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Nokia's warning gives reason for pause

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A pre-market quarterly earnings warning from the world's largest cell phone maker Nokia (NYSE:NOK) $17.21 -18.62% gave investors a reason for pause, where the major indices saw a mixed to lower trade, with technology sectors showing their first sign of rest in over a week.

Market Snapshot / Internals - 04/05/04 Close

The Dow Industrials (INDU) 10,570.81 +0.12% scratched out a gain by the close, while the small-cap Russell-2000 Index ($RUT.X) 599.33 -1.16%, which looked set to trade all-time highs never did muster a gain, or show signs of follow through bullishness.

Treasuries did find some buying after sharp selling, which began on Friday, with the 10-year YIELD ($TNX.X) falling 4.9 basis points to 4.171%, while the longest-dated 30-year YIELD ($TYX.X) edged back a more modest 2.7 basis points to 5.016%.

Despite the recent run higher for the Semiconductor Index (SOX.X) 508.07 -2.05%, an intra-day low of 502.36 found buyers holding firm above its WEEKLY Pivot of 501.86.

Pivot Analysis Matrix

As the S&P Banks Index (BIX.X) 345.64 +0.31% tried to see trade higher at its WEEKLY Pivot, the SOX.X came close to testing its WEEKLY Pivot, with handset chipmakers seeing some defensive selling on Nokia's warning. I couldn't come up with any correlative support levels in tomorrow's pivot matrix, but marked those levels of resistance where some correlations can be found.

iShares Cohen & Steers Realty Majors (AMEX:ICF) - Daily Intervals

There was definitely some continued fallout, or negativity shown to interest-rate sensitive stocks in today's trade, where the iShares Cohen & Steers Realty Major (AMEX:ICF) $108.50 -4.44% lead today's list of iShare percentage decliners. I'm also seeing where the NYSE-listed shares of Cohen & Steers REIT (NYSE:RTU) $18.54 -3.98% traded a 52-week low, as did Apartment Investment & Management Company (NSYE:AIV) $29.32 -2.91%, Government Property (NYSE:GPP) $12.25 -3.92%, Capital Lease Funding (NYSE:LSE) $12.35 -2.75%, Affordable Residential Community (NYSE:ARC) $17.96 -1.75%.

One investor noted that many high yield closed end fund, similar to Pacholder High Yield Fund (NYSE:PHF) $9.15 -3.37% have been hit hard the past two sessions. In this weekend's "Ask the Analyst" column, I discussed the Pacholder High Yield Fund (PHF) per a couple of e-mails received during the week. I'm noting tonight that today's trade did see a break below the $9.41 level, where today's lows of $8.90 did find some buyers at the rising 200-day SMA ($8.96), but an investor that is starting to count any investment's decline in "months of dividends gone" is probably too OVERLEVERAGED in this asset class, and needs to get things under control.

ANY investor that owns a closed-end fund, regardless of asset class may want to review their asset by visiting this link, where you can get a quick snapshot glance at some of the funds top holdings.

While the Pacholder High Yield (PHF) is actively managed with a portfolio turnover of 51% (meaning what's was there last year at this time, half of it has probably been sold). Pacholder High Yield (PHF) as discussed previously has traded at a premium to its current NAV (Net Asset Value) of $8.72 ($8.75 last week). Top SECTOR weightings can be found for your holdings. PHF's top sector weighting is in media/telecom (27.23%). I looked at one of their top holdings where these company's trade publicly with the underlying shares of Rural Cellular (NASDAQ:RCCC) $10.12 +3.79% gaining in today's trade, but Charter Communications (NASDAQ:CHTR) $4.36 -2.24% fell back to test its 200-day SMA.

I also checked an OPEN-END high yield fund with the AIM High Yield Fund (AMHYX) $4.42 (unch) and American Funds High-Income Trust A (AHITX) $12.30 +0.16%, where there NAV's (Net Asset Values) are tabulated each day.

Still, a weekly bar chart of the American Funds High-Income Trust A (AHITX) shows the OPEN-END fund traded a high of $12.61 in mid- January, where at today's close, would represent a 2.45% decline.

Here I might note a difference as it relates to the CLOSED-END fund of PHF versus the OPEN-END fund AHITX, is that we may well be seeing the PREMIUM of the PHF, which the MARKET built into PHF, unwinding back to its published NAV (Net Asset Value).

Index traders and investors are urged to review a June 15, 2003 Ask the Analyst column "Sector/Index Trading with HOLDRs and iShares," which lists some resources of information on these products. link

Dow Industrials (INDU) Chart - Daily Intervals

The Dow Industrials (INDU) 10,570.81 +0.11% came just shy of testing its WEEKLY R1, but traded strong relative to the other major indices. Alcoa (NYSE:AA) $36.50 +1.69% traded strong, but fell to $35.05 in extended hours after reporting quarterly EPS of $0.41, which matched consensus estimates, on revenues that rose 11% year-over-year to $5.7 billion.

S&P 500 Index Chart - Daily Intervals

The morning lows found support at the MONTHLY 38.2% retracement, where despite an earning's pre-announcement from Nokia (NYSE:NOK) $17.21 -18.62%, which triggered profit taking among Semiconductors (SOX.X) 508.07%, especially handset chip makers, the SPX showed resilience. Many analysts look for first quarter earnings to be impressive, as there are some "easy" comparables to last year, when the U.S. was just going to war with Iraq, and corporate spending was very weak.

Everything looked fine for Nokia (NOK) as it had bounced from the $19.50 to test its starting to round lower 50-day SMA of $21.25 in yesterday's trade. Until they told analysts that earnings and revenues were going to be shy of expectations.

NASDAQ-100 Tracking Stock (QQQ) - Daily Intervals

Yahoo! Inc (NASDAQ:YHOO) $48.77 -2.44% traded off its 52-week high set on Monday after being downgraded based on "valuation" and was first day YHOO traded below its prior session's low in 8 sessions. Almost identical pattern to the QQQ. Yahoo! reports earnings after tomorrow's close, with consensus estimates at $0.11 per share, compared to year-ago quarter's EPS of $0.08. At a 52-week high, there's usually little room for disappointment and if tech decides to take a rest, a break below today's lows could see the QQQ pull back to our WEEKLY 61.8% retracement, which would tie in with the backfilling of the nonfarm payroll gap higher. I'm just noticing that Monday's gains came on some very light volume, which might suggest there's not as much interest in the QQQ up at these levels.

Jeff Bailey

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