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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: drsvelte who wrote (22198)	7/20/1999 6:09:00 PM
From: Iris Shih	Respond to of 69854

OPTIONS-More S&P downside signaled, extent unclear CHICAGO, July 20 (Reuters) - Bears have begun restating their case for the Standard & Poor's 500 (S&P) this week as options and other technical indicators suggested a market ripe for further downside correction, analysts said. Contrarians cited a still-large overhang of calls versus puts and a still-low reading in the Market Volatility Index (^VIX - news) as indicating a market overly comfortable with the upside. Some also pointed to weaker chart formations and the end of a seasonally strong period as strengthening the case for a deeper correction after Tuesday's slide. ''I see a continuation of what we've had in the last two weeks,'' said Elliot Spar, senior options strategist, Gruntal & Co. Inc. ''What you've got here is good earnings but it's old news. It's well built into prices.'' ''It looks like the market is trying to put in a short-term low,'' said Tim Ord, editor of The Ord Oracle. ''But the uptrend's over.'' The trickier question for many was figuring out how much would the market correct and for how long. Tuesday's sharp decline began a down phase that should continue for the balance of this week, according to Jerry Hegarty, analyst with Cape Market Research. ''The probability of the next 50.00 S&P future points being down versus up remains about about 5:1,'' Hegarty wrote in Tuesday morning's commentary. On Tuesday, September S&P 500 futures shed 30.50 points, closing pit trading at 1,387.50. The cash S&P 500 dropped 30.55 points to 1,387.50, and the cash Nasdaq Composite fell more than 98 points to 2,732.18. The VIX, which measures implied volatility of several Standard & Poor's (OEX) 100 strikes and typically moves opposite the stock market, advanced 2.94 points or 15.1 percent, to 22.41. Ord said he was unsure whether Tuesday's drop signaled the start of a short-term consolidation or that the market had topped. He noted that the VIX on Friday fell to 17.70, near last July's 16.73 level that preceded a market correction. He also said September S&P 500 futures on Tuesday punched below key support at 1,412, a breakout area from last Thursday. He said if September S&Ps on their next rally fail to return above 1,418, they could drop again. ''The next rally will tell me if we'll have entered a consolidation or if we've actually peaked,'' Ord added. ''I don't know if we'll get a 20 percent correction, but I wouldn't be surprised'' over the next few weeks. ''The worst kind of correction is what we've got now,'' Spar said. He said if the market exhibits the same momentum on the downside that it has on the upside, and skittish buyers bail out, he looked for a pullback in the cash S&P 500 to as low at 1,350. In the NASDAQ Composite, which pierced trendline support Tuesday near 2,800, he saw a drop to as low at 2,650. But he also figured the decline would occur quickly. ''Overall, at the pace we're going, this is going to be done by Thursday,'' Spar said.