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Daily Newsletter, Tuesday, 08/13/2002

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PremierInvestor.net Newsletter                 Tuesday 08-13-2002
                                                   section 1 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
=================================================================

In section one:

Market Wrap:      Fed Holds Interest Rates Steady, but Turns Bias Toward Weakness
Market Sentiment: Now What?
Play-of-the-Day:  Nail In the Coffin

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U.S. Market Numbers
-----------------------------------------------------------------
MARKET WRAP  (view in courier font for table alignment)
-----------------------------------------------------------------        
      08-13-2002           High     Low     Volume Advance/Decline
DJIA     8482.46 -206.40  8745.52  8473.32 1.52 bln   1014/2184
NASDAQ   1269.28 - 37.60  1324.43  1268.99 1.45 bln   1101/2294
S&P 100   445.30 - 10.85   460.13   444.89   Totals   2115/4478
S&P 500   884.21 - 19.59   911.71   883.62
RUS 2000  377.76 - 10.80   389.57   377.75
DJ TRANS 2264.23 - 44.40  2326.27  2261.59
VIX        39.80 -  0.66    41.35    37.94
VXN        57.68 +  1.39    58.61    54.72
Total UpVol   464M
Total DnVol 2,757M
52wk Highs    65
52wk Lows    353
TRIN        2.06
PUT/CALL                  .71
-----------------------------------------------------------------

===========
Market Wrap
===========

Fed holds interest rates steady, but turns bias toward weakness

The long awaited Federal Open Market Committee announcement on 
interest rates was given at approximately 02:15 PM EST today and 
to little surprise to economists, the Fed left its federal funds 
rate unchanged at 1.75%.

In a brief statement, the Committee said it has observed the 
softening in growth (from economic data recently released) of the 
aggregate demand that emerged this spring, which has been 
prolonged in large measure by weakness in financial markets and 
heightened uncertainty related to problems in corporate reporting 
and governance.

The Committee went on to say that the current fed funds rate is 
an accommodative stance of monetary policy, coupled with still-
robust underlying growth in productivity, which should be 
sufficient to foster an improving business climate over time.

Nonetheless, the Committee recognizes that, for the foreseeable 
future, against the background of its long run goals of price 
stability and sustainable economic growth and of the information 
currently available, the risks are weighted mainly toward 
conditions that may generate economic weakness.

This afternoon's statement and KEY words "may generate economic 
weakness" were enough to send some investors looking for the 
exits as Treasuries quickly found buying and stocks suffered the 
consequences into the close.

In brief, while the Fed left interest rates unchanged at today's 
meeting, it certainly appears the Fed is trying to hold back some 
interest rate cuts, almost like a card player will do when 
strategizing what cards to play when uncertain of what the 
competition really holds.  In other words, it doesn't appear the 
Fed is quite ready to pump more liquidity into the economy unless 
its certain it has to.

With the next FOMC meeting not scheduled until September 24th, 
current odds are about 25% that the Fed will cut rates at that 
meeting.  However, the Fed seems very cognizant of the FACT that 
the broader stock market weakness is adversely impacting consumer 
confidence, which in itself threatens the economy, so I would not 
rule out a "surprise" announcement of a rate cut should the S&P 
500 Index (SPX.X) 884.21 -2.16% undercut its recent relative low 
of 775 set on July 24th, or the Dow Industrials Average (INDU) 
8,482 -2.37% violate its July 24th low of 7,523.

Immediately after the Fed's decision to stand pat on interest 
rates, it was the bond market that perhaps showed the first signs 
of a defensive posture, or "disappointment" from today's FOMC 
meeting and comments.

The broader stock market averages did hold tough for about 25-
minutes after the FOMC announcement, but Treasury YIELD turned 
lower from unchanged levels immediately near the unchanged level 
and finished the session at their lows.

The shorter-term 5-year YIELD ($FVX.X) 3.138% was trading with a 
3.216% YIELD right when the FOMC decision was announced, but then 
turned sharply lower and closed at a new 52-week closing YIELD 
low.

The more intermediate-term 10-year YIELD ($TNX.X) 4.116% closed 
at a new 52-week low, but did not violate its 52-week intraday 
YIELD low of 4.096% from November 1, 2001, which was partly 
created that day on the Treasuries decision to suspend further 
auctions in the longer-dated 30-year Treasury ($TYX.X), which I 
felt created a short-term surge in demand for the higher YIELDing 
Treasuries during that time.

Still, today's bond market reaction was that of a MARKET looking 
for safety, despite historic low YIELDS.  Per past commentary, 
this has me thinking stocks are suspect as cash flows toward 
Treasuries.

The point and figure charts of YIELD among the various maturities 
continue to hint of lower YIELDS still as we continue to see 
YIELD "sell signals" (buy signals for the underlying Treasuries) 
created and YIELD rallies continue to be lower.

One "key level" that was traded today was in the 10-year YIELD 
($TNX.X) 4.116%, when it traded its bearish YIELD objective 4.15% 
10-minutes after the FOMC interest rate announcement.

10-year YIELD Chart - 0.50 box




Back on July 24th, we observed what appeared to be an "asset 
allocation" take place when the 5-year YIELD traded its bearish 
vertical count on YIELD at 3.3%.  Today we witnessed the 10-year 
YIELD ($TNX.X) trade its bearish vertical count so traders should 
be aware that we might see a near-term asset allocation take 
place again, but this time triggered by the 10-year.

Now, lets also quickly review the 5-year YIELD ($FVX.X) and what 
has taken place in that bond's YIELD in recent weeks.  While we 
did see that bond sell off after achieving its prior bearish 
YIELD objective, this shorter-term Treasury YIELD is back on a 
YIELD sell signal and looks lower again, with a bearish YIELD 
objective of 2.6%.  When comparing the 5-year against the 10-
year, just keep in mind the "perception of risk" as it relates to 
Treasuries.  In essence, the shorter-term maturity is considered 
"less risky" due to the length of time to maturity.

