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Daily Newsletter, Wednesday, 10/31/2001

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PremierInvestor.net Newsletter              Wednesday 10-31-2001
                                                  section 1 of 2
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In section one:

Market Wrap: They bought them like they were going out of style!
Market Sentiment: Seesaw battle ends in a draw
Play-of-the-Day: Unsure About Insurance?
Watch List: SZA, PG, MOVI, TEVA

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U.S. Market Numbers
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MARKET WRAP  (view in courier font for table alignment)
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      10-31-2001          High     Low     Volume Advance/Decline
DJIA     9075.14 - 46.84  9223.07  9064.41 1.32 bln   1929/1172
NASDAQ   1690.20 + 22.79  1721.69  1677.71 1.87 bln   2220/1367
S&P 100   544.43 -  0.63   552.84   543.55   Totals   4149/2539
S&P 500  1059.48 -  0.01  1074.79  1057.55             
RUS 2000  428.17 +  5.34   429.48   422.83
DJ TRANS 2195.84 +  0.58  2221.20  2194.82
VIX        35.28 +  0.13    35.55    33.67 
VXN        62.42 -  0.99    64.27    60.66
TRIN        1.51 
Put/Call    0.50
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===========
Market Wrap
===========

They bought them like they were going out of style!

I can remember my mother saying "they were buying them like they 
were going out of style."  I can't remember what she was talking 
about.  Maybe it was gasoline at 32.9 cents a gallon.  It could 
have been Hula Hoops too.  Today it was 30-year Treasuries.

Today's announcement by the Treasury Department to suspend future 
auctions of the 30-year Treasury had bond traders buying the 30-
year "like it was going out of style" because it was indeed going 
out of style.  Not that they were really out of style, but that 
supply was going to be limited for the near-future, if not 
forever.  

30-year YIELD Chart - 




Today's news from the Treasury Department had investors gobbling 
up 30-year bonds and driving its YIELD lower.  The U.S. Treasury 
said it wanted to stop issuance of the 30-year bond, hoping to 
save the government money and shifting its focus to short-term 
debt should federal coffers begin to feel the sting of the U.S. 
economic contraction.  This week, the U.S. reported it second 
largest surplus on record ($127 billion for fiscal 2001 ended 
September 30th), but analysts believe that report may be the last 
annual budgetary black ink for the government for the next couple 
of years.

The government also said there would not be a debt buyback in 
January of 2002 and that it would begin announcing any future 
debt buybacks on a quarter-by-quarter basis from this point 
forward.  Plans to retrieve some $9 billion in securities from 
circulation this quarter will proceed as planned.

The 30-year bond was first issued on a regular basis in 1977, 
which means that none of these bonds have matured to date.  
Private investors hold approximately $565 billion in the 30-year 
bond.

Is this a sign of better things to come?

Today's "surprise" move by the Treasury Department has some 
market participants wondering if this is a sign of better things 
to come for the economy in the future.  Treasury undersecretary, 
Peter Fisher, stated that the 30-year bond has been expensive for 
the government and tax payers as it has carried a higher rate of 
interest that has rewarded investors for holding the security 
with the longest exposure to inflation, reflecting expectations 
the nation will return to budget surpluses once the economy 
recovers.

"We do not need the 30-year bond to meet the governments current 
financial needs, nor those that we expect to face in coming 
years," said Mr. Fisher.  "Looking beyond the next few years, we 
believe that the likely outcome is that the federal government's 
fiscal position will improve after the temporary setback that we 
are now experiencing."  Mr. Fisher then conceded that if things 
don't go as planned, the government could always issue the 
longer-term 30-year bond again.

I agree with Irwin Kellner!

I (Jeff Bailey) don't tout myself as an economist, but I agree 
with economist Irwin Kellner and some other economists that 
today's move by the Fed is a bit perplexing and somewhat "risky."

With the 30-year YIELD at multi-year lows, why wouldn't the 
government be willing to lend HUGE amounts of debt at lower 
interest rates?  "Over the long run, they could be opening 
themselves up for higher average costs of the debt," said Mr. 
Kellner.

New challenges ahead

Just when investors think things are getting somewhat "boring," 
and pieces of a puzzle are beginning to fall into place, things 
change and a new dynamic or challenge presents itself.

In today's 01:00 EST update, we spent some time on the Insurance 
Index (IUX.X) and mentioned some relatively bearish technicals 
that looked to be unfolding there.  That update was not 
necessarily a coincidence as it relates to today's Treasury 
announcement.

