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Daily Newsletter, Monday, 07/07/2003

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PremierInvestor.net Newsletter                 Monday 07-07-2003
                                                  section 1 of 2
Copyright (c) 2003, 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:      Reordering the Alphabet
Play of the Day:  Patience Is Rewarded

===============================================================
MARKET WRAP  (view in courier font for table alignment)
===============================================================
     07-07-2003           High     Low     Volume Advance/Decline
DJIA     9216.79 +146.58  9261.12  9073.92 1.79 bln   2198/1046
NASDAQ   1720.71 + 18.72  1721.25  1685.41 1.88 bln   2349/ 983
S&P 100   505.50 +  9.42   506.53   496.08   Totals   4547/2029
S&P 500  1004.42 + 18.72  1005.56   985.70
RUS 2000  465.71 +  9.36   465.71   456.35
DJ TRANS 2458.13 + 42.82  2463.03  2416.30
VIX        22.05 +  0.44    22.54    21.79
VXN        33.51 +  1.04    33.99    32.75
Total Volume 7,401M
Total UpVol  5,060M
Total DnVol  2,341M
52wk Highs     864
52wk Lows       23
TRIN          0.49
PUT/CALL      0.71
===============================================================

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

Reordering the Alphabet

When does the letter "s" outrank the letter "r"?  When markets
surge and soar rather than retreat and retrace.  When support
sustains the markets while resistance fails to restrain them.

The surging and soaring began with the Asian and European
markets.  The Nikkei climbed to 9795, a closing level not seen
since last August.  The Nikkei has already achieved the upside
target promised by this spring's inverse head-and-shoulders
formation, but pushes ever closer to its magic 10,000 level.  As
the opening of our markets approached, the DAX had already
climbed toward its next resistance at 3325 and soon shot above
that, with next strong resistance at 3500.

This morning's early surge in the U.S. markets powered the SPX
above 1000 resistance, the OEX above 500, the COMPX above 1700,
and the DJI above 9200, and the indices closed above those
levels.  Although volume stood at a tepid 1.3 billion on the NYSE
and 1.8 billion on the Nasdaq, advancers beat decliners by more
than 2:1 on both exchanges.  Up volume measured 4.4 times down
volume on the NYSE and almost 5 times down volume on the Nasdaq.

The surging markets make both bulls and bears nervous, with
markets pundits across the globe questioning the gains.  These
markets desperately need a pullback.  Or do they?  For a little
while tonight, I'm playing devil's advocate--or rather bull's
advocate--just as I did today on the Market Monitor.

While most pullbacks retrace 1/3 to 2/3 of a previous move,
strong markets sometimes retrace as little as 1/4 or 25 percent.
That's already happened.  The standard Fibonacci retracement tool
does not include a 25 percent retracement, but Q-charts allows a
customization of the retracement tool.  I added the 25 percent
retracement to many of tonight's graphs.  Here's what I found on
the SPX daily chart.

Daily Chart of the SPX:


Last Tuesday, the SPX followed a bull flag down, trading as low
at 962.10, just off the 25% retracement of the March-to-June
rally.  After bouncing from that level, the SPX broke out of the
bull flag to the upside and now trades safely back within its
ascending regression channel.  Today, it broke back above its 21-
dma and closed above that average.  Was this a stealth pullback,
one we all noted at the time but didn't consider the real
pullback?

Note that RSI broke above the descending trendline, tested it and
headed back up again.  RSI trendline breaks often prove
trustworthy.  They're especially helpful because they sometimes
lead price action.  In this case, RSI broke through its trendline
last Tuesday, just as the SPX was bouncing from that 25 percent
retracement line and heading up again.  Although the 5(3)3
stochastics have zoomed up to levels indicating overbought
conditions, they're still in full bull run, turned straight up.
The +DI portion of ADX has kicked back up again, although the ADX
hasn't yet followed.