Once you've done that, you can then carry that thought of "risk" 
to other asset classes like corporate bonds and stocks.  It is 
the general perception of risk that a 13-week Treasury YIELD 
($IRX.X) 1.597% (most money market accounts are tied to this 
YIELD) is less risky than the 5-year Treasury YIELD ($FVX.X) 
3.138%, which is less risky than the 10-year Treasury YIELD 
($TNX.X) 4.116%, which is less risky than the 30-year Treasury 
YILED ($TYX.X) 4.997%.

5-year YIELD ($FVX.X) Chart - 0.50 box




While the 10-year YIELD ($TNX.X) chart from earlier achieved its 
bearish YIELD objective, the 5-year YIELD ($FVX.X) chart above 
has established another bearish YIELD objective that hints at an 
eventual YIELD of 2.6%.  In my book, this is a near-term 
negative.  If the question is posed "why would the 5-year YIELD 
potentially trade with a 2.6% YIELD?" then the answer must be 
that the MARKET is either going to be very defensive and seeking 
out safety, or the Fed will eventually be cutting rates in the 
future.  Either answer has me thinking that stocks are suspect at 
current levels if cash is going to be flowing into this Treasury 
bond and driving YIELD lower.  

Near-term keep an eye on both the 5-year and 10-year Treasury 
YIELDS.  What an equity BEAR does not want to see is the 5-year 
YIELD ($FVX.X) getting much above the 3.4% YIELD level.  That 
would be a "buy signal" on the YIELD chart, and if we tie that 
technical action back to the July 29th "buy signal" on YIELD and 
what took place in the S&P 500 Index (SPX.X) that day (46 point 
gain : +5.3%) then we should know what to be on the lookout for 
if shorting stocks.

Now lets pull together the above with a bar chart of the S&P 500 
Index (SPX.X) 884.21 -2.16% and we'll most likely see where 
resistance has formed which we discussed last week and why I 
think the SPX is vulnerable to the 852 level and perhaps the 
September 24th lows when we witnessed an "asset allocation" 
shift.

S&P 500 Index Chart - Daily Chart Interval




Look for bears to perhaps be getting some confidence back and 
looking to leverage off the 912 level as resistance.  The 912 
level was briefly violated to the upside on August 9th when it 
traded 913.95 intra-day, but failed to close there.  

While I truly believe there was short covering ahead of today's 
Fed meeting and had bears jittery, I think stocks will be starved 
for cash near-term as depicted by the lower Treasury YIELDS.  I 
also think near-term rallies without much selling in Treasuries 
will have bears looking to short rallies below the 912 level and 
not worrying too much about any type of "surprise" Fed rate cut 
unless the recent S&P 500 lows of 775 are violated.  

Bulls that were bidding up stocks ahead of the Fed meeting and 
didn't get the rate cut they may have been looking for still have 
some nice gains at hand and may be looking to lock in gains over 
the next several session with a potential "catalyst" now gone.

Now, this doesn't mean a bear can throw caution to the wind and 
get complacent.  Remember that the Fed didn't cut interest rates 
and it still feels that there's enough underlying economic 
strength to warrant such a stance on not further pumping 
liquidity into the system.

As it pertains to "asset allocation" programs that may have been 
triggered on July 24th, I think the editor of Jim Brown, at 
OptionInvestor.com said it best when he mentioned that asset 
allocation programs are simply a "rebalancing" of assets based on 
a portfolios asset allocation mix.

On July 31 (S&P 500 prior day close was 902.78), in a pre-market 
note, Goldman Sachs announced it was raising its global equity 
weighting to 65% from 60%, saying that global equities were very 
attractively valued relative to bonds; believing that the sectors 
most likely to lead the market turnaround were the higher-beta 
casualties of the downturn (technology, telecom, and insurance).

Now, if you think for a minute that Goldman "reallocated" on July 
31st, think again.  My guess is that the "call" went out to 
institutional clients on or about July 24th.  You wouldn't tell 
your best clients before you told the public what you (the 
largest brokerage firm in the world) was getting ready to do 
would you?

Now, I'm not doing any type of name calling here.  However, it 
has been my experience that the general public gets the "call" 
after the institutional clients get the call.  

I DON'T disagree too much with Goldman about "global equities 
were very attractive RELATIVE to bond..." BUT I do DISAGREE with 
their thoughts that technology and telecom would lead an advance.

But lets quickly look at the Beetle's Benchmark Fund that we 
created on July 31st, just after the GDP data was released.  It 
may at least help us all understand what an "asset allocation" is 
intended to do.

Beetle's Balanced Benchmark - From July 31 close




"Asset Allocation" and rebalancing of a portfolio at certain 
times can be a very good tool for systematically "buying low" and 
"selling high."  

On Monday, the "Beetle's Balanced" shows that the stock portion 
of our hypothetical fund had the stock portion (DIA, SPY and QQQ) 
clawing its way back to break-even, while the "safer" asset 
classes at the top were still showing gains.

However, as time has passed, look at those 20-year + basket of 
Treasuries (AMEX:TLT) $86.45 +1.22% really starting to distance 
themselves from other asset classes.  This is an important 
observation when considering "risk" as it relates to Treasuries 
isn't it?  The 20-year + weighted basket of Treasuries is 
CONSIDERABLY more risky than the 7-10 and 1-3 year maturity 
baskets.  It's that HIGHER YIELD and SAFETY that the MARKET seems 
so hungry for.  

That 4.74% gain since July 31 for the TLT in the "P/L %" column 
isn't anything to sneeze at while your waiting for the interest 
payment is it?

But at "asset allocation" program may see a temporary "shift" and 
partial selling of that asset and perhaps rebalancing itself 
among the other asset classes available.

This type of "asset allocation" thinking was perhaps explained 
best when Harry Markowitz won a Nobel Prize in Economics for his 
theory called "Modern Portfolio Theory."  

I won't go into great detail, but the theory was based around the 
notion that the MARKET is efficient, and within the MARKET there 
is always some type of "efficient frontier" that constantly 
weighs risk/reward among the various asset classes.

