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Daily Newsletter, Monday, 12/15/2003

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PremierInvestor.net Newsletter                 Monday 12-15-2003
                                                  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:      One Green Cheese Lane
Play of the Day:  Off And Running

===============================================================
MARKET WRAP  (view in courier font for table alignment)
===============================================================
     12-15-2003            High     Low     Volume Advance/Decline
DJIA    10022.82 - 19.34 10139.63 10021.64 1.76 bln   1035/1808
NASDAQ   1918.26 - 30.74  1979.78  1918.26 1.78 bln    902/2196
S&P 100   530.47 -  1.31   536.53   530.42   Totals   1937/4004
S&P 500  1068.04 -  6.10  1082.79  1068.02
RUS 2000  535.25 - 12.34   553.38   535.25
DJ TRANS 2950.77 - 32.64  3010.74  2950.64
VIX        17.23 +  0.82    17.42    15.79
VXO        16.91 +  0.96    17.25    16.26
VXN        27.07 +  1.21    27.23    25.96
Total Volume 3,949M
Total UpVol  1,102M
Total DnVol  2,783M
52wk Highs     847
52wk Lows       36
TRIN          1.14
PUT/CALL      0.70
===============================================================

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

One Green Cheese Lane
by Jane Fox

If your address is One Green Cheese Lane, The Moon then you may 
not know that US Military forces captured Saddam Hussein over the 
weekend. This of course made for a gap up this morning but not 
anywhere near the kind of gap I thought it would be. 

The SPX opened at 1077 a 3-point gap from Friday's close, 
immediately rushed to make a daily high of 1082 by 9:35ET and 
took the rest of the day off. By 3:00 ET the SPX had closed the 
gap and everyone expected a small reprieve from the selling. 
Unfortunately it didn't happen and SPX just continued to fall 
making a daily low of 1068 at the 4:00 close, a 14-point range. 
This is what some call a gap and crap. 

S&P 500 (SPX) - 60-minute chart:


Using some of Jeff Bailey's retracement techniques, I have 
anchored a retracement on the 60-minute chart from the November 
21st lows at 1031 and fitted the 19.1% retracement, to the 
December 3rd and December 12th levels. Using this retracement, a 
normal 38.2% retracement would take the index back to 1064 and a 
50% retracement, still within the range of a normal retracement, 
would take the index back to 1057. So although today looked 
bearish the SPX is not in any danger of entering bearish 
territory but a trade below the last swing low and the 61.2% 
retracement level (yellow line) would change my mind. 

When the DOW opened it also raced to make its daily highs of 
10139 by 9:35 ET. It was sort of like these indexes wanted to get 
the daily highs out of the way early so they could get down to 
some serious selling. The DOW closed on its lows at 4:00ET at 
10021 a 118 point range. 

DJIA - 60-minute chart:




I have also anchored a fitted retracement on the DOW November 
21st lows and fit the 19.1% retracement to the December 9th swing 
high which fits nicely with the 10000 level. As long as the DOW 
stays above the 38.2% retracement level and does not make a lower 
low I think the bulls are in control. 

For the OEX wrap I solicited Linda Piazza's help for there is no 
one the OIN staff that knows the OEX better than Linda. Here is 
her commentary. 

Late last week, the OEX began moving up from the midline of its 
rising regression channel, suggesting that it might rise toward 
the top of that channel, currently near 540.  Monday's trading 
pattern questioned that assumption.  Although the 535-536 
resistance zone does not appear as strong as the 527-529 and 531-
533 zones on the monthly chart, it proved strong enough to turn 
back further OEX advances today.  Monday's trading pattern 
produced an inverted umbrella sitting high above the previous 
candles on the daily chart, with such a candle sometimes serving 
as a reversal signal.  With one notable exception on October 9, 
such candles on the OEX are almost universally followed by a 
decline. Prices pierced through the 533 resistance and the upper 
Bollinger band, but could not maintain that level and fell back, 
with the body forming below both.  That shows market participants 
that bullish fervor wasn't strong enough to hold onto those 
levels.

Such potential reversal signals must be confirmed, however.  
Tomorrow, traders will watch first for an open below that candle 
and then for a move down from there to confirm the reversal 
signal.  Even then, they might be nervously aware that October 10 
presented just such an opening, but that day's trading produced a 
spinning top that was followed by a climb rather than the 
expected decline.