Pension funds, hedge funds, bond funds and even insurance 
companies have bought longer-term Treasury bonds as these bonds 
help eliminate "credit risk."  Yes, the Federal government could 
conceivably default on its debt, but where would thing be if they 
did?  Would General Motors (NYSE:GM) or International Business 
Machines (NYSE:IBM) be in good shape if the government were in a 
state of default?  Answer: No.  If the government were in a state 
of default, it would be due to horrific economic conditions and 
lack of tax base where it derives revenue from.  

The challenge will be for a substitute to emerge for longer-term 
interest rates, and you can bet the MARKET will be quick to 
respond.

Remember Fannie Mae?

Subscribers know too well our profiling of Fannie Mae (NYSE:FNM), 
the mortgage lender, as a bearish candidate on the thinking that 
a higher bond YIELD tied to the 30-year and 10-year bond could 
put pressure on the stock.  Well... with today's dramatic drop in 
longer-term rates (caused by aggressive buying in the 30-year), 
guess what happened to Fannie Mae (FNM)?  You got it, the stock 
jumped higher.  At the time of today's announcement, shares of 
Fannie Mae were trading down about 1%, but by session's end the 
stock reversed course and finished up 2.4% at $80.96.  Still 
below where we profiled the stock as a bearish play, but today's 
bond market action really ate into some profits we were starting 
to see in our bearish play.

What some feel may take place is that corporations or government 
agencies like Fannie Mae (FNM) or Freddie Mac (NYSE:FRE) that 
carry higher credit ratings (their debt is backed by the 
underlying mortgages or protected by insurance) could emerge as 
longer-term benchmarks.

This presents a "can of worms" to many market participants.  Some 
investors may not be comfortable with investments that are backed 
by an asset that may actually depreciate during an economic 
downturn, or debt that may become dependent on insurance payments 
due to a potential default.

For Fannie Mae (NYSE:FNM) the challenge becomes how they look to 
actually try and hedge their mortgage lending activities.  For 
fiscal year 2000, FNM derived 89% of their revenues from 
mortgages.  3% came from fess, but 8% came from other interest 
income.  This "other interest income" may have come partially 
from longer-term Treasury bonds to help hedge the 15 and 30-year 
mortgages!

For Freddie Mac (NYSE:FRE) their challenge and business model 
looks to be slightly different that that of Fannie Mae (even 
though they're both mortgage lenders).  Freddie Mac (FRE) derived 
95% of 2000 revenues from mortgages, 5% from fees and nominal 
amounts from other income.  

Chart Comparison of Fannie Mae and Freddie Mac





There are quite a few similarities in the technicals of Fannie 
Mae (top) and Freddie Mac (bottom) with the subtle difference 
being where these stocks have traded relative to their moving 
averages.  Fannie Mae (FNM) looked technically weaker as that 
stock was beginning to fall below its 200 and 50-day moving 
averages.  This is, until today's Treasury announcement.  One 
reason for the "technical weakness" might have been that 8% 
"other income" from the fundamentals that Freddie Mac (FRE) 
wasn't showing in its financials.

Is there some type of bullish play that now presents itself?  I'm 
not sure as I don't know what the market is thinking from here.  
I was 14-years old in 1977 when the 30-year Treasury bond was 
first issued.  While I didn't start trading stocks and using the 
30-year YIELD as a guide in my trading back then, I just don't know 
what the market is going to "pick out" or use as a longer-term 
benchmark.  It may be the 10-year Treasury bond ($TNX.X).  
Until I get some more information, I'm quite tempted to move 
to the sidelines in a Fannie Mae (FNM) short until I get some 
type of information going forward (see play update for FNM).

This is suspicious

In today's 01:00 EST Update, we looked at a chart pattern called 
the "bearish triangle" that had been created in a breakdown for 
the Insurance Index (IUX.X).  The Insurance sector was under 
selling pressure today, but that pressure seemed to grow after 
today's announcement by the Treasury Department.  

What may be taking place for some stocks in this group is that 
near-term, the market is selling risk that it may not understand 
or be able to manage at this point.  Insurance companies make 
their money by actuarial tables, playing the probabilities and 
hedging risk.  Perhaps the 30-year Treasury bond (or lack of that 
bond going forward) has some market participants selling stocks 
in the group where the longer-term 30-year Treasury bond will not 
be available for hedging some insurance policies where a fixed 
rate of interest has been promised to the policyholder.  

Until some type of security emerges as a "benchmark" for longer-
term rates, some institutions may be hesitant to commit further 
moneys to insurance stocks until they have a better idea of how 
some insurance companies are going to be able to hedge their 
interest rate risk.