As you can perhaps see from the "Beetle's Balanced" which we did 
not try and "weight" or strategically place money (each asset 
class received approximately $1,000) you can see how some asset 
classes are doing better than others.

As it relates to Goldman's "high beta" leading, then that would 
be the QQQ as it relates to the "Beetle's Balanced" portfolio.  
So far, that QQQ, which is stocked full of high beta technology 
stocks seems to be the laggard.  To me, that remains an area for 
bulls to stay void, and bearish traders to stay focused.

Jeff Bailey
Senior Market Technician
PremierInvestor.net


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

Now What?

by Steve Price

Day umpteen of the Fed watch is finally over.  Now we can begin 
the countdown to September 24, when the FOMC next gets together 
for tea and crumpets.  The Fed did exactly as OI predicted and 
kept rates steady, while issuing an easing bias.  Also, as OI 
predicted, we experienced a major sell off.  Makes one wonder why 
they don't invite the OI staff to their meetings. The FOMC 
finished their meeting by issuing a statement that they still saw 
economic weakness as the greatest risk.  This basically means 
that there is still a danger of recession, but that they are 
holding on to their ammunition, as  there is only so much further 
that they can lower rates.  With a 1.75% Fed Funds rate, they may 
need several more decreases to deal with a faltering economy, and 
the specter of a September 11 anniversary attack still looms.  
Historically speaking, we have now been warned about the 
possibility of a surprise cut between now and the next meeting.

The Airline industry got more bad news just two days after U.S. 
Airways filed bankruptcy.  American Airlines revealed its plans 
to cut 7,000 jobs, or 6% of its workforce.  They will also reduce 
their fleet and defer current aircraft deliveries.  In total  
American will cut capacity by 9% in an attempt to save about $1.1 
billion per year.  The resulting sell off in the airlines also 
bled into the aerospace and defense stocks.

The tech sector, which has been reeling from lack of IT spending 
got more bad news, as well.  IBM announced that they are in the 
process of cutting over 15,000 jobs, due to a recent decline in 
corporate spending on tech services.  They reported cutting about 
14,000 workers from their Global Services Unit, and another 1400 
from the Microelectronics division.

Consumer spending appeared to show a healthy trend this morning, 
as retail giant Wal-Mart reported a 26% gain in net profit and 
raised guidance for next quarter, igniting a rally during the 
early part of the day. The Commerce Department reported that 
retail sales were up 1.2% for the month of July, although most of 
the spending was focused on new cars and trucks, as consumers 
took advantage of low financing offers.  This rally  was tempered 
in the afternoon by the Fed's comments about dangers to the 
economy.

Now that the anticipation of a rate cut is over, we can expect to 
give back more of the Dow's recent gains.  Now trading at 
8482.39, the possibility of re-testing the 8000 level seems 
realistic.  With a break back under 1300 in the Nasdaq Composite, 
which finished the day at 1269.28, we will be looking toward 
support at 1200 to see if it can hold once again. Bulls can focus 
on the Fed's easing bias as an indication that rates will be 
lowered in the near future.  Investors eyeing September 11 will 
most likely want to avoid holding long positions toward the end 
of this month.  A surprise rate cut just before the anniversary 
is not out of the question, as a preliminary strike toward 
preventing an anticipatory nosedive in the markets.  Short of 
that, there is a slew of economic data due at the end of this 
week.  On Wednesday, we will see business inventories.  Thursday 
brings initial unemployment claims, industrial production and the 
Philadelphia Fed.  Friday is CPI, housing starts and preliminary 
consumer sentiment.  Although the big number may be behind us 
temporarily, there are a lot of rungs to climb this week.  Watch 
for continued volatility in the market, as the market Volatility 
Index (VIX)  maintained itself over 40, in spite of the rate news 
fading in the rear view mirror.  

Tomorrow, August 14, is the day that hundreds of companies are 
required to certify their accounting results.  We could be in for 
some surprises, as we find out who signs off and who does not.  
Not all companies are required to report tomorrow, but keep an 
eye on the ones that are, and the ones that have their dates 
coming up.  For those that don't report on time, remember that 
puts serve a purpose.


-----------------------------------------------------------------

Market Averages

DJIA ($INDU)

52-week High: 10679
52-week Low :  7702
Current     :  8482

Moving Averages:
(Simple)

 10-dma: 8495
 50-dma: 8918
200-dma: 9740

S&P 500 ($SPX)

52-week High: 1226
52-week Low :  797
Current     :  884

Moving Averages:
(Simple)

 10-dma:  883
 50-dma:  940
200-dma: 1075

Nasdaq-100 ($NDX)

52-week High: 1782
52-week Low :  892
Current     :  907

Moving Averages:
(Simple)

 10-dma:  917
 50-dma: 1013
200-dma: 1350


-----------------------------------------------------------------


The Semiconductor Index (SOX.X):  The Semiconductor Index returns 
to Market Sentiment on a sour note.  The index had staged a 
valiant rally above 300, but has lost its footing and fallen back 
below this key support level.  IBM announced they are cutting 
over 15,000 jobs, as a result of a slowdown in IT spending.  This 
does not bode well for the stocks in this sector.  The index has 
rolled over once again at its downward sloping trend line, 
beginning in the middle of June.  The next level to look out for 
is the 282.75 support level from August 5th, just before the 
sector began its failed rebound.  A break below this level will 
demonstrate the lack of a new floor, and a move down to 250 would 
not be out of the question.

52-week High: 657
52-week Low : 282
Current     : 298

Moving Averages:
(Simple)

 10-dma: 308
 50-dma: 372
200-dma: 500

-----------------------------------------------------------------

Market Volatility

In spite of the FOMC announcement on interest rates being behind 
us, the VIX has maintained itself over 40.  This foreshadows 
continuing volatility as the market searches out a bottom after 
today's 206-point drop.  We may see the Dow approach 8000 once 
again, which would probably translate into a VIX level back near 
50 again.