S&P 100 (OEX) - Daily chart:



Daily oscillators do not offer convincing evidence of either a 
drop or a climb. MACD lines slant up, RSI tried to hook over, and 
21(3)3 stochastics trend in territory indicating overbought 
conditions.  MACD attempts to erase the bearish divergence that 
has troubled many technicians, with MACD lines moving higher than 
their position during the early November price highs.  However, 
MACD has not yet eclipsed the MACD high achieved in September 
although prices have surmounted the September high, so it's 
possible to point out conflicting evidence. 

S&P 100 (OEX) - 60-minute chart:


Thirty-minute and 60-minute oscillators hint that there's plenty 
more downside to go, and if daily oscillators turn down, too, the 
downside promised by that potential reversal signal may be 
realized.  With inconclusive oscillators, October 9/10's example 
before us, and the known bullishness of the Santa rally season, 
we may not be able to count on that reversal signal being 
confirmed. 

Thank you Linda for a great analysis. 

One of the reasons I have been bearish lately is the weakening of 
the small cap stocks in comparison to the large caps. Last week I 
posted a chart in the Market Monitor of the $RUT.X (Russell 2000 
small cap index), the $SPX.X and an indicator that measures the 
spread between the two. I would now like to spend some time 
discussing why my bearish outlook may have been wrong. The spread 
is a very simple formula (RUT + SPX) / SPX but a very good visual 
for how well the small caps are doing in relation to the large 
caps. 

Russell 2000 (RUT) - Daily chart:



The top panel is the $RUT.X, middle panel $SPX.X and the bottom 
panel the spread. Within the red box I drew, the spread is 
flatlining demonstrating both indexes are falling or rising in 
tandem. But come March the spread moved above its 50MA and 
continued to rise, which indicates the small caps were 
outperforming. Then I noticed the possible H&S forming in the 
$RUT.X while the SPX was making new 52-week highs which caused 
the spread to take a plunge below its 50MA. All this lead me to 
believe it was bearish for market overall but that thinking may 
have been wrong and another scenario may be taking place. 

The Russell 2000 tracks US companies with a market capitalization 
of $1.2 billion or less and therefore more sensitive to an 
economic deceleration that higher interest rates could bring. 
Wall Street expects to see a quarter point interest rate hike by 
early next summer and although this is not a huge hike, it could 
mean the cyclical small caps that are more sensitive to interest 
rate hikes will no longer outperform the large caps. This is not 
bearish for the market as a whole but just a cyclical reshuffling 
that happens all the time.  

In other news Oracle (ORCL) topped Wall Street expectations by 
posting a 15% increase in net income on strong software-licensing 
revenue. It reported net income for its fiscal second quarter of 
$617 million, or 12 cents a share, compared with $535 million, or 
10 cents a share, a year earlier. ORCL's results are closely 
watched for clues about the future of corporate information-
technology spending. 

Wal-Mart Stores Inc. (WMT) weighed on the Dow as the nations 
largest retailer gave a not so rosy outlook for December sales as 
more people delayed holiday shopping or bought gift cards that do 
not immediately count toward revenue. WMT shares fell $1.76, or 
3%, to $50.74.

There were not a lot of sector winners today but the airline 
($XAU.X) and utility ($UTIL) indexes were able to squeak out a 
1.12% and 0.04% rise respectively. 

Sector losers were lead by the disk drive index ($DDX.X), the 
Semicondutor index ($SOX.X) and the Russell 2000 ($RUT.X) with 
3.96%, 2.79% and 2.25% loses respectively. 

Moving onto market internals we saw the bears in control with 
declining issues outnumbering advancers by a 20 to 12 margin on 
the NYSE and by a 22 to 9 score on the Nasdaq exchange. The 
volume of stocks moving lower was 928 million shares on the Big 
Board and 1400 million shares on the Nasdaq, vs. higher volume 
of 515 million shares and 397 million shares, respectively. New 
highs to new lows painted a much healthier picture with NYSE new 
highs clocking in at 435 to new lows of 10 and on the NAZ new 
highs were 121 to 5 new lows.

remember plan your trade and trade your plan.

Jane Fox (with a little help from her friend Linda)
 


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

Abercrombie & Fitch - ANF - cls: 23.49 chng: -1.10 stp: 25.25*new*

Company Description:
A specialty retailer, ANF is principally engaged in the purchase, 
distribution and sale of men's, women's and children's casual 
apparel.  The company's retail activities are conducted through 
retail stores, a catalogue, a magazine and a website, all bearing 
some form of the company name.  Merchandise is targeted to appeal 
to customers in specialty markets, who have distinctive consumer 
characteristics.