Today's Interest Rates

This commentary will help serve as an important reference point 
going forward.  At the close of today's trading, the 30-year 
YIELD finished at 4.873%, the 10-year YIELD closed at 4.263%, the 
5-year YIELD closed at 3.506% and the 13-week YIELD closed at 
2.01%.  A 30-year fixed rate mortgage was at 6.82%, a 15-year 
fixed rate mortgage yielded 6.36% and a 1-year ARM (adjustable 
rate mortgage) was at 5.92%.

As you can see, if Fannie Mae (NYSE:FNM) originated a loan 
yesterday for $100,000 at 6.8%, they might have rushed into the 
30-year bond this morning at 5%, captured a nice spread for 
approximately 30-years and been sitting fat and happy by 
session's end.

While the 30-year Treasury will continue to trade, there was a 
definite hunger for that bond today.  Today's announcement has 
created a new dynamic for the market to ponder.  It's our job to 
now try and figure out just what scenario unfolds from here 
regarding "benchmarks" that the market will try and key off of.  

Whenever we get the feeling that we've got things figure out and 
a strategy begins to unfold in our favor, how quickly things can 
change.

House for sale!

On www.realtor.com there's a house for sale in Manalapan, Florida 
for $39,900,000.  About a month ago, when mortgage rates were 
less than today's stated 6.82% 30-year fixed rate mortgage, our 
house payment (with 20% down) was about $193,000 per month.  At 
6.82% our house payment is $208,520 per month.

$39 million is a drop in the bucket to many companies that have 
used the longer-term 30-year Treasury as a benchmark and security 
to hedge their interest rate risk.  We might see some volatility 
in some of the YIELD sensitive portions of the markets in the 
near-term.  There's a lot of questions to be answered, but this 
is what makes investing/trading so interesting.

Today I feel like I've lost a long-term friend.

Jeff Bailey
Senior Market Technician


================
Market Sentiment
================

Seesaw battle ends in a draw
by Russ Moore

Seesaw battle ends in a draw. Despite a better than expected GDP 
number, blue chips suffered another negative session as the DOW 
closed with a loss of -0.5 percent. The NASDAQ, on the other 
hand, was the beneficiary of a few positive comments emanating 
from a technology conference in New York. The tech index finished 
on the upside with a gain of +1.4 percent. The big cap NDX added 
+1.7 percent.

Volume was moderate with the NYSE trading 1.31 billion shares and 
the NASDAQ moving 1.87 billion shares. Winners turned the table 
on the losers with a 19/12 victory on the big board and a 22/14 
score on the NASDAQ.

Retail, natural gas, and biotech helped soften the losses on the 
DOW while chips, networkers, and hardware sectors led the way on 
the NASDAQ.

The third quarter advance GDP fell -0.4 percent, versus the -0.9 
percent forecast. The Chicago Purchasing Mangers index marked its 
thirteenth month of contraction with a 46.2 reading.

Bond markets were on fire after the Government announced it would 
no longer issue the 30yr Treasury bond. The 30yr bond soared, 
with the yield falling from 5.20 to 4.88. The move was made to 
save the Government money by shifting focus to shorter-term debt 
instruments. 

Several pieces of economic data are due out tomorrow with the 
NAPM the most closely followed. Of course, the big number will 
have to wait until Friday, when the non-farm payrolls and 
unemployment numbers are released.


VIX 
Wednesday 10/31 close: 35.28


VXN
Wednesday 10/31 close: 62.42


30-yr Bonds
Wednesday 10/31 close: 4.88


Total Put/Call Ratio: .71


Equity Option Put/Call Ratio: .59


Index Option Put/Call Ratio:  1.46


===

NASDAQ 100 Index (NDX/QQQ)
52-Week High: 103.51
52-Week Low:   28.19
Current close: 33.90

Volume/Open Interest
Maximum calls: 35/57,403
Maximum puts : 33/69,403

Moving Averages
 10 DMA 34
 20 DMA 33
 50 DMA 33
200 DMA 43

Fibanocci Retracements
Relative High: 51.95 (05/22/01)
Relative Low:  27.00 (09/21/01)
38% 36.60
50% 39.57
62% 42.59

===

S&P 100 Index (OEX)
52-Week High:  834.93
52-Week Low:   491.70
Current close: 544.43

Volume/Open Interest
Maximum calls: 560/6,099
Maximum puts : 480/8,060

Moving Averages
 10 DMA  556
 20 DMA  555
 50 DMA  557
200 DMA  619

Fibanocci Retracements
Relative High: 680.03 (05/22/01)
Relative Low:  480.07 (09/21/01)
38% 556.14
50% 579.65
62% 603.55