CBOE Market Volatility Index (VIX) = 40.09 -0.37
Nasdaq-100 Volatility Index  (VXN) = 57.68  1.39

-----------------------------------------------------------------

          Put/Call Ratio  Call Volume   Put Volume
Total          0.71        616,365       436,169
Equity Only    0.52        496,394       257,843
OEX            1.23         32,207        39,752
QQQ            0.25        121,082        30,186

-----------------------------------------------------------------

Bullish Percent Data

           Current   Change   Status
NYSE          33      + 1     Bull Confirmed
NASDAQ-100    29      + 1     Bull Correction
DOW           40      + 3     Bull Confirmed
S&P 500       35      + 2     Bull Alert
S&P 100       36      + 2     Bull Alert

Bullish percent measures the number of stocks in an index 
currently trading on a buy signal on their point and figure 
chart.  Readings above 70 are considered overbought, and readings 
below 30 are considered oversold.

Bull Confirmed  - Aggressively long
Bull Alert      - Cautiously long
Bull Correction - Pause or pullback in upward trend
Bear Alert      - Take defensive action if long
Bear Confirmed  - High risk if long, good conditions for shorting
Bear Correction - Pause or rebound in downtrend

-----------------------------------------------------------------

 5-Day Arms Index  1.23
10-Day Arms Index  1.41
21-Day Arms Index  1.32
55-Day Arms Index  1.40

Extreme readings above 1.5 are bullish, and readings below .85 
are bearish.  These signals don't occur often and tend be early, 
but when the do, they can signal significant market turning 
points.

-----------------------------------------------------------------

Market Internals

        Advancers     Decliners
NYSE        808          1939
NASDAQ     1054          2222

        New Highs      New Lows
NYSE         19              97
NASDAQ       30             146

        Volume (in millions)
NYSE     1,493
NASDAQ   1,560

-----------------------------------------------------------------


Commitments Of Traders Report: 08/06/02

Weekly COT report discloses positions held by small specs
and commercial traders of index futures contracts at the 
Chicago Mercantile Exchange and Chicago Board of Trade. COT data 
can be found at www.cftc.gov.

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 tend 
to be wrong.  

S&P 500

The commercials reduced their short contracts position by 4,000, 
while increasing their long contracts slightly. Small traders, 
increased their long contracts by nearly 6,000, while leaving 
their short positions virtually unchanged.


Commercials   Long      Short      Net     % Of OI 
07/16/02      388,943   464,162   (75,219)   (8.8%)
07/23/02      405,969   471,704   (65,735)   (7.5%)
07/30/02      430,833   482,957   (52,124)   (5.7%)
08/06/02      431,590   478,879   (47,289)   (5.2%)

Most bearish reading of the year: (111,956) -   3/6/02
Most bullish reading of the year: ( 36,481) - 10/16/01

Small Traders Long      Short      Net     % of OI
07/16/02      157,370    67,247    90,123     40.1%
07/23/02      166,713    73,778    92,935     38.6%
07/30/02      153,858    67,451    86,407     39.0%
08/06/02      159,561    67,434    92,127     40.5%

Most bearish reading of the year:  36,513 - 5/01/01
Most bullish reading of the year: 114,510 - 3/26/02
 
NASDAQ-100

Commercials increased both long and short contract positions 
equally, by just less than 3,000 contracts on each side.  Small 
traders reduced both positions, taking 1600 contracts from the 
long side, and 450 from their shorts.


Commercials   Long      Short      Net     % of OI 
07/16/02       33,152     39,866    (6,714) ( 9.2%)
07/23/02       37,204     43,601    (6,397) ( 8.0%)
07/30/02       38,163     47,343    (9,180) (10.7%)
08/06/02       41,014     50,025    (9,011) ( 9.9%)

Most bearish reading of the year: (15,521) -  3/13/02
Most bullish reading of the year:   9,068  - 06/11/02

Small Traders  Long     Short      Net     % of OI
07/16/02       12,816    10,774     2,042     8.7%
07/23/02       12,756    11,152     1,604     6.7%
07/30/02       13,159     9,237     3,922    17.5%
08/06/02       11,547     8,782     2,765    13.6%

Most bearish reading of the year: (10,769) - 06/11/02
Most bullish reading of the year:   8,460  -  3/13/02

DOW JONES INDUSTRIAL

Commercials added to both long and short contract totals.  They 
added 1,000 long contracts and about 1400 shorts.  Small Traders 
also added to both sides, increasing their long contracts by 
1200, while adding 250 to the short side. 


Commercials   Long      Short      Net     % of OI
07/16/02       20,357    14,074    6,283      18.2%
07/23/02       22,369    14,745    7,624      20.5%
07/30/02       22,429    12,811    9,618      27.3%
08/06/02       23,491    14,290    9,201      24.4%

Most bearish reading of the year: (8,322) -  1/16/01
Most bullish reading of the year: 15,135  - 10/16/01

Small Traders  Long      Short     Net     % of OI
07/16/02        8,524    10,133    (1,609)   (8.62%)
07/23/02        9,101    12,604    (3,503)   (16.1%)
07/30/02        6,778     8,999    (2,221)   (14.1%)
08/06/02        7,981     9,258    (1,277)   ( 7.4%)

Most bearish reading of the year:  (8,777) - 10/12/01
Most bullish reading of the year:   1,909  -  1/16/01

-----------------------------------------------------------------



===============
PLAY-of-the-Day  ((new BEARISH high-risk/high-reward play))
===============

National Semiconductor - NSM - cls: 15.91 chg: -0.61 stop: *text*

Company Description:
National Semiconductor is the premier analog company driving the 
information age. Combining real-world analog and state-of-the-art 
digital technology, the company is focused on the fast growing 
markets for wireless handsets; displays; information 
infrastructure, and information appliances. (source: company 
press release)

