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Daily Newsletter, Monday, 11/17/2003

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PremierInvestor.net Newsletter                 Monday 11-17-2003
                                                  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:      Terrorism Spooks Global Markets

Play of the Day:  Followed the Script

===============================================================
MARKET WRAP  (view in courier font for table alignment)
===============================================================
     11-17-2003            High     Low     Volume Advance/Decline
DJIA     9710.83 - 57.85  9765.64  9629.87 1.62 bln    794/2030
NASDAQ   1909.61 - 20.65  1919.23  1890.72 1.84 bln    965/2126
S&P 100   516.23 -  2.78   519.01   511.74   Totals   1759/4156
S&P 500  1043.63 -  6.72  1050.35  1035.28
RUS 2000  526.21 -  6.75   532.96   521.51
DJ TRANS 2893.13 - 34.51  2926.59  2874.64
VIX        18.60 +  1.66    19.36    18.04
VXO        18.82 +  1.19    20.27    18.24
VXN        27.81 +  1.65    28.56    26.96
Total Volume 3,923M
Total UpVol  3,045M
Total DnVol    800M
52wk Highs     269
52wk Lows       42
TRIN          1.94
PUT/CALL      0.84
===============================================================

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

Terrorism Spooks Global Markets
by James Brown

Monday proved to be another rough day for investors around the 
globe.  Asian and European exchanges swooned and U.S. averages 
joined the retreat with an extremely broad-based sell-off that 
left no survivors.  Not one U.S. sector index closed in the green 
today.  The catalyst for the declines, or as some market pundits 
might call an excuse to take profits, are renewed concerns that 
Al Qaeda is still threat.  The terrorist network took credit for 
two synagogue bombings in Istanbul, Turkey over the weekend and 
threatened to bomb Tokyo if Japan sends troops to Iraq.  Last 
week OptionInvestor.com reported on the Al Qaeda threat to launch 
a new attack in the U.S. during the Muslim holy month of Ramadan.  
Ramadan, the fourth pillar of Islamic belief, is a month-long 
fast (during daylight hours).  This year it began on October 
27th, 2003 and should end around November 27th.  Major news media 
failed to carry the threat story last week and they still remain 
cautious on highlighting the threat today.  Either they don't see 
it as credible or they don't want to raise a panic.  The U.S. 
department of Homeland Defense has kept the risk level unchanged 
at elevated (yellow).  

Japan's stock market didn't take the threat to bomb Tokyo 
lightly.  The NIKKEI index dove 3.74 percent or 380 points to 
close under the 10,000 mark for the first time in three months.  
The selling in Japanese stocks was exacerbated by concerns that 
their banking system continues to defy improvement despite the 
government's actions.  The Hong Kong Hang Seng index joined its 
neighbor with a 206-point decline to close at 11,997.  Meanwhile 
European stocks were walloped one day before President Bush is 
set to appear in London for the first formal visit by a U.S. 
President.  The English FTSE index lost 1.32% to close at 4338 
but the German DAX lead the decliners down 3.24% to 3674.  

Here at home stocks started the day with early weakness that 
eventually brought the S&P 500, the Dow Jones Industrials and the 
NASDAQ Composite down to their respective simple 50-dma(s).  Yet 
by 2:00 PM ET the worse was behind us and traders began to buy 
the dip.  By the end of the day the DJIA and the NASDAQ had cut 
their losses in half to close down 57 and 20 points, 
respectively.  Not all averages were so fortunate.  Several 
sector indices broke their 50-dma, technically a bearish 
development.  The heaviest selling was in gold stocks, airlines 
and technology (Internet, hardware and disk drives).  The selling 
in gold stocks was probably due to the failed rally in December 
gold futures.  Gold shot up to $399.90 but couldn't break the 
$400 barrier.  By the close, gold futures had lost $6.50 to close 
at $391.50 an ounce.  The XAU gold index lost 2.13 percent.  The 
XAL airlines fell almost three percent, which is most likely 
attributed to terrorism jitters.  The group has been a big winner 
for investors so the urge to take money off the table is rather 
strong.  

It is that very urge to harvest gains that many market 
commentators say is the real culprit behind today's losses.  The 
S&P 500, the most common barometer and measure for the markets, 
was up 17 percent year-to-date last week and up about 26 percent 
from its March lows.  Many a mutual fund manager is looking at 20 
percent gains in their portfolio and could be thinking to quit 
now and lock in a very good year after three years of losses.  
Speaking of losses, there were certainly a lot of them today.  
Declining stocks outnumbered advancing stocks 20 to 8 on the NYSE 
and 21 to 10 on the NASDAQ. More telling was how down volume was 
five times up volume on the NYSE and three times up volume on the 
NASDAQ.  