===

S&P 500 (SPX)
52-Week High:  1530.01
52-Week Low:    965.80
Current close: 1059.78

Volume / Open Interest
Maximum calls: 1100/18,071
Maximum puts :  950/22,522

Moving Averages
 10 DMA 1080
 20 DMA 1079
 50 DMA 1087
200 DMA 1201

Fibanocci Retracements
Relative High: 1315.93 (05/22/01)
Relative Low:   944.75 (09/21/01)
38% 1086.75
50% 1130.62
62% 1175.23

==

DJIA (INDU)
52-Week High:  11,518.83
52-Week Low:    8,235.81
Current close:  9,075.14

Volume / Open Interest
Maximum Calls: 94/22,104
Maximum Puts   92/20,838

Moving Averages:
 10 DMA  9,290
 20 DMA  9,258
 50 DMA  9,406
200 DMA 10,265

Fibanocci Retracements
Relative High: 11,350.05 (05/22/01)
Relative Low    8,062.34 (05/21/01)
38%  9,308.92
50%  9,693.99
62% 10,085.60

==

Biotech Index (BTK)
52-Week High:  811.61
52-Week Low:   383.28
Current close: 548.68

Volume / Open Interest
Maximum Calls: 620/  325
Maximum Puts:  420/1,576

Moving Averages
 10 DMA 533
 20 DMA 506
 50 DMA 494
200 DMA 539

Fibanocci Retracements
Relative High: 811.61 (09/25/00)
Relative Low:  383.28 (03/22/01)
38% 546.22
50% 596.57
62% 646.71

==

Semiconductor Index (SOX)
52-Week High: 1280.84
52-Week Low:   362.00
Current close: 448.02

Volume / Open Interest
Maximum Calls: 570/ 503
Maximum Puts:  420/ 773

Moving Averages
 10 DMA 448
 20 DMA 442
 50 DMA 468
200 DMA 580

Fibanocci Retracements
Relative High: 710.78 (05/22/01)
Relative Low:  343.93 (09/27/01)
38% 484.50
50% 527.18
62% 570.57

==

Pharmaceutical Index (DRG)
52-Week High:  455.28
52-Week Low:   339.49
Current close: 386.18

Volume / Open Interest
Maximum Calls: 420/ 284
Maximum Puts:  400/1002

Moving Averages
 10 DMA 394
 20 DMA 394
 50 DMA 388
200 DMA 393

Fibanocci Retracements
Relative High: 448.43 (12/29/00)
Relative Low:  339.49 (03/22/01)
38% 382.22
50% 395.69
62% 409.03

*****

CBOT Commitment Of Traders Report: Friday 10/26
Weekly COT report discloses positions held by small specs
and commercial traders of index futures contracts on the 
Chicago Board Of Trade. 

Small specs are the general trading public with commercials being 
financial institutions. Commercials are historically on the 
correct side of future trend changes while small specs are not. 
Extreme divergence between each signals a possible market turn in 
favor of the commercial trader’s direction.   

S&P 500
Commercials   Long      Short      Net     %Change 
10/09/01     369,049   407,804   (38,755)   (10.6%)
10/16/01     378,866   415,289   (36,423)   ( 6.0%
10/23/01     377,177   413,658   (36,481)     0.1%

 
Most bearish reading of the year: (111,956) - 3/6/01
Most bullish reading of the year: (41,144)  - 5/1/01

Small Traders   Long      Short      Net      %Change
10/09/01       122,292    74,539    47,753    (5.2%)
10/16/01       124,568    73,779    50,789     6.3%
10/23/01       127,016    71,212    55,804     9.9%
  
Most bearish reading of the year:  36,513 - 5/01/01
Most bullish reading of the year:  91,122 - 3/06/01

NASDAQ-100
Commercials   Long      Short      Net     %Change 
10/09/01      24,662    38,020   (13,358)   21.5%
10/16/01      27,398    40,397   (12,999)   (2.7%)
10/23/01      29,920    40,358   (10,438)  (19.7%)

Most bearish reading of the year: (15,521) - 3/13/01
Most bullish reading of the year:  (1,825) - 1/02/01

Small Traders  Long      Short      Net      %Change
10/09/01       11,948     7,012    4,936      20.0%
10/16/01       12,901     6,893    6,008      21.7%
10/23/01       11,567     6,934    4,633     (22.9%)

Most bearish reading of the year:  (1,028) - 1/02/01
Most bullish reading of the year:   8,460  - 3/13/01