Why We Like It:
It seems like every time the semiconductor index (SOX.X) attempts 
a rebound, another round of negative news pulls it down to new 
multi-year lows.  The past week has been no exception to this 
trend.  The chip sector rebounded with the NASDAQ, only to be 
targeted by a negative cover story in the weekend issue of 
Barron's.  Monday saw brokerage downgrades of both AMAT and INTC.  
The proverbial "nail in the coffin" that could drag the SOX.X to 
new lows came after the bell today, when AMAT announced earnings.  
Although the company beat Q3 estimates, this apparent good news 
was tempered by a steep slowdown in orders growth.  In other 
words, it doesn't look like there's going to be an upturn in 
demand anytime soon.  That isn't what investors want to hear.  
The SOX.X closed under the psychological 300 mark today and looks 
poised to head lower on this news.  Technically, declining action 
in the MACD and daily stochastic oscillators should have the 
bulls shaking in their bovine boots.  There are plenty of 
possible shorts in the semi group (including KLAC, TXN, and 
QLGC), so what makes NSM stand out as the best bearish candidate?

First and foremost, the bar chart looks extremely weak.  Shares 
recently sold off from the $18.00 level and are now in danger of 
falling under the 52-week low of $15.63.  Shares were hammered 
earlier this month when the company announced an earnings warning 
for Q1, based on weak order rates for PC products.  It looks like 
NSM is suffering from the same lack of demand that's plaguing the 
rest of the sector.  Although psychological support at $15.00 may 
briefly halt the stock's decline, the rolling daily stochastics 
(5,3,3) are hinting at more downside.  A trade at $15.50 will 
also create a double-bottom breakdown on the point-and-figure 
chart.  Given the fundamental, technical, and sector-related 
weakness that is surrounding NSM, we think shares could 
eventually fall to the $10 region.  However, our initial profit-
target will be somewhat more conservative at $12.01.  We'll 
reevaluate our exit strategy as shares approach this level.  This 
play will not be activated until NSM trades at or below $15.62.  
We would not be surprised to see shares gap under this mark 
tomorrow morning.  If triggered, our stop will be set at $17.32, 
just above today's high.  Note that we will NOT enter this play 
if NSM opens below $15.00 on Wednesday.
 
Picked on August xth at $xx.xx <- see text 
Results since picked:    +0.00
Earnings Date         09/04/02 (confirmed)
 






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PremierInvestor.net Newsletter                  Tuesday 08-13-2002
                                                    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
=================================================================

In section two:

Net Bulls
  New Bearish Plays:     EXPE
  Bullish Play Updates:  RX
  Bearish Play Updates:  VZ
  Closed Bullish Plays:  ORCL

Stock Bottom / Active Trader
  New Bearish Plays:     CB, PNRA
  Bullish Play Updates:  SBUX
  Bearish Play Updates:  ALK, CPG
  Closed Bearish Plays:  AZO, DIA

High Risk/Reward
  New Bearish Plays:     NSM
  Bullish Play Updates:  FDRY
  Closed Bearish Plays:  RKY

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) Tech Stock section
==================================================================

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

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

Expedia Inc - EXPE - close: 47.08 change: -2.51 stop: *text*

Company Description:
Expedia, Inc. is the world's leading online travel service and 
was the eighth largest travel agency in the most recent United 
States agency rankings. (source: company press release)

Why we like it:
The airline sector has been absolutely inundated by a flood of 
negative news over the past month.  From smaller carriers such as 
Vanguard to previous high flyers such as U.S. Airways, bankruptcy 
filings are becoming almost a weekly event.  UAL may soon follow 
suit if the U.S. Government doesn't grant the company a $1.8 
billion loan.  The latest bad news came today, when AMR announced 
they were laying off 7,000 employees as part of a restructuring 
process.  

Although this industry-wide turmoil isn't completely a result of 
lower ticket sales, travelers faced with the prospect of higher 
rates and longer waits may begin to put off trips or just decide 
to travel by car.  This would not be a positive development for 
EXPE, and we're surprised the stock has held up this long.  
Regression channel enthusiasts, however, will note that the stock 
has just begun to rollover from its descending trendline.  This 
level coincides with psychological resistance at $50.00.  With 
the daily stochastics starting to release from the overbought 
extreme, odds seem good that EXPE will continue to retrace last 
week's gains.  On a non-technical note, investors may be 
reluctant to buy travel stocks ahead of the 9/11 anniversary.  By 
opening a hypothetical short position on a move below $47.00, 
we're aiming to ride EXPE down to the August lows near $42.00.  
If triggered, we'll use a stop one cent above today's high, at 
$51.11.  Slightly more conservative traders may want to use a 
stop just above $50.00.

Picked on August xth at $xx.xx <-- see text 
Results since picked:    +0.00
Earnings Date         07/23/02 (confirmed)





===============
NB Play Updates
===============

  --------------------
  Bullish Play Updates
  --------------------

IMS Health - RX - close: 15.82 change: -0.41 stop: 15.65 

Uh oh, things are not looking good for bulls. With today's action 
from the Fed, bears sold the market in the afternoon, causing the 
Dow Jones to close down -206.43 at 8482.46.  Even though IMS 
Health filed their CEO/CFO accounting certifications with the SEC 
yesterday afternoon, it didn't seem to matter in today's trading.  
We are concerned about this position and are considering the 
possibility that tomorrow could bring trading action that could 
quickly fall into our stop.  On the top of our minds, is that RX 
broke its ascending trend line today.  Also, the daily 
Stochastics look like they could fall out of the overbought 
region, indicating potential selling on the horizon.  Because we 
haven't completely given up on this position, we will leave our 
stop at $15.65, allowing the position a little room to breathe 
still.  There is no fresh news on IMS Health today.    

