PremierInvestor.net Newsletter Monday 08-11-2003 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: Dog Days Play of the Day: Slip Sliding Away =============================================================== MARKET WRAP (view in courier font for table alignment) =============================================================== 08-11-2003 High Low Volume Advance/Decline DJIA 9217.35 + 26.26 9251.59 9146.62 1.20 bln 1700/1082 NASDAQ 1661.51 + 17.48 1668.06 1646.59 1.19 bln 1927/1139 S&P 100 495.12 + 1.32 497.66 491.93 Totals 3627/2221 S&P 500 980.59 + 3.00 985.46 974.21 RUS 2000 459.27 + 5.33 459.27 453.94 DJ TRANS 2579.03 + 6.79 2597.80 2570.74 VIX 21.42 + 0.13 22.43 21.16 VXN 32.12 + 0.09 33.50 31.36 TRIN 0.62 PUT/CALL 0.93 =============================================================== =========== Market Wrap =========== Dog Days by James Brown Wall Street finds itself smack dab in the middle of the Dog Days of Summer and we witnessed the lowest volume day of the year. Of course the FOMC meeting tomorrow may have something to do with the low volume today but we'll get to that in a moment. The Industrials squeaked out another 26 point gain to make the current rally stretch to four days in a row. Much of the afternoon bounce in the $INDU was probably owed to 3M's announcement to split its stock in September. Meanwhile last week's losers were this week's gainers as the tech sector was generally green today. All the major tech averages including the DDX disk drive index, the GHA hardware index, the GSO software index, the INX Internet index, the NWX networking index and the SOX semiconductor index all turned in positive sessions. Leading the way were the storage and chip stocks. Lending their efforts to help boost the U.S. markets were generally positive world indices. Japan begins a traditional weeklong holiday today but that didn't stop the NIKKEI index from adding 1.72% or +160 points to close at 9487. Plus the Hang Seng index rallied 1.49% or +148 points to break back above the 10,000 mark to 10,093. European markets were mostly positive but the gains were rather muted probably an extension of the range trading here domestically before the FOMC meeting tomorrow. Not helping stocks was another drop in the bond market, which drove yields higher again with the 10-year note yielding 4.371% and the 30-year yielding 5.296%. Market internals were actually much more positive than the closing numbers may lead you to believe. On the NYSE advancers beat decliners 17 to 10 and on the NASDAQ gainers trumped losers 19 to 11. Up volume beat down volume by a margin of 2-to-1 on the NYSE and by nearly 4-to-1 on the NASDAQ. Despite it all the Dow Industrials remain below overhead resistance at 9300 and the NASDAQ Composite, which appeared to snap a losing streak, is still below the 1675 and the 1700 levels (not to mention its simple 50-dma). Chart of the Dow Jones Industrials: Chart of the NASDAQ Composite: Most of the newsworthy stocks making headlines today were in the technology sector but stealing the show was conglomerate 3M (NYSE:MMM). Shares of MMM spiked higher with a late afternoon push after the company announced a 2-for-1 stock split. This is the first stock split in nine years for the highest dollar stock in the Dow Industrials. MMM last split 2-for-1 in April of 1994. MMM's strong $1.95 gain on the day was crucial to the Dow's 26- point gain on the session. MMM burst out of a short-term bull flag consolidation pattern and looks ready to breakout above current resistance at $142. Shares are currently overbought but with any shorts still in this high flyer probably looking for the exits it could get even more overbought. The split will take place on September 29th for shareholders on record as of September 22nd. Giving the software sector a boost today was an upgrade for Oracle (NASDAQ:ORCL) from Merrill Lynch. MER's analyst lifted ORCL from a "neutral" to a "buy" citing limited downside risk and plenty of benefit should the economy continue its gradual recovery. Looking at the chart of ORCL it may take some faith to invest new capital as shares have fallen from $14 in mid-June to just above $11 late last week. Of course the timing of the upgrade may not be that bad given the stock was near serious support. Shares bounced more than three percent today but still closed under its simple 200-dma. Believe it or not we still have corporate earnings to contend with. While we may miss the "Dude, you're getting a Dell!" commercials we don't want to miss DELL's earnings report. The PC giant will be announcing earnings after the bell on Thursday. What they have to say about end-user demand, especially during this back to school period, will help set the stage for any future technology moves throughout the third quarter. Current