DOW JONES INDUSTRIAL
Commercials   Long      Short      Net     %Change 
10/09/01      24,873    10,194   14,679     16.2%
10/16/01      25,402    10,267   15,135      3.1%
10/23/01      25,568    11,832   13,736     (9.2%)

Most bearish reading of the year: (8,322) - 1/16/01
Most bullish reading of the year:  8,925  - 5/22/01

Small Traders  Long      Short      Net      %Change
10/09/01       3,517    12,294    (8,777)     23.0%
10/16/01       4,514    12,104    (7,590)    (13.5%)
10/23/01       4,902    11,900    (6,998)     (7.8%)
 
Most bearish reading of the year:  (7,572) - 5/08/01
Most bullish reading of the year:   1,909  - 1/16/01


                    Small Specs               Commercials
S&P 500         (Current)  (Previous)     (Current) (Previous)
Open Interest
Net Value        +55,804     +50,789        -36,481     -36,423

Total Open
Interest %       (+28.15%)  (+25.61%)     (-4.61%)   (-4.59%)
                 net-long   net-long      net-short  net-short


                     Small Specs             Commercials
DJIA futures     (Current) (Previous)    (Current) (Previous)
Open Interest
Net Value          -6,998     -7,590          +13,736    15,135
Total Open
interest %       (-41.65%)    (-45.67%)      (+36.73%)  (+42.43%)
                 net-short   net-short     net-long    net-long


                     Small Spec              Commercials
NASDAQ 100      (Current) (Previous)    (Current) (Previous)
Open Interest
Net Value         +4,633      +6,008         -10,438    -12,999

Total Open
Interest %        (+25.04%)   (+30.35%)     (-14.85%) (-19.17%)
                 net-long   net-long      net-short net-short


What COT Data Tells Us
----------------------
Indices:.Another flat week as Commercials hold steady on their 
S&P net-short contracts.

Gold:.Commercials cut their short contracts in half this week. 
Gold has certainly cooled off in the last month; however, another 
switch to a net-long position could see gold on the rise once 
again.

9/25  36,638 contracts net-long
10/02 67,122 contracts net-short
10/09 64,729 contracts net-short
10/16 51,816 contracts net-short
10/23 25,191 contracts net-short

Data compiled as of Tuesday 10/23 by the CFTC.


=========================
Play-of-the-Day (Bearish)
=========================

St Paul Co. - SPC - close: 45.90 change: -2.61 stop: 48.25

Company Description
The St. Paul Companies, headquartered in Saint Paul, Minn., USA, 
provides commercial property-liability insurance and non-life 
reinsurance worldwide. The St. Paul reported 2000 revenue from 
continuing operations of $8 billion, total assets of $35.5 
billion, and is ranked No. 222 on the Fortune 500 list of largest 
U.S. companies. (source: company press release)

Why We Like It:
If you read the 1:00 pm ET update from PremierInvestor.net today 
then you already know why we like shares of SPC for a short play.  
A few days ago we highlighted the pennant-shaped triangle forming 
in the insurance sector on the point-and-figure chart.  We were 
expecting a break one way or the other and it recently confirmed 
a downside breakdown.  I don't want to be redundant if most of 
our readers have already received the afternoon update but the 
sell signal given on the sector p-n-f chart is a powerful one.  
Hence we decided to find an insurance stock that was also showing 
weakness and St. Paul Co. fit the bill.  We did get a double-
bottom sell-signal by the close and there isn't long-term support 
for the stock until it hits the $39-$40 level.  SPC was one of 
the insurers that got hit hard with the WTC attack and the 
zealous rebound we saw from mid-September to mid-October has 
played itself out.  We are bearish on the stock with shares under 
$47 and will start the play with a stop just over today's high at 
48.25.  If you are looking for confirmation wait for shares of 
SPC to fall below its 200-dma (currently 45.80) or below price 
support at $45.  Our first target is $40.50 or 11 percent.

Picked on October 31st at $45.90
Gain since picked:         +0.00
Earnings Date              10/23 (confirmed)





==========
Watch List
==========

The PremierInvestor.net watch list is not designed to be read
as full fledged stock picks.  Rather we would prefer to offer
it as an extra tool in today's investor toolbox.  Think of it
as a radar screen with your own radar operator pointing out
interesting developments, technical patterns or potential plays
that you may or may not have seen on your own.  Due to time
constraints we do glance at the news but rarely do we have 
time to fully read pertinent news stories, due background 
research and other necessary screens that investors should do
before making a decision.  A common exercise is to read the
entry, glance at the sector and other stocks in that industry
and then compare what's happening in the stock to what's 
happening in the broader market indices.  We hope you enjoy
the Watch List and that it proves to be a useful tool for your
own trading success.