I'm supposed to be playing bull's advocate, but that still-
declining ADX, coupled with what I know about historical trading
patterns in July, makes me hesitant to believe the bullishness
implied by the close above the 21-dma, the bounce from the 25
percent retracement, the upside breakout of the bull flag, the
bullish oscillators, and the close above 1000.  What's it going
to take to make me trust what my eyes are seeing?  A whole lot,
apparently.  After the steep declines over the last years, I
can't stop the skepticism.  Apparently I'm not alone, either, as
the two volatility indices, the VIX and VXN, gained 2.04 and 3.20
percent, indicating rising fear as the markets rose.  That rising
fearfulness may be cheering the bulls, however, as markets need
that wall of worry to climb.

Even a cautious market observer has to acknowledge the tenuous
signs of economic recovery, but it's difficult to put those signs
into perspective when they're liberally mixed with more troubling
signs and fears of nasty surprises just around the corner.
Today's trading showed a refreshingly rational reaction to news,
however, with many stocks sometimes trading according to their
outlook, slipping if they offered bad news and gaining if they
offered better news.

For example, before the market opened this morning, drugmaker
Schering Plough (SGP) debuted the warning season, saying that Q2
and full year profit would be below expectations.  Blaming
competitive pressures, SGP led analysts to expect Q2 earnings of
12 cents per share, down from the previously expected 18 cents
per share, and said second half earnings might not match those of
the first half.  BMC Software (BMC) and Web content management
software company FileNet (FILE) also warned.  Houston's BMC said
customers had delayed purchasing decisions.  A FILE spokesperson
mentioned that large transactions had been deferred or delayed.

Although FILE closed up, SGP and BMC both closed down, as did
PRAA, the subject of a negative article in Barron's, and RBAK,
RITA, and WGRD, all of which either warned or lowered guidance.
What I found interesting about those reactions was that the spate
of warnings did not scare the markets or diminish their gains.
While those stocks declined, ATYT, the subject of a positive
article in Barron's, and UNTD, MWD, BEBE, and CSL, all raised by
various analysts, all gained.  Although I could point to
exceptions such as CERN, which was cut to a sell but still gained
on the day, stocks seemed to trade in a reasonable relationship
to their current outlooks.

I'm a little like the characters in the old movies with an angel
on one shoulder and a devil on the other.  I've got a bull on one
shoulder and a bear on the other.  The bear keeps whispering that
any improved outlook is already built into prices.  Is it?  Is
there even an improved outlook to be anticipated?  Today, CNBC
mentioned a Merrill Lynch report staying that the IT spending
cycle remained depressed.  Results of similar reports related to
tech spending have been mixed over the last week.  A Goldman
Sachs study of expected IT spending showed minimal changes from
the year-ago period, a better-than-expected result since
expectations had been for a decline of 3.2 percent.

In addition to that better-than-expected result, other results
have been positive.  Early last week, a CNN Money article
referred to a CIO Magazine survey of chief IT officers at 311
companies.  Of those that responded, 47.4 percent had either just
replaced a significant number of PC's or were currently doing so.
In an intraday email update today, Jeff Bailey referenced a
Needham statement mentioning expectations for positive business
momentum to continue.  A survey by Nikkei Market Access showed PC
sales for the week ending June 22 climbing 20 percent from the
year-ago level.

Certainly these varied outlooks offer some potentially bullish
forecasts sprinkled among the bearish ones.  In this cluster of
reports, the bullish reports might even outweigh the bearish
ones.  Those studying the markets must negotiate such conflicting
outlooks with care.  How much weight should be given to the CIO
Magazine survey?  How much to the Merrill Lynch report?  Is
either outlook already priced into the market?

With the bear on one shoulder whispering "summer doldrums just
ahead" and the bull on the other shoulder whispering "bullish
chart formations," I'm adopting a wait-and-see attitude until the
SPX clears the June 1015.33 high.  That June high now coincides
with the resistance offered at the midline of the rising
regression channel.  A close above that level would imply a move
to the top of the channel, although not necessarily without an
intermittent pullback or two.  That top-of-the-channel level
would be marked by a move to 1045-1050 depending on how quickly
the SPX rose.  Interim resistance would lie at the June high near
1015, also near 1027, and then at 1050, with 1050 being the
strongest of the three.