DELL estimates are for 24 cents a share. Additional tech earnings to watch this week are Applied Materials (AMAT) and Maxim Integrated (MXIM) who both announce tomorrow. This is also a heavy week for retail business earnings announcements. The S&P Retail index (RLX) is currently near 52- week highs. The RLX appears to have broken out of a bull flag consolidation pattern but any follow through on the move will depend on corporate results. Tomorrow is a busy day with earnings from May Department stores (MAY), Abercrombie & Fitch (ANF), J.C.Penney (JCP), T.J.Maxx (TJX) and OfficeMax (OMX). The headline announcement to watch will be Wal-Mart's (WMT), which comes out on Wednesday. WMT announced today that they appeared to be "on track" to meet its August same-store sales growth. The news helped spike shares of WMT up to a new 52-week high early in the session before its gains faded into the close. Also announcing on Wednesday will be Ann Taylor (ANN) and Federated Dept Stores (FD). The biggest event this week also hits tomorrow and that is the FOMC meeting. Everyone expects the Fed to leave interest rates unchanged at 1%, a 45-year low. A surprise cut could be seen rather poorly. Everyone would wonder what the Fed saw that scared them enough to cut rates again. The real focus will be on what the Fed has to say about current conditions and where they see the economy headed. The challenge here is that productivity was very high in the second quarter. Strong productivity gains coupled with low utilization capacity does not create a need for businesses to hire new staff. Everyone knows that as we approach this coming election year the number one topic will become job growth. We'll probably hear more comments about how the Fed is ready to be accommodative and their biggest concerns are inflation falling too low. The good news is that we probably have yet to see the bulk of any impact from those child tax credit (refunds) hitting the economy. Although the early signs point to families spending those checks at stores like Wal-Mart, which should be good news for the retail earnings announcements this week. As traders our concern could be another "sell the news" event with the FOMC even though there doesn't appear to be any news to sell just yet. Thus far the traditional late-July to early October market sell-off has not yet occurred. We could be seeing some signs of it in the NASDAQ but investors don't seem worried yet, at least not from what the VIX and VXN are telling us. As Jim pointed out on Sunday, the longer we can trade sideways the better chance we have of building a new base before what is expected to be a ramp up into the fourth quarter. Unfortunately, we're starting to hear more "professionals" calling for a retracement of one third to one half of the March to June gains. Should the Dow/NASDAQ/SPX really breakdown then traders will need to be ready to switch to bearish strategies. Watch those stop losses. James =============== Play-of-the-Day ( BEARISH ) =============== Sharper Image - SHRP - close: 24.30 change: -0.35 stop: 26.75 Company Description: Sharper Image is a specialty retailer that is nationally and internationally renowned as a leading source of new, innovative, high-quality products that make life better and more enjoyable. A significant and growing proportion of sales are of proprietary products created by the Company's product development group, Sharper Image Design. The Company operates over 130 stores throughout the United States, mails millions of its award-winning catalogs each month and advertises through other direct response media including television. The Company's products may also be purchased on the Internet via its online store at sharperimage.com. The Company also has an online auction site where consumers can place bids to win Sharper Image products at lower prices; the auction site is accessed from the home page of the Company's Web site. The Company also markets its products through business-to-business sales for corporate marketing programs and wholesale customers. (Source: Company Press Release.) Why we like it: We're basing this play on technical considerations seen in SHRP's chart. Friday, SHRP broke through the neckline of a clean and well-formed head-and-shoulders formation. Along the way, it also broke through support at 25.75 and 25.00, falling 4.35 percent on almost double daily average volume. Meanwhile, the $RLX gained 1.52 percent. The target of the H&S formation projects down just below SHRP's 200-dma at $20.68, but we'll be targeting $21.00, just above that level. That H&S neckline gives us a well-defined stop to watch, too, and we're setting our stop at $26.75, a point above the neckline. Entries can be made at the current level or on a rollover anywhere