---

Suiza Foods - SZA - close: 58.97 change: +0.97

WHAT TO WATCH: If you're starting to believe all the nay-sayers 
that claim the market has to retest its September low then you
may want to look more closely at some defensive plays.  We think
SZA may be a stock to watch and its strength today could be a 
clue.  Yesterday, shares of SZA came down to bounce at the same
level it did two weeks before.  This actually looks like a good 
place to go long the stock with a tight stop under Tuesday's low 
but we'd rather have the stock confirm itself by closing back above 
its 50-dma or the $60 level.  This may end up on the play list
before the week is out.  Be aware that earnings are coming up in
the first week of November (around the 7th).




---

Procter & Gamble - PG -close: 73.78 change: -0.58

WHAT TO WATCH:  PG is another potential defensive play that could
really pay off if the broader markets begin a prolonged tumble.
The stock has slowly been digesting gains from its ascent from the
April lows and shares have bounce convincingly off the 200-dma 
last month and again off price support near $70.  The stock spent
much of today hovering around resistance at the $74 level.  A 
positive close tomorrow (above $74) could be the confirmation of a
new bullish trend.  The strong rally on Tuesday above its 50-dma
probably caught the attention of the technical trading crowd.  Our
only concern is the very heavy resistance at the $77 level.  The
stock has been stopped dead twice with a two-day attempt back in 
February and a three-day attempt back in August to climb above 
this level.  The MACD has turned bullish and is about to turn 
positive.




---

Movie Gallery, Inc - MOVI - close: 27.55 change: +3.00

WHAT TO WATCH: Shares of MOVI soared today on a strong breakout
above resistance at 25.50-26.00.  The stock has been a real 
winner for investors over 2001 beginning the year at $2.20 
(split adjusted).  We like the breakout today due to its strong
volume and the nature of MOVI's business.  Since the 9-11 attack
there has been renewed interest in business that would benefit
from a cocooning effect in the U.S.  The movie rental business
is one of them and by the looks of the chart the could be
plenty of upside.  Strongly considering waiting for a pullback.




---

Teva Pharmaceutical - TEVA - close: 61.80 change: -2.02

WHAT TO WATCH: TEVA, a generic drug maker, significantly beat 
analyst estimates with their 3Q earnings today and as a reward
investors hit their "sell" buttons.  The stock had been growing
weaker after it reversed a bullish breakout above its 50-dma on
October 17th.  Since that time the 50-dma has been a lid on the
stock's share price with any group support eroding away with the 
drug sector producing its own negative trend and breakdown.  A 
potential trigger to go short would be the stock under the 200-dma
(currently at 60.90) or under round number price support of $60.  
Our first target would be $55. 




---

FYI: Glancing at the Monday Watch List shows that QLGC, BBBY,
and AIG still look like potential short candidates.  





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DISCLAIMER
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This newsletter is a publication dedicated to the education
of stock traders. The newsletter is an information service
only. The information provided herein is not to be construed
as an offer to buy or sell securities of any kind. The
newsletter picks are not to be considered a recommendation
of any stock but an information resource to aid the investor
in making an informed decision regarding trading in stocks. It
is possible at this or some subsequent date, the editors and
staff of PremierInvestor.net may own, buy or sell securities
presented. All investors should consult a qualified professional
before trading in any security. The information provided has
been obtained from sources deemed reliable but is not
guaranteed as to accuracy or completeness. PremierInvestor.net
staff makes every effort to provide timely information to its
subscribers but cannot guarantee specific delivery times due to
factors beyond our control.

Please read our disclaimer at:
http://www.optioninvestor.com/page/oin/aboutus/disclaimer.html

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Do not duplicate or redistribute in any form.



PremierInvestor.net Newsletter               Wednesday 10-31-2001
                                                   section 2 of 2
Copyright © 2001, All rights reserved.
Redistribution in any form is strictly prohibited.