If the SPX should achieve that 1050 level, the low daily ADX
number hints that the SPX might settle into a trading range
throughout the summer doldrums, perhaps between 937 and 1150.  If
the SPX instead falls below 1000, watch for support near 990,
also at 986, then at 972-975, historical support and the top of
the bull flag.  Strongest support might lie at the 959-962 level
that represents the 25 percent rally retracement.  SPX 929
represents the 38.2 percent rally retracement and also is the
area of the 200-ema, but there's also light support at 935.

The OEX daily chart displays similar characteristics.  On July 1,
the OEX dropped out of its regression channel long enough to
achieve an intraday low of 484.41, approximating a 25 percent
retracement of the spring rally.

Daily Chart of the OEX:


While retracing 25 percent of the rally, the OEX traded down in a
bull flag, springing from the bottom of that bull flag at the
same time that RSI broke above its formerly violated trendline.
As with the SPX, MACD flattens, but the +DI line of the ADX has
kicked up again.  RSI and 5(3)3 stochastics remain bullish.  The
OEX closed well above its 21-dma.

Midline regression channel resistance for the OEX would be found
at 510-513, and a close above that level would hint at a move
toward the top of the regression channel.  The OEX would hit the
top of that channel near 525, depending on how quickly it rose.
The OEX might see light resistance near the June high, near
417.50, near the top of the regression channel, and again at 533
and 542.  If the OEX did manage a move to the top of the
regression channel, the currently low ADX hints that it might
also establish a trading range throughout the summer doldrums.

If the OEX should instead fall, it will fall back into the recent
congestion zone with support layered underneath, perhaps
strongest at 500.80-501, 497.60-498, and then between 489-491, at
which point it would be testing the bull flag's support.  Other
support might be found at the 25 percent rally retracement just
below 485, at 478.50-480, and at the 38.2 percent rally
retracement and 200-ema at 469-470.

The DJI also touched its 25 percent rally retracement, doing so
on July 1 when it also dipped to the bottom of its bull flag and
then sprang up from that level.  I haven't included the Fibonacci
lines on this chart because I wanted to show a comment I'd first
written on June 13, before that dip to the 25 percent retracement
value, but the 25 percent retracement lies at about 8880.  On
June 13, I'd speculated that the bullishness of the chart
formation would be preserved with a fall to 88.80 (using the DJX
chart as a proxy for the Dow's).  I'd expected that plunge to
88.80 to take place sooner so that the DJX would have remained
within the regression channel while retreating to 88.80, but the
violation of the ascending channel was brief, taking place as the
DJX traded within its bull flag.

Daily Chart of the DJX:


I can add little to a discussion of this chart that hasn't
already been said about the other charts.  The bull flag, the
regression channel, the close above the 21-dma, and the positive
RSI action all appear similar.

Midline resistance would be found between 93.20-93.80, depending
on how quickly the DJX rises.  A close above that midline
resistance and the June high might portend a move toward the top
of the regression channel, near 95-95.50, depending on how
quickly the DJX rose.  Other resistance might be found at 9700
and 9900, but the DJX might also retreat once it hit the top of
its regression channel.  ADX measures less than 20, an indication
of range-bound rather than trending markets.

If the DJX should instead decline, participants could first watch
for support at 9200, then in 50-point increments down to 8950.
The 25 percent rally retracement lies at 8880, some support
exists between 8710-8740, and the 38.2 percent retracement and
200-ema lie between 86.20 and 86.50.

When studying the NDX chart, it quickly becomes apparent that the
NDX has already moved above the midline resistance on its rising
regression channel.  This perhaps portends that other indices
will do so, too.  Although a classic bull flag might see a
tighter range of lower highs and lower lows, the NDX pattern over
the last several weeks could also be described as a bull flag,
with the breakout having taken place.  The NDX moved above its
21-dma last week, perhaps also portending that the other indices
would do so today.  It also tested and sprang up from its 25
percent rally retracement level and RSI broke above its trendline
as that was happening.