Picked on August 9th at $16.21  
Gain since picked:       -0.39
Earnings Date         07/15/02 (confirmed)




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

Verizon Communications - VZ - cls: 29.40 cls: -0.70 stop: 31.05

The U.S. District Court in Trenton N.J. dismissed an antitrust 
case filed against Verizon by Ntegrity yesterday afternoon.  This 
news should have slightly helped bulls today, though in the 
shadow of bears applying pressure to the market after the Fed 
announced that it would not lower rates, VZ stumbled on the day.  
Losing almost a dollar in the last hour of trading, this short 
position could finally start to look like a decent trade for 
bears.  With today appearing as a potential bearish continuation 
via an outside day, the stock needs to see some continued selling 
to enforce our convictions.  An outside day is where the trading 
range of today engulfs the trading range of yesterday.  
Initially, we would like to see VZ break $29.00, and then acquire 
increased volume to verify a potential sell off.  Given today's 
events, we will lower our stop on this trade to $31.05.  Bulls 
could also be discouraged today, as the daily Stochastics (which 
were in mid-range) seem to be turning lower.  New short entries 
could be considered at current levels.  More conservative traders 
could wait until the stock falls under $29.00, though keep in 
mind that a position initiated under $29.00 has $1.05 of 
potential pain with our current stop.      

Picked on August 6th at $29.87 
Results since picked:    +0.47
Earnings Date         07/31/02 (confirmed)





===============
NB Closed Plays
===============

  --------------------
  Closed Bullish Plays
  --------------------

Oracle Corporation - ORCL - cls: 9.09 cls: -0.64 stop: 9.40

Although ORCL has been trying to gain strength for several weeks, 
two events today caused the tech giant to lose ground in the last 
hour of trading.  First, the Fed announced its decision to leave 
interest rates unchanged, allowing the bears to take control of 
the market for the remainder of the day.  Second, Goldman Sac's 
software analyst Rick Sherlund warned clients that he was not 
optimistic about the ORCL and the larger sector.  His assumption 
is that weakened 2003 growth will cause reductions in revenue and 
earnings estimates.  The news today did not bode well for bulls, 
as the stock lost almost 42 cents, or roughly 4.4% in the last 
hour.  Our stop of $9.40 was quickly penetrated, causing a 6% 
loss on this trade.  Bulls still holding onto positions should be 
careful of the whole number at $9.00.  If this number is violated 
with a close beneath it, bears could certainly pile into this 
stock like a spring river flowing with salmon...all hungry and 
looking for a quick meal.         

Picked on August 9th at $10.01
Results since picked:    -0.61
Earnings Date         06/18/02 (confirmed)



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

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

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

Chubb Corporation - CB - close: 62.26 change: -0.75 stop: $65.01

Company Description:
The Chubb Corporation was formed in 1967 and was listed on the 
New York Stock Exchange in 1984. It ranks among the top 10 
publicly traded insurance organizations based on revenues in the 
United States.  With more than 10,000 employees throughout North 
America, Europe, South America, and the Pacific Rim Chubb serves 
property & casualty customers from more than 132 offices in 33 
countries. Chubb works closely with 5,000 independent agents and 
brokers worldwide.  (source: company website)

Why We Like It:
Given the Feds announcement today that it would not lower rates 
just yet, we believe that insurance companies could see anemic 
buying until after the next FOMC meeting in September.  Also, 
with September 11th just around the corner and worries of a 
possible terrorist attack looming over our heads, it is plausible 
that institutional investors might wait until clearer times 
before taking speculative long positions in insurance stocks.  
Insurance stocks can sometimes be interest rate sensitive, as 
they invest heavily in debt, and sometimes act as lenders with 
customer premiums.  Further, in today's news Chubb announced that 
it will begin to expense stock options next year, which will cut 
earnings.  Expensing options will cut next years earnings by 11 
cents per share, from the expected $5.54 annual earnings.  

After digesting both announcements today, investors reacted 
negatively to Chubb's shares, which closed down -0.75 cents.  
Over the last two days CB has failed at resistance in the $65.01 
area, where it is yet to trade above for more than four days 
since July 10th.  Bears are encouraged as a close under $62.65, 
is a close under the 38.2% Fibonacci retracement number (please 
see chart).  Seeing the descending trend still intact should be 
good news for bears wishing to short this stock.  Also, the daily 
Stochastics recently made a run at the overbought region, but 
were turned back as the stock could not show enough strength.  We 
would consider shorts at current levels.  Our stop for this 
position is at $64.25, which would be a 3.1% loss if our position 
were to be eliminated by bullish action.  Our profit target is at 
$55.00, just slightly above support.  However, CB will have to 
contend with technical and psychological support at $60.00, 
before our target can be hit.   

For annotated chart: Click here.
Chart of: Chubb Corporation, Daily.



Picked on August 13th at $62.26 
Results since picked:     +0.00
Earnings Date          07/29/02 (confirmed)
 



--- 

Panera Bread - PNRA - close: 28.62 change: -2.13 stop: *text*

Company Description:
Panera Bread owns and franchises bakery-cafes under the Panera 
Bread and Saint Louis Bread Co. names. The company is the leader 
in the emerging specialty bread/cafe category due to its unique 
bread combined with a quick, casual dining experience. (source: 
company website)

Why We Like It:
It seems Panera Bread is getting some pretty good news coverage 
lately... We certainly agree that the fundamentals of the company 
are decent.  However, on a trading basis, the stock itself looks 
as if it could be growing weaker, and is in for a technical drop. 

The stock began its most recent descent in late June, when the 
bread company looked as if the stock was forming a double top.  
The decline that followed verified such thoughts, as the stock 
could not hold its 50-dma.  The daily Stochastics (which were 
overbought) quickly dropped to the bottom of the oscillator, 
dipping into the oversold region.  After staging a rebound to the 
78.6% Fibonacci number (view below chart for Fibonacci range), 
the stock proceeded to fall once again.  PNRA dropped to the 
$28.00 level, where it then tried to regain its footing, and 
bouncing back to the 61.8% Fibonacci retracement.  Since then, 
the Panera has fallen into the 38.2% Fib number in the $28.50 
area, which is under the 200-dma.  Given how tuned into the 
Fibonacci retracement points this stock has been, we could infer 
that the next move might be a breach of the 38.2% level all 
together.  If this scenario appears, we could have a profitable 
short trade on our hands.  