The entire newsletter is best viewed in COURIER 10 for alignment
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In section two:

Net Bulls
  New Bearish Plays:    Qualcomm - QCOM

Stock Bottom / Active Trader
  New Bearish Plays:    St. Paul Co. - SPC
  Bearish Play Updates: Fannie Mae - FNM


Trading Ideas
  Value Plays With Bullish Signals
  Breakout to Upside (Stocks $5 to $20)
  Breakout to Upside (Stocks over $20)
  Breakout to Downside (Stocks over $20)
  Recently Overbought With Bearish Signals (Stocks over $20)


=================================================================
Net Bulls (NB) section
==================================================================

============
NB New Plays
============

  --------------------
  New Bearish Plays
  --------------------

Qualcomm - QCOM - close: 49.05 change: +0.36 stop: 51.50

Company Description:
QUALCOMM Incorporated is a leader in developing and delivering 
innovative digital wireless communications products and services 
based on the Company's CDMA digital technology. The Company's 
business areas include CDMA chipsets and system software; 
technology licensing; the Binary Runtime Environment for Wireless
(TM) (BREW(TM)) applications platform; Eudora® e-mail software; 
digital cinema systems; and satellite-based systems including 
portions of the Globalstar(TM) system and wireless fleet 
management systems, OmniTRACS® and OmniExpress(TM). (source: 
company press release)

Why We Like It:
Before we begin, please take note that trading QCOM has always 
been a risky proposition.  Even now, with the stock a shadow of 
its former self, shares can still be volatile.  Take appropriate 
actions to protect your account.  Now the goods on our latest 
tech short play.  QCOM may have participated in the tech sector 
strength today but a closer look at the intraday trading doesn't 
give us, a group of normally optimistic chaps, much encouragement 
that the sell-off is over.  Quite the opposite.  The late day 
selling in dozens of tech stocks quickly erased the majority of 
gains has only lead us to believe we have farther to go on the 
downside.  Again you need to believe that we really are a bullish 
bunch of traders but to make matters worse the Nasdaq 100 went 
bear confirmed today which only reaffirms our doubts.  Shares of 
QCOM actually traded up to its 50-dma at its high before 
investors took the opportunity to sell into strength.  The second 
consecutive day of closing under the $50 level isn't a bullish 
sign either.  The MACD is about to produce a bearish crossover 
and we want to be ready for the next leg down.  There have been a 
number of brokers cutting their estimates on the stock lately and 
one of them from Merrill Lynch alluded to QCOM's large base of 
long-term interest rate sensitive assets.  With the surprise move 
by the U.S. Treasury to stop offering the 30-year bond there will 
be an even stronger downside trend for long-term interest rates, 
which will also weigh heavily on QCOM's earnings.  We doubt this 
will have much affect on the company's earnings report that is 
expected on November 6th, but the stock market is a machine that 
discounts future events now.  We are going to start the play with 
a relatively tight stop at 51.55 which was today's high and just 
above the 50-dma.  Our first downside target is $45 with a 
secondary target closer to $40.  Confirm stock and market 
direction before initiating a position.

Picked on October 31st at $49.05
Gain since picked:         +0.00
Earnings Date              11/06 (not confirmed)





==================================================================
Stock Bottom / Active Trader (AT) section
==================================================================

===============
AT New Plays 
===============

  --------------------
  New Bearish Play 
  --------------------

St Paul Co. - SPC - close: 45.90 change: -2.61 stop: 48.25

Company Description
The St. Paul Companies, headquartered in Saint Paul, Minn., USA, 
provides commercial property-liability insurance and non-life 
reinsurance worldwide. The St. Paul reported 2000 revenue from 
continuing operations of $8 billion, total assets of $35.5 
billion, and is ranked No. 222 on the Fortune 500 list of largest 
U.S. companies. (source: company press release)

Why We Like It:
If you read the 1:00 pm ET update from PremierInvestor.net today 
then you already know why we like shares of SPC for a short play.  
A few days ago we highlighted the pennant-shaped triangle forming 
in the insurance sector on the point-and-figure chart.  We were 
expecting a break one way or the other and it recently confirmed 
a downside breakdown.  I don't want to be redundant if most of 
our readers have already received the afternoon update but the 
sell signal given on the sector p-n-f chart is a powerful one.  
Hence we decided to find an insurance stock that was also showing 
weakness and St. Paul Co. fit the bill.  We did get a double-
bottom sell-signal by the close and there isn't long-term support 
for the stock until it hits the $39-$40 level.  SPC was one of 
the insurers that got hit hard with the WTC attack and the 
zealous rebound we saw from mid-September to mid-October has 
played itself out.  We are bearish on the stock with shares under 
$47 and will start the play with a stop just over today's high at 
48.25.  If you are looking for confirmation wait for shares of 
SPC to fall below its 200-dma (currently 45.80) or below price 
support at $45.  Our first target is $40.50 or 11 percent.

