW not participate in a rally or gap open and when it fails to participate traders should take notice. News that 20 members of Sen. Daschle's staff tested positive for anthrax and that another letter laced with anthrax was sent to the Governor of New York was used as the excuse to take the market down. A late day warning by SEBL was the icing on the Bear's cake as it caused a wave of selling that spread to most sectors. We have been waiting for this dump for a couple of days now. Traders who positioned in smallcaps and exited large caps should have done quite well today and should continue to do well in the next few days. In economic data today it was reported that Eurozone inflation fell in the latest month to an annualized rate of only 2.5%. Still, traders should expect the ECB bankers to find some reason not to reduce interest rates so they can continue their fight against a non-existent enemy. Maybe an inflation rate of 0% will get them to act. In other news Mortgage applications jumped 18% last week, a good sign. However, new housing permits showed a larger than expected decline and should be monitored going forward. Jobless claims data for last week will be released tomorrow as will the Philadelphia Fed Survey. The Dow lost 151.26 to close at 9,232.96, the Nasdaq lost 75.73 to close at 1,646.34 and the S&P 500 lost 20.45 to close at 1,077.08. RMBS came crashing back to a slightly less than bloated price, dropping 22% on heavy volume. CSCO yet again hit its max pain zone on options week. For the last several months CSCO's Max Pain has been $15. The stock always manages to trade up to $17 the week before expiration before falling the week of. CSCO is the most consistent max pain theory play we have identified. ADSX retraced today as expected, closing down 18% on heavy volume. This stock likes to follow trends. In after hours TXN warned for the next quarter. It will be interesting to see how the market and semi stocks react tomorrow on the news. Volatility should pick over for the remainder of the week with options expiration on Friday. We have been calling for a retrace and a fast drop for a few days now so traders should not have been surprised by today's drop. October 18th is an up day on the Nasdaq 68% of the time with 15 up days and 7 down days since 1971. Stocks to Watch: Yesterday's stocks to watch turned in stellar performances today. LOR moved higher by 13% on heavy volume. News that GlobalStar won a contract from the Italian Navy (they need satellite phones on gondolas?) helped but was not the reason for the move. Traders should note that President Bush is meeting with Jiang Zemin in Shanghai on October 20-21st. They are expected to discuss trade, weapons proliferation and human rights. LOR has had a satellite sale to China stalled by the US Government and this has been a major overhang on the stock. A run into the meeting on expectations of resolution should be in the cards for LOR. RAZF jumped out of the gate and ended the day higher by 42% on heavy volume. We continue to hold and expect RAZF to move into the $0.40's in the coming days. IBAS hit our $1 target this morning and we used the strength to reduce our position. We will re-enter on a solid break of $1 or on any dips into the $0.70's. We are focusing on stocks that are winding up for runs in the near term and taking gains on big winners such as BVSN and IBAS. We initiated positions in two other stocks today, LOUD and our old friend GMGC. LOUD is trading at a discount to its cash value of $1.60. LOUD is another pick-up on our small/microcap pop list. With a little patience LOUD should make a nice move over the coming days. We are expecting a run into earnings next week. LOUD doubled during the last rally and at its current valuation a repeat of that is a high probability. We also entered GMGC today. GMGC released news last night concerning the resolution of its toxic financing. GMGC's new CFO has managed to convince the companies convertible preferred crook holders to convert all their shares at a very reasonable price, using a reset price higher than what they were entitled to. GMGC has avoided substantial share dilution by accomplishing this and is among a select few company to successfully emerge from toxic financing. We believe some major news is on the horizon here as these toxic financing sharks do not walk away from free shares this easily unless something big is happening. Financing cleanups such as this are usually an indication of a buyout or capital investment down the road. Removal of the toxic's should all but eliminate much of the shorting of GMGC as the sharks have now flipped to the long side. Earnings are next week and hopefully some good news.

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