Why we like it:
Between less than stellar Retail Sales comparisons going into the 
holidays and some mixed economic reports, the Retail sector 
(RLX.X) has really been losing its appeal with investors.  After 
rolling over from the $390 level in early December (also right at 
the bottom of the already violated ascending channel), the RLX 
dropped through the 50-dma and continued to fall last week, even 
breaking below the $370 support level.  Simply put, the RLX is 
losing strength, just as we head into the holiday shopping season.  
Could it be that investors are selling after already pricing in 
strong performance in Q4?  While it certainly looks like a pocket 
of weakness, if we're going to play the downside, we need to focus 
our efforts on stocks in the sector that are looking particularly 
weak.  ANF definitely fits that bill, having broken down from a 
broad topping formation that began to form in April.  The catalyst 
for the drop back on December 4th was the company's November same-
store sales, which fell 13%, much worse than the 5% consensus 
drop.  That propelled the stock below major support at $26 and 
since then the stock has been coiling just above $24.

This coil looks like the prelude to another breakdown and if the 
$24 level gives way, we'll be looking for an eventual fall to the 
$20 area.  The PnF chart agrees with the bearish outlook, as it 
gave a new Sell signal with the drop under $26, which also broke 
the bullish support line.  The current bearish vertical count 
points to a downside target of $17, which isn't far above the lows 
from last October.  We're going to start coverage with a $24 entry 
trigger and favor momentum entries when that breakdown occurs.  
ANF should make a fairly quick move down towards the $22 level, as 
that is the bottom of the gap from early January.  Expect a 
reactive bounce from the bottom of that gap, which should set up a 
rollover entry prior to the stock continuing down to our $20 
target.  Place initial stops at $25.75, which is above both the 
10-dma ($25.68) and the top of the recent consolidation zone.

Why This is our Play of the Day
News of Saddam's capture over the weekend gave equities a boost at 
the open, but it didn't last for long.  The Retail index (RLX.X) 
gave one feeble attempt at a bullish move before the bulls turned 
tail and ran, leading to a 1.7% slide and a close at the low of 
the day.  Our new bearish play on ANF got off to a great start as 
well.  After the failed rally attempt at the open, the stock 
turned south, hitting our $24 trigger 90 minutes into the session 
and then the decline began to pick up steam.  By the end of the 
day, ANF had given up nearly 4.5% on volume that more than doubled 
the ADV.  That certainly got the play off to a positive start and 
the bears seem to have their sights set on the bottom of that 
January gap just above $22.  For traders that didn't take this 
morning's breakdown entry, the next likely opportunity to enter 
will be on a failed bounce in the $24.00-24.50 area.  After 
today's breakdown, ANF should not be able to climb back above last 
Friday's intraday high ($25.16).  Lower stops to $25.25, just 
above that level and above the 10-dma ($25.28) by Tuesday.

Annotated Chart of ANF:
 

Picked on December 14th at  $24.59
Change since picked          -1.10
Earnings Date              2/17/04 (unconfirmed)
Average Daily Volume =    2.09 mln
Chart:




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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
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Do not duplicate or redistribute in any form.



PremierInvestor.net Newsletter                  Monday 12-15-2003
                                                   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 Updates:  ANF, DLTR, UTEK

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 Updates
==================================================================

ANF - short
Adjust from $25.75 down to $25.25

DLTR - short
Adjust from $31.51 down to $30.90

UTEK - short
Adjust from $29.25 down to $28.00




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

BAC     Bank of America Corp       76.43    +0.58
F       Ford Motor Co              14.28    +0.56
MHP     McGraw-Hill Companies      67.84    +0.55
K       Kellogg Co                 36.50    +0.68
FO      Fortune Brands Inc         70.05    +0.95
PKX     Posco                      32.45    +0.95

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

STAT    I-Stat Corporation         15.21    +2.34

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

SSP     E.W. Scripps Company       94.85    +1.48
COL     Rockwell Collins Inc       28.42    +1.37
DL      Dial Corp                  28.38    +2.50
MRX     Medicis Pharmaceutical     69.96    +4.91

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

WMT     Wal-Mart Stores Inc        50.74    -1.76
TGT     Target Corporation         37.12    -1.65
DISH    Echostar Comm Corp         30.44    -1.98
CEO     Cnooc Ltd (ADR)            41.85    -3.70
CLX     Clorox Co                  47.10    -1.29

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

CHA     China Telecom              33.99    -3.11
CEO     Cnooc Ltd (ADR)            41.85    -3.70
JP      Jefferson-Pilot Corp       48.72    -0.61
CINF    Cincinnati Financial Cp    40.88    -0.37




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