Picked on October 31st at $45.90
Gain since picked:         +0.00
Earnings Date              10/23 (confirmed)





===============
AT Play Updates 
===============

  --------------------
  Bearish Play Updates
  --------------------

Fannie Mae - FNM - close: 80.96 change: +1.93 stop: 80.99 *new*

In a move that shocked the market, the Treasury department 
announced that it would no longer offer 30-year bonds.  With the 
recent government surpluses and the expectation that the U.S. 
will be back on track to pay its debt the Treasury felt there was 
no longer a need to offer the 30-year bond which to many was the 
safest of securities.  This sudden move by the U.S. Treasury 
helped erase our +2% gain we had in the FNM play and essentially 
brought us back to dead even.  Why did FNM rally?  The removal of 
the 30-year bond and the new focus on the short-term treasuries 
will be one more factor in reducing long-term interest rates.  
Reducing long-term interest rates will spur home sales which is 
good for FNM.  However, all of the repercussions by the 
Treasury's decision today have probably not been considered yet.  
Thus we're willing to keep the play open with a scalpel thin stop 
versus just closing it altogether.  It's possible something may 
be discovered before the market opens that may cause fund 
managers to rethink how this decision will affect FNM.  Please 
note that our new stop is 80.99. 

Picked on October 19th at $80.99
Gain since picked:         +0.03
Earnings Date              10/15 (confirmed)





==================
  Trading Ideas
==================

This section contains stocks that meet criteria which may make
them of interest to long and short side traders.  These are not
recommendations, nor have they been reviewed by PremierInvestor
editors for investment potential.  However, each of them has
technical and fundamental characteristics that make them worthy
of further review by traders and investors looking for fresh ideas.
New stocks will appear daily following the market close.


--------------------------------- 
Value Plays With Bullish Signals 
--------------------------------- 
Ticker  Company Name               Close     Change 

FMX     Fomento Economico Mex      31.00     +0.80
BKNG    Banknorth Group Inc        21.93     +0.62
FCX     Freeport Mcmoran           11.10     +0.88
JRC     Journal Register Co        17.20     +0.68
RCII    Rent A Center Inc          27.25     +1.36

--------------------------------------- 
Breakout to Upside (Stocks $5 to $20) 
--------------------------------------- 
Ticker  Company Name               Close     Change 

RDA     Reader's Digest Assn       17.70     +2.05
OCAS    Ohio Casualty Corp         15.25     +1.70
GSPN    Globespan Inc              11.96     +1.41
MSO     Martha Stewart             16.45     +2.35
ENDP    Endo Pharmaceutical         9.85     +1.45

--------------------------------------- 
Breakout to Upside (Stocks over $20) 
--------------------------------------- 
Ticker  Company Name               Close     Change 

FOX     Fox Entertainment Group    22.01     +1.56
UNP     Union Pacific Corp         52.01     +1.71
DRI     Darden Restaurants         32.02     +1.82
HAE     Haemonetics Corp           38.10     +2.20
PDX     Pediatrix Medical          29.04     +3.54

----------------------------------------- 
Breakout to Downside (Stocks over $20) 
------------------------------------------- 
Ticker  Company Name               Close     Change 

WMI     Waste Management Inc       24.50     -1.38
HAL     Haliburton Co              24.69     -1.66
EK      Eastman Kodak              25.57     -2.23
COF     Capital One Financial      41.31     -2.25
AOC     Aon Corp                   38.04     -1.99

------------------------------------------------------------ 
Recently Overbought With Bearish Signals (Stocks over $20) 
------------------------------------------------------------- 
Ticker  Company Name               Close     Change 

AA      Alcoa Inc                  32.27     -0.90
RYN     Rayonier Inc               42.78     -0.11
CTIC    Cell Therapeutics          30.03     -1.03



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This newsletter is a publication dedicated to the education
of stock traders. The newsletter is an information service
only. The information provided herein is not to be construed
as an offer to buy or sell securities of any kind. The
newsletter picks are not to be considered a recommendation
of any stock but an information resource to aid the investor
in making an informed decision regarding trading in stocks. It
is possible at this or some subsequent date, the editors and
staff of PremierInvestor.net may own, buy or sell securities
presented. All investors should consult a qualified professional
before trading in any security. The information provided has
been obtained from sources deemed reliable but is not
guaranteed as to accuracy or completeness. PremierInvestor.net
staff makes every effort to provide timely information to its
subscribers but cannot guarantee specific delivery times due to
factors beyond our control.

Please read our disclaimer at:
http://www.optioninvestor.com/page/oin/aboutus/disclaimer.html

*****************************************************************
ADVERTISING INFORMATION

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Newsletter, or any Premier Investor Network newsletter please
contact Contact Support.

*****************************************************************


Copyright © 2001  PremierInvestor.net. and
The Premier Investor Network.
Do not duplicate or redistribute in any form.




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