Chart of the DJIA:



Chart of the NASDAQ:



The economic calendar this week is devoid of any major reports 
and littered with second or third tier news.  This morning 
unveiled a positive surprise as the Empire State Index jumped to 
a record 41.0 in November compared to what most had been 
expecting as a loss towards the 31 level.  Obviously the news 
failed to fuel any buying but it is one more mile market on the 
road to economic recovery.  Meanwhile the flight to quality in 
U.S. bonds continued today, stretching the bond rally to four 
days in a row.  Terrorism concerns, if they continue, should fuel 
additional "safety" buying for U.S. debt.  As bonds rise their 
yields fall.  The bump today pushed the 10-year yield down to 
4.188 percent. 

Wall Street continues to hear from late cycle earnings 
announcements and two big caps making headlines were LOW and TOY.  
Home improvement and building supplies center Lowe's Companies 
(LOW) announced Q3 earnings of 56 cents a share, three cents 
better than estimates.  Revenues also topped analysts' forecasts 
at $7.92 billion for the quarter.  The company is seen moving in 
on larger rival Home Depot's (HD) turf and stealing market share.  
The stock failed to move much on the report and LOW's guided 
inline for the fourth quarter.  Home Depot is due to announce its 
own earnings tomorrow before the opening bell.  Estimates are for 
46 cents a share.  Shares of HD did react poorly to LOW's 
earnings report, dropping nearly 2 percent on the session.  Or 
maybe it was just the widespread selling across the markets.  Or 
maybe it was a comment from a Morgan Stanley strategist 
suggesting traders short HD and try and cover near the $30 level.  
Whatever the case, HD, as a Dow component, could be a stock to 
watch tomorrow after their morning report.

Contributing to the negative market action was Toys 'R Us (TOY), 
who's 12.24 percent drop to close under its simple 200-dma was 
the biggest percentage decliner in the S&P 500.  The company 
severely missed its Q3 earnings numbers today.  Analysts had been 
looking for a loss of 10 cents.  TOY turned in a loss of 18 cents 
a share.  Management commented on the growing competition from 
Wal-Mart, which investors fear the company is losing to.  In 
their press release TOY stated they plan to close 146 
freestanding Kids 'R Us and 36 freestanding Imaginarium stores 
along with 3 distribution centers that support these stores.  
"The majority of these facilities are expected to close on or 
before January 31, 2004."  You know what that means, right?  If 
they plan to close all of these before the end of January, not 
only will we probably see some huge sales during the holiday 
shopping season but the after-Christmas clearance sales at these 
locations could turn into an "everything must go" mob scene.

Now it wouldn't be a Monday without some merger news.  Today's 
merger springs from the insurance sector.  St. Paul Cos. (SPC) 
has announced their plans to acquire their larger rival Travelers 
Property Casualty Corp (NYSE: TAPa & TAPb) for $16.4 billion in 
stock.  Investors rewarded SPC with a 2.63% gain in its stock 
price since the company is paying zero premium for Traveler's 
stock.  Together they will become St. Paul Travelers Cos and will 
be the second biggest property insurer in the country behind AIG.  

Drum roll please... remember on Friday that the SEC teased the 
market with a "big announcement" concerning action against a 
major Wall Street broker?  That news sent the XBD broker dealer 
index to a 4% loss on Friday as everyone wondered who was to be 
fined and how big would the fine be?  Ta da!  The SEC announced a 
$50 million fine against Morgan Stanley (MWD) who was charged 
with failing to disclose incentive payments it was receiving from 
various mutual funds for pushing their products on MWD clients.  
Considering that the company brings in a net income close to $3.5 
billion a year, the $50 million fine seems a little anti-
climatic.  Now maybe the fine fits the scope of the alleged 
"crime" but shares of MWD rose 9 cents by Monday's close.  

Schwab, Bear Stearns and Putnam also made minor headlines.  
Schwab reportedly sent an email to all of its 16,000 employees 
stating they had uncovered 18 trades that were "problematic".  
Two employees were fired after the company retrieved deleted 
emails pertaining to the issue.  Bear Stearns also fired six 
employees last week over the growing mutual fund probes.  
Meanwhile Putnam Investments, the lead pig in this scandal so 
far, reported that it has lost some $16 billion in assets under 
management due to withdrawals, leaving it with $256 billion.  

Tomorrow could be interesting.  The major U.S. averages have all 
bounced from their simple 50-dma(s).  This normally sounds like a 
buying opportunity and the afternoon rebound today could easily 
continue into Tuesday's session.  The real question is how long 
will it last?  Tuesday will bring more earnings, the CPI report, 
and potentially more headlines from a number of ongoing analysts 
conferences. 