Our plan for PNRA is to initiate a position below today's low.  
However, if the stock gaps below $28.00 on the open, we will not 
enter PNRA short.  If the position is triggered, we will put our 
initial stop just above today's high at $30.75.  Assuming the 
position is triggered and begins to move in our direction, we 
will quickly move our stop to just above $30.00.  Our initial 
profit target for this trade is $24.25, where we hope to pocket 
some bread.       

For annotated chart: Click here.
Chart of: Panera Bread, Daily.



Picked on August xth at  $xx.xx <-- See text
Results since picked:     +0.00
Earnings Date          08/22/02 (confirmed)
 




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

  --------------------
  Bullish Play Updates
  --------------------

Starbucks Corporation - SBUX - cls: 18.95 cls: -0.77 stop: 18.40

The past two sessions have seen SBUX rally up to psychological 
resistance at $20.00, only to rollover from this level.  Today's 
failed rally proved to be more than the bulls could handle.  
Pressured by the declining broader market, SBUX sold off sharply 
during the final two hours of trading and closed near the worst 
levels of the day.  This could portend further weakness in 
tomorrow's session.  Also of some technical concern are the daily 
stochastics, which have begun to fall from the overbought region.  
But all is not lost for this play.  Our stop remains unmolested, 
just under the multi-month low of $18.44.  It'll take a concerted 
effort on the part of the bears to push SBUX under that region.  
Although we would not recommend entries at current levels, a move 
over $20.00 might provide a possible action point if the stock 
can muster a rebound.

Picked on August 8th at $19.39 
Gain since picked:       -0.44
Earnings Date         07/25/02 (confirmed)




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

Alaska Air - ALK - close: 22.76 change: +0.16 stop: 24.01

The airline sector encountered some severe turbulence yesterday 
after U.S. Airways filed for Chapter 11 bankruptcy.  ALK 
responded in kind, gapping lower on the news and briefly piercing 
the $22 level.  Today's action was more palatable for the bulls, 
as shares rebounded slightly and outpaced the XAL.X airline 
index.  Although this relative strength is a positive development 
for ALK, the stock was unable to break above the declining 50-dma 
at $23.88.  This is good news for our play, because our stop lies 
slightly overhead at $24.01.  It was also encouraging to see ALK 
give back most of its gains in afternoon trading.  New entries 
could be gauged on a move under either Monday's low of $21.83 or 
the August low of $21.39.  In sector-related news, AMR announced 
today that it would cut 7,000 jobs and reduce capacity as part of 
a restructuring project.

Picked on July 30th at $23.62
Results since picked:   +0.86
Earnings Date        07/22/02 (confirmed)
 



---

Chelsea Property - CPG - close: 32.45 change: -0.19 stop: 34.11

More of the same for CPG.  The stock has been in a holding 
pattern for the better part of a week, trading on relatively 
light volume.  Tuesday's action was somewhat encouraging for the 
bears, as shares finished with a small loss after briefly spiking 
above the $33 level.  This early-morning bullishness may have 
been a knee-jerk reaction to the company's Monday evening 
earnings report.  The subsequent sell-off reflects the lack of 
any positive guidance or upside surprises in Chelsea's 
announcement.  Hopefully this failed intraday rally is the start 
of a near-term reversal.  Technically, we like how the daily 
stochastics (5,3,3) are beginning to falter near overbought 
levels.  This suggests that CPG's upside potential may be 
limited.  Traders looking for new entries can continue to watch 
for a move under the relative low of $31.50.

Picked on August 2nd at $32.68
Results since picked:    +0.23
Earnings Date         08/12/02 (confirmed)





===============
AT Closed Plays
===============

  --------------------
  Closed Bearish Plays
  --------------------

AutoZone - AZO - close: 66.15 change: +0.90 stop: 68.11

With AZO underperforming the broader market on Monday, we elected 
to tighten this play's stop-loss to $68.11.  This conservative 
approach was based on our belief that shares would not be able to 
attract much buying attention ahead of the FOMC announcement.  
The bears, however, seemed to be spooked at the prospect of a 
positive reaction to this afternoon's decision.  AZO moved higher 
with the Dow Jones on Tuesday morning and spiked above our stop, 
thus closing our play for a loss of 15 cents.  Shares sold off 
during the latter part of the session, giving new hope to the 
bears.  A move under the relative low of $64.50 could clear the 
way for a retest of the $60.00 level.

Picked on July 25th at $67.96 
Results since picked:   -0.15
Earnings Date        09/24/02 (unconfirmed)


 

--- 

Diamonds Trust - DIA - close: 84.95 change: -2.04 stop: *text*

This play was designed to ride the Dow Jones lower if it rallied 
up to the 9000 level before today's FOMC meeting.  As it turned 
out, the index couldn't even rally above its descending line of 
resistance near 8700.  In light of today's afternoon sell-off, 
we're going to drop the Diamonds.  Although we were never 
trigged, DIA may still offer a good shorting opportunity if the 
Dow falls below today's low at 8473.  Given the fact that the 
daily stochastics (5,3,3) are just beginning to release from 
overbought levels, we would not be surprised to see a retest of 
the 8000 level in the near future.  The rest of the week is a 
veritable minefield of possible market-moving events, with the 
CEO/CFO certification deadline tomorrow and several economic 
reports on Thursday and Friday.