Daily Chart of the NDX:


This action hints that the NDX will test the top of its
regression channel, perhaps near the 1320-1350 historical
resistance, although market participants might have liked a
bigger closing margin above its 1280 former resistance before
they started counting on testing higher resistance.  Oscillators
look bullish, however, with the ADX above 30 and perhaps turning
up again.

Support lies beneath at 1280, although that support remains
questionable, between 1265-1266, near 1250, and between 1220-
1223.  A steeper fall might bring the NDX back to test its 25
percent rally retracement at 1184 or to 1180 support.  Other
support can be found between 1162.50-1165.50 and then at 1140,
the site of historical support and the 38.2 percent rally
retracement.

Even though I'm viewing these charts with a bear sitting on one
shoulder, the indices seem primed to move higher, perhaps only
over the next week or so with maybe a down day or two along the
way.  Many 30-minute and 60-minute charts display oscillators
that indicate short-term overbought markets, but the high ADX
levels on those 30-minute and 60-minute charts hint that the
upward trend remains strong and that oscillators can't be
trusted.  I'm still inclined to listen to the bear, particularly
with the summer doldrums almost upon us, so can't quite believe
the evidence I'm seeing.  Not even the bear is whispering that
it's time to short the markets just yet, though.  He's just
growling warnings.

Tomorrow, that may all change.  What would change the outlook?
Nothing I can predict at this point since earnings and economic
releases will be light.  AA will report.  As Jim mentioned this
weekend, this will be the first Dow component to report. GE
reports on Friday.  Nasdaq biggie YHOO reports on Thursday.

Tomorrow morning's economic reports include Chain Store Sales at
7:45 ET, previously -0.5%, Redbook Retail Sales at 9:00,
previously +0.9%, and the June Richmond Manufacturing Index at
10:00, previously at -5.

Out of those numbers, the Richmond Manufacturing Index at 10:00
ET might be the most likely suspect to initiate a pullback on
those 30-minute and 60-minute charts.  May's Consumer Credit will
be released at 3:00 p.m. ET, previously $10.7 billion and with a
market consensus of $5.0 billion for May, but with predictions
ranging from $1.5 billion to $5.3 billion.  As the wide-ranging
predictions demonstrate, this number can prove volatile.  Perhaps
due to the warnings Jonathan Levinson and others have issued
about the dangers of higher consumer credit, market participants
should pay more attention to this number than they usually do.
Because of that volatility and because the information is
considered old news, it's not often a market mover.

Earnings warnings are likely to accumulate as the week
progresses.  Also, as the end of the week approaches, expect
attention to focus on Friday's upcoming economic release of the
PPI and core PPI.  Numerous weekend articles focused on Friday's
PPI, with many articles speculating on the various forces that
might impact the number.  For example, producers from car
manufacturers to 3M have been using incentives and discounts to
prop up demand and undercut competitors.

Be careful picking a top just yet.  If markets are going to dive
rather than consolidate, we'll have evidence of that happening
when key support levels are violated, and you may just get a
better chance for a higher top.

Linda Piazza



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

Synopsis, Inc. - SNPS - cls: 64.82 chng: +2.14 stop: 61.50*new*

Company Description:
Synopsis is a supplier of electronic design automation software to
the global electronics industry.  The company's products are used
by designers of integrated circuits (ICs), including system-on-a-
chip ICs, and the electronic products (such as computers, cell
phones, and internet routers) that use such ICs to automate
significant portions of their chip design process.  SNPS' products
offer its customers the opportunity to design ICs that are
optimized for speed, area, power consumption and production cost,
while reducing overall design time.