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

Solectron Corp. - SLR - close: 5.29 change: -0.29 Stop: 6.02*new*

Company Description:
Solectron Corporation provides integrated supply chain solutions 
that span the entire product life cycle, including technology, 
manufacturing and services. The company has four operating 
segments: Global Operations, Technology Solutions, Global Services 
and MicroSystems. Through Global Operations, it provides customers 
with pre-manufacturing, manufacturing, materials management and 
fulfillment services for printed circuit boards, backplanes, 
system enclosures and complete electronic products. Technology 
Solutions provides modular memory and embedded systems design and 
related manufacturing services. Global Services is the company's 
primary provider of post-manufacturing services with solutions 
from the time a product is put in service until it is removed from 
the market. MicroSystems offers a broad portfolio of enabling 
solutions to the communications, automotive and military markets.


Why we like it:
While there is still a lot of strength to be found in the 
Technology sector, investors are definitely becoming more 
discriminating about their purchases.  That can be seen in shares 
of SLR, which has been a real laggard since late October, when it 
broke below its 50-dma (currently $6.09).  The $5.50 level has 
been key support going back to early October, but with the weak 
price action of the past two days, that support is definitely at 
risk.  Once it gives way, SLR should have a rather quick trip down 
to the next solid support near $4.50, also the site of the 200-
dma.  Certainly there is the possibility of the stock finding 
near-term support at $5.00, but that level looks less significant 
and we think the bears will likely press their advantage once the 
$5.50 level breaks.

This is definitely an aggressive play, especially with the PnF 
still on a Buy signal.  But with the ability to set a reasonably 
tight stop at $6.12 (just over the 50-dma and the top of the most 
recent failed rebound), SLR does present a favorable risk-reward 
dynamic.  The best entry appears to be on the break of our $5.50 
trigger, looking for a steady decline from there.  But traders 
willing to take the risk of missing the move can look for a 
subsequent failed rally below $5.70.  SLR will have to hit our 
trigger in order for it to be considered a live play.

Why This is our Play of the Day
What a great start to our SLR play!  The stock opened right on our 
$5.50 entry trigger, bounced slightly and then plunged to its 
intraday low at $5.11.  SLR did bounce back modestly in the 
afternoon, but it appears the downward slide has begun in earnest.  
We expected to see some support in the vicinity of $5.00, so 
today's rebound is really no surprise.  If still seeking entry 
into the play, a rollover below $5.50 would be ideal.  Of course, 
there's the potential for a slightly higher bounce, with the stock 
running into stiff resistance near $5.75, the site of the 
converged 10-dma ($5.77) and 20-dma ($5.78).  It may take a few 
days to get below $5.00 support, but then the bears can be 
expected to set their sights on the $4.50 level, currently the 
site of the 200-dma.  That level will almost certainly see a 
concerted bounce attempt, so we'll want to aggressively harvest 
gains at that point.  Note that with today's breakdown working in 
our favor, we've reduced our risk in the play by lowering our stop 
to $6.02, just above the intraday highs from the end of last week.

Annotated Chart of SLR:

 

Picked on November 16th at  $5.58
Change since picked         -0.29
Earnings Date            12/22/03 (unconfirmed)
Average Daily Volume =   5.34 mln


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

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

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

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Newsletter, or any Premier Investor Network newsletter please
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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 11-17-2003
                                                   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
=================================================================

Stop Loss Adjustment: SLR

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)


==================================================================
Stop Loss Adjustments:
==================================================================


SLR - short
Adjust from $6.12 down to $6.02



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

KFT     Kraft Foods Inc            31.20    +0.68
DGX     Quest Diagnostics Inc      71.33    +1.13


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

HLR     Hollinger Intl Inc         15.73    +2.23
QLTI    QLT Inc                    16.91    +1.51


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

ACL     Alcom Inc                  56.28    +2.14
GRMN    Garmin Ltd                 51.72    +2.34
HAR     Harman Internat Ind Inc   126.06    +1.86
AJG     Arthur J. Gallagher & Co   31.72    +1.04


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

AXP     American Express Co        43.93    -1.40
DB      Deutsche Bank Ag           65.32    -1.30
YHOO    Yahoo! Inc                 40.36    -1.27
RTP     Rio Tinto Plc (ADR)        96.50    -1.95
FUJIY   Fuji Photo Film Co Ltd     26.84    -1.26
KYO     Kyocera Corp               58.12    -1.81
GENZ    Genzyme Corp               42.72    -1.15
HNP     Huaneng Power Intl Inc     56.54    -1.61


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

V       Vivendi Universal          21.62    -0.53
YUM     Yum! Brands Inc            33.77    -0.71
JWN     Nordstrom Inc              29.94    -1.23


=================================================================
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.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

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