Picked on August xth at xx.xx <- see text 
Results since picked:   +0.00
Earnings Date             N/A






==================================================================
HIGH RISK/HIGH REWARD (HR) section
==================================================================

=============
HR New Plays
=============

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

National Semiconductor - NSM - cls: 15.91 chg: -0.61 stop: *text*

Company Description:
National Semiconductor is the premier analog company driving the 
information age. Combining real-world analog and state-of-the-art 
digital technology, the company is focused on the fast growing 
markets for wireless handsets; displays; information 
infrastructure, and information appliances. (source: company 
press release)

Why We Like It:
It seems like every time the semiconductor index (SOX.X) attempts 
a rebound, another round of negative news pulls it down to new 
multi-year lows.  The past week has been no exception to this 
trend.  The chip sector rebounded with the NASDAQ, only to be 
targeted by a negative cover story in the weekend issue of 
Barron's.  Monday saw brokerage downgrades of both AMAT and INTC.  
The proverbial "nail in the coffin" that could drag the SOX.X to 
new lows came after the bell today, when AMAT announced earnings.  
Although the company beat Q3 estimates, this apparent good news 
was tempered by a steep slowdown in orders growth.  In other 
words, it doesn't look like there's going to be an upturn in 
demand anytime soon.  That isn't what investors want to hear.  
The SOX.X closed under the psychological 300 mark today and looks 
poised to head lower on this news.  Technically, declining action 
in the MACD and daily stochastic oscillators should have the 
bulls shaking in their bovine boots.  There are plenty of 
possible shorts in the semi group (including KLAC, TXN, and 
QLGC), so what makes NSM stand out as the best bearish candidate?

First and foremost, the bar chart looks extremely weak.  Shares 
recently sold off from the $18.00 level and are now in danger of 
falling under the 52-week low of $15.63.  Shares were hammered 
earlier this month when the company announced an earnings warning 
for Q1, based on weak order rates for PC products.  It looks like 
NSM is suffering from the same lack of demand that's plaguing the 
rest of the sector.  Although psychological support at $15.00 may 
briefly halt the stock's decline, the rolling daily stochastics 
(5,3,3) are hinting at more downside.  A trade at $15.50 will 
also create a double-bottom breakdown on the point-and-figure 
chart.  Given the fundamental, technical, and sector-related 
weakness that is surrounding NSM, we think shares could 
eventually fall to the $10 region.  However, our initial profit-
target will be somewhat more conservative at $12.01.  We'll 
reevaluate our exit strategy as shares approach this level.  This 
play will not be activated until NSM trades at or below $15.62.  
We would not be surprised to see shares gap under this mark 
tomorrow morning.  If triggered, our stop will be set at $17.32, 
just above today's high.  Note that we will NOT enter this play 
if NSM opens below $15.00 on Wednesday.
 
Picked on August xth at $xx.xx <- see text 
Results since picked:    +0.00
Earnings Date         09/04/02 (confirmed)
 




===============
HR Play Updates
===============

  --------------------
  Bullish Play Updates
  -------------------- 

Foundry Networks - FDRY - close: 8.44 change: -0.16 stop: 8.13

With a lack of new media stories or press releases on Foundry 
Networks, the networking company was subject to broader market 
selling in today's trading session.  Although we were very 
encouraged by yesterdays high at $9.45, today we are slightly 
concerned about the staying power of FDRY and the Nasdaq.  FDRY 
seemed to have a strong open this morning, but could not hold its 
gains into the afternoon.  Given market weakness in light of the 
Fed not lowering rates any further, we will keep our stop tight 
at $8.13.  Bulls seeking new positions might want to wait a day 
or two, thus seeing whether the Nasdaq Composite and FDRY are 
able to keep the recent trend alive.  

Picked on August 9th at  $8.51 
Results since picked:    -0.07
Earnings Date         07/24/02 (confirmed)
 




===============
HR Closed Plays
===============

  --------------------
  Closed Bearish Plays
  --------------------

Adolph Coors - RKY - close: 61.27 change: +0.24 stop: 61.26

We certainly had the right train of thought on this play, though 
unfortunately, we were one day to late.  After we gave our short 
recommendation in RKY on Friday, the stock gapped down $2.94 the 
following session, triggering our short on the opening print at 
$60.50.  A downgrade by UBS Warburg was the main reason for the 
sell off, though the gap certainly made our position hard to 
handle.  After the gap, investors realized that the move down was 
slightly extreme, and began to buy the stock back up.  In 
response, we tightened our stop to protect ourselves against a 
substantial loss.  This morning, our stop of $61.26 was hit 
fairly early, forcing us to close our position for a 1.3% loss.  
With the gap down, our thoughts about Coor's weakness was 
certainly confirmed... We were simply a day late on entry.  
Traders currently in RKY short should be careful of a sustained 
rally attempting to fill the window.  However, if the stock does 
begin to fail, a move under the 200-dma could be very encouraging 
for bears.  

Picked on August12th at $60.50 
Results since picked:    -0.76
Earnings Date         07/25/02 (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 

PLCE    Children's Place           20.30     +1.05
POG     Patina Oil & Gas           25.86     +0.66
FINL    Finish Line Inc.           11.68     +0.65
BYS     Bay State Bancorp          56.70     +1.70
--------------------------------------- 
Breakout to Upside (Stocks $5 to $20) 
--------------------------------------- 
Ticker  Company Name              Close     Change 

MCAF    Mcafee.Com                14.89     +2.05
OSIS    Osi Systems               16.41     +1.94
FOSL    Fossil Inc.               18.65     +1.53

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

WSM     Williams Sonoma Inc.       22.30     +1.30
IDMC    Inamed Corporation         20.46     +2.05
CBH     Commerce Bancorp Inc.      48.85     +1.11
DE      Deere & Co.                46.20     +4.18
TIF     Tiffany & Co.              23.19     +1.63

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

HUG     Hughes Supply Inc.         29.75     -5.55
QLGC    Qlogic Corporation         32.14     -3.15
UTX     United Technologies        62.47     -5.98
BA      Boeing Co.                 37.23     -3.27
HCR     Manor Care inc.            21.17     -1.39

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

USPI    Utd Surgical               27.13     -2.16
GLYT    Genlyte Group Inc.         36.76     -1.29
MRBK    Mercantile Bankshares      37.54     -1.01
HCR     Manor Care Inc.            21.17     -1.39
LDG     Longs Drug Stores Inc.     23.64     -0.95
AGII    Argonaut Group Inc.        20.85     -1.05




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staff of PremierInvestor.net may own, buy or sell securities
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