beneath $25.00. What happened to SHRP? We're not sure. Thursday, SHRP announced an 11 percent increase in July in same-store sales. Total sales rose 20 percent from the year-ago period. Internet sales jumped 60 percent. The company said it still expected Q2 earnings to be at 2 to 3 cents per share, and the CEO characterized this statement as "confirming our increased guidance." The CEO mentioned the great momentum. Is there something disturbing buried in this report? Is it that June same-store sales climbed 15 percent and total company sales increased 28 percent, greater than July's numbers? SHRP's July same-store sales certainly increased more than those of most other retailers we checked, with the exception of CHS, with that company's same-store sales increasing 15.7 percent. SHRP is on a P&F buy signal, but has reversed into an "O" column and is in danger of giving a high-pole warning if it drops too much further. This stock looks primed to fall, but it needs to do so quickly. The company will announce earnings August 21, and we'll be closing the play ahead of that earnings announcement. Why This is our Play of the Day Shares of SHRP caught our attention late last week after the sharp downward move from the $28 resistance area and the bearish picture was further solidified by the break of the 2-month Head & Shoulders pattern neckline at $25.50. That break drew in some pretty strong selling volume on Friday and despite gains across all the major indices and the Retail index (RLX.X) on Monday, the stock slid lower along the lower Bollinger band, which is starting to peel off to the downside. While aggressive traders can look to enter on a continued deterioration below the $24 level, they'll need to be on the lookout for an oversold rebound from the $23.25 area, the site of strong resistance on the way up and likely to be pretty firm support on the way down. A rebound from that area should find plenty of overhead supply in the $25.50-26.00 area and a rollover there would make the best case for new bearish entries. Once below the $23.25 support, look for SHRP to seek out strong support near $21, which is just above the 200-dma ($20.69). Annotated Chart of SHRP: Picked on Aug 10th at $24.65 Change since picked: -0.00 Earnings Date: 08/21/03 (confirmed) Average Daily Volume: 260 K ================================================================= 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.
PremierInvestor.net Newsletter Monday 08-11-2003 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 ================================================================= Split Announcement: MMM Stop Loss Updates: NEM Trading Ideas There will be no Trading Ideas today due to technical difficulties. Please look for them again tomorrow. ================================================================== Split Trader/ Stock Splits ================================================================== ------------------- Split Announcements ------------------- MMM sticks a 2-for-1 stock split... on a post-it note! Late in this afternoon's trading session, 3M's (NYSE:MMM) Board of Directors declared a 2-for-1 stock split of its common shares. 3M also announced a quarterly cash dividend of $0.66 per share, payable September 12th, 2003, to shareholders on record by August 22nd. The stock dividend will be payable to September 29th, 2003 to shareholders on record as of September 22nd. This is the MMM's first stock split in nine years. About the company: Every day, 3M people find new ways to make amazing things happen. Wherever they are, whatever they do, the company's customers know they can rely on 3M to help make their lives better. 3M's brands include icons such as Scotch, Post-it, Scotchgard, Thinsulate, Scotch-Brite, Filtrete, Dyneon and O-Cel-O. Serving customers in more than 200 countries around the world, the company's 70,000 people use their expertise, technologies and global strength to lead in major markets including consumer and office; display and graphics; electronics and telecommunications; safety, security and protection services; health care; industrial and transportation. (Source: Company Press Release) ================================================================== Stop Loss Updates ================================================================== Long play --------- NEM - We are raising our stop loss from $36.15 to $36.90. ================================================================== Trading Ideas ================== ! Please note ! There will be no Trading Ideas today due to technical difficulties. Please look for them again tomorrow. ================================================================= 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.
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