Why we like it:
With another failure below the $64 level on Wednesday and a steady
bleed lower throughout Thursday's shortened trading session, we're
starting to lose faith in our SNPS play.  While the stock found
support again last week at its month-long ascending trendline
(currently $60.90), the intraday highs on each of the past three
assaults on the $64 resistance level have been slightly lower.  It
is difficult to draw any conclusions though, until SNPS either
breaks that supportive trendline or breaks out over our $64.25
entry trigger.  A large part of what is allowing SNPS to hold near
its recent highs has got to be the stellar earnings report in May.
Should the bulls recover their footing next week and propel the
Semiconductor index (SOX.X) back over $375, then that ought to
give SNPS the lift it needs to finally break through resistance.
Wait for the breakout before playing.

Why This is our Play of the Day
It took a lot of grunting and straining to get the job done, but
SNPS finally blew through the $64.25 trigger level that we've been
monitoring for the past couple weeks.  The stock certainly wasn't
able to keep up with the more than 7% advance of the Semiconductor
index (SOX.X), but we're not going to complain about a solid
breakout to a new multi-year high.  It appears the bulls are
intent on breaking the SOX above $400 on a closing basis and if
successful, that ought to help propel SNPS up towards next major
resistance near $68.  Now that the stock has given us the
breakout, successive pullbacks into the $63-64 area should be met
with eager buyers and make for solid entries ahead of a concerted
assault on that $68 resistance area.  Look for the SOX to plow
through the $400 resistance level before buying into further
strength in SNPS above $65.

Annotated Chart of SNPS:


Picked on June 25th at   $63.59
Change since picked       +1.23
Earnings Date          08/20/03 (unconfirmed)
Average Daily Volume = 1.57 mln




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DISCLAIMER
=================================================================

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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Copyright ) 2003  PremierInvestor.net. and
The Premier Investor Network.
Do not duplicate or redistribute in any form.
PremierInvestor.net Newsletter                  Monday 07-07-2003
                                                   section 2 of 2
Copyright (c) 2003, All rights reserved.
Redistribution in any form is strictly prohibited.

The entire newsletter is best viewed in COURIER 10 for alignment
=================================================================

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)

==================================================================
  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

KB      Kookmin Bank               34.35     +2.55
NMGA    Neiman Marcus Group        37.65     +1.10
FRM     Friedman's Inc             12.50     +1.05
HTRN    Healthtronics Surgical     11.03     +0.78

---------------------------------------
Breakout to Upside (Stocks $5 to $20)
---------------------------------------

AMAT    Applied Materials          17.63     +1.61
SEO     Stora Enso Oyj             12.44     +1.19
ASML    ASML Holdings              11.66     +1.17
AMKR    Amkor Technology           16.24     +2.50
AVX     AVX Corp                   11.80     +1.01
THOR    Thoratec Corp              17.63     +1.38

---------------------------------------
Breakout to Upside (Stocks over $20)
---------------------------------------

QCOM    Qualcomm Inc               39.88     +2.52
MER     Merrill Lynch              50.70     +1.45
CAJ     Canon Inc (ADR)            52.02     +2.52
STM     STMicroElectronics         22.39     +1.26
HIT     Hitachi Ltd                53.50     +4.40
A       Agilent Technologies       21.29     +1.30
SMG     Scotts Co                  54.00     +3.50

-------------------------------------------
Breakout to Downside (Stocks over $20)
-------------------------------------------

KO      Coca-Cola Co               44.95     -1.28
BR      Burlington Resources       51.06     -1.74
WFT     Weatherford Intl Ltd       39.75     -1.21
PPP     Pogo Producing             41.68     -1.67
SCHL    Scholastic Corp            28.34     -1.21
EVG     Evergreen Resources        51.63     -2.17

-----------------------------------------
Recently Overbought With Bearish Signals (Stocks over $20)
-------------------------------------------

. none ..




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To stop receiving this PremierInvestor.net Newsletter,
send email to Contact Support
=================================================================
DISCLAIMER
=================================================================

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

For more information on advertising in PremierInvestor.net
Newsletter, or any Premier Investor Network newsletter please
contact Contact Support.

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

Copyright 2003  PremierInvestor.net. and
The Premier Investor Network.
Do not duplicate or redistribute in any form.

DISCLAIMER

Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

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