Option Investor

Daily Newsletter, Thursday, 01/08/2004

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PremierInvestor.net Newsletter                 Thursday 01-08-2004
                                                    section 1 of 2
Copyright (c) 2004, 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:      Resistance Targets Hit
Watch List:       KRB, S, GPT, STR and more!
Market Sentiment: Will Investors Sell The News?

MARKET WRAP  (view in courier font for table alignment)
      01-08-2004           High     Low     Volume Advance/Decline
DJIA    10592.44 + 63.40 10592.59 10530.07 2.52 bln   2000/1233
NASDAQ   2100.25 + 22.60  2100.25  2078.05 2.67 bln   1981/1262
S&P 100   562.88 +  3.57   562.88   559.02   Totals   3981/2495
S&P 500  1131.92 +  5.59  1131.92  1124.91 
W5000   11009.62 + 52.50 11009.62 10943.02
RUS 2000  579.62 +  5.00   580.22   574.62 
DJ TRANS 3029.70 -  4.40  3037.44  3022.89   
VIX        15.61 +  0.11    15.68    15.32
VXO (VIX-O)14.46 -  0.39    15.39    14.42
VXN        21.89 -  0.02    22.16    21.36 
Total Volume 5,497M
Total UpVol  3,836M
Total DnVol  1,615M
52wk Highs 1118
52wk Lows    11
TRIN       0.81
NAZTRIN    0.72
PUT/CALL   0.65

Market Wrap

Resistance Targets Hit

It was not pretty but after a day of strong volume and numerous
direction changes the indexes edged up at the end of the day to
close exactly at those very strong resistance levels I have
been discussing for the last three weeks. The Dow was the only
laggard with a close at 10592 missing my 10600 resistance target
by -8 points. The Nasdaq closed exactly on the 2100 level and
the Wilshire 5000 closed +8 points over my 11000 target. Friday
should be a very exciting day. 

Dow Chart - Weekly

Nasdaq Chart Weekly

Economically the day was a draw with the real fireworks held
for Friday's open with the December Jobs Report. The Jobless
Claims today came in at 353,000 and slightly over the consensus
of 350,000. No brain damage there as 350K is the average for
the last four weeks. This inline report was actually an upside
surprise as the whisper number was for a lot more. This is the
first post holiday week, although still a partial, and analysts
thought it possible for a surge to appear. Next week is the
real number with no holidays to skew the figures. Continuing
claims continue to fall and this is pumping up expectations
for the Jobs Report on Friday. A drop in Jobless Claims means
layoffs are slowing but a drop in continuing claims means there
are people either finding work or dropping out of the system
as their claim periods expire. Analysts are hoping it is due
to hiring. 

The Wholesale Trade numbers rose slightly in November with
Sales up +0.3% and Inventories up +0.5%. This was the lowest
sales increase in three months and well below the +2.0% gain
in October. Inventories remained the same at the +0.5% level.
The inventory to sales ratio remained a its historic low of
1.18 for the second consecutive month. While the rate of
growth has slowed it was still positive and continues to 
predict a rapid inventory rebuild cycle ahead. 

Consumer Credit fell to $4B in November from $8.3B in Oct
and $11.3B in September. Normally this would be a negative
occurrence but October was revised up to $8.3B from only
$900 million. Talk about a missed estimate there! The gain
was almost exclusively in the non revolving component from
strong auto purchases. Credit card debt fell for the first
time since June. Looks like consumers were getting ready
for the shopping season by making space on their cards.

Retail Sales rose +4.2% in December according to the ICSC
survey. Drug stores and Wholesale Clubs sported the biggest
gains at +8.0% for each component. There were some real 
discrepancies to this in the news today. Major chains warned
that sales were weak and earnings would suffer while others
raised earnings guidance. It was a very confusing sector. 
Kohls (KSS) warned and dropped -$3.70 to 41.80 after cutting
estimates to 69 cents from prior expectations in the 92 cent
range. KSS said same store sales FELL -1.2% for the last
five weeks. They aggressively managed inventory and slashed
prices to give away merchandise rather than carry it over
into January. Competitors claimed they "bought" the business
by selling so cheaply. 

Other retailers warning were TAL, ANF, GPS and WMT. Retailers
raising guidance were ANN, BBY, PSUN and HOTT. Wal-Mart said
same store sales rose +4.3% as a surge in late holiday traffic
saved them from a dismal month. However they warned that 
earnings would come in at the low end of their previously
forecasted range. Despite the weaker than expected performance
WMT still sold $33.66 billion for the five weeks ended Jan-2nd.
Pretty amazing volume and their one month revenue is more than
most retailers sell all year. Hard to grow in double digits
when the numbers are already so large. Still despite the
various warnings and misses 74% of retailers hit their Dec

Another warning came from Ryland Group that cratered the 
entire homebuilding sector. RYL said it was disappointed in
its fourth quarter sales due to new orders declining for the
period. While earnings are still expected to be at record
levels it was not a major blow for the company but any sales
weakness in new homes produces fear in the sector. RYL is
still predicting earnings of $9.50 for 2004. (PE 7.7) They
ended the year with an order backlog of 5,841 units worth
$1.4 billion in sales. You would have thought they declared
bankruptcy from the hit to the stock. RYL dropped -$10 on
the news to $72.91. KBH fell -2.83, CTX -5.42, HOV -3.90.

The transportation sector took a hit after JBLU was cut by
JP Morgan saying it no longer believes the carrier can gain
in 2004 due to increased competition and lower traffic than
previously expected. With falling seat traffic and increased
competition the airline sector is facing an all out price
war to attract flyers. The code orange alert and the constant
cancellation of flights due to security concerns is going to
slow any recovery. American Airlines is going head to head 
with JBLU by offering a free trip promotion in areas served
by both carriers. 

The telecommunication sector got another boost on Thursday
from Nokia after they raised their estimates for the quarter.
The sector was hot after Nortel soared earlier in the week
on news of a new network build out contract. Even Lucent
soared from $2.85 to nearly $4.00 on the positive sector
news. LU and NT alone have accounted for more than 20% of
the NYSE volume over the last two days with combined volume
of more than 400 million shares on Thursday. 

IBM was a focus of the day and traded up only slightly at
$93 after new rumors surfaced that they would miss their
revenue estimates. IBM has failed to take part in the rally
over the last month on earnings fears. After the close IBM
announced that the SEC had issued a Wells notice to IBM and
was ready to recommend action for securities fraud in the
handling of its relationship with Dollar General. IBM paid
$11 million for some equipment that was replaced at DG and
the accounting for that purchase and sale placed DG in a
favorable position. The SEC alleges that IBM aided DG in 
a fraudulent transaction to pump up DG's books. 

HPQ was back in the news with the Nasdaq claiming they were
going to be the first NYSE company to double list on both
exchanges. Carly Fiorina declined to comment in an on air
interview but the floor of the NYSE was a hotbed of concern
all day. Analysts feel that any material movement to "list"
on the Nasdaq could divert order flow from the NYSE and 
limit the usefulness of the market makers thereby jeopardizing
the current specialist system. Others dismissed the Nasdaq
claim saying that most NYSE stocks were already traded 
electronically on ICNs with no material volume drain. 

UBS raised their 12 month S&P target to 1200 from 1150 on
expectations for better earnings in 2004. With markets at
two year highs that is a gutsy call but then 1200 is not
much higher than we are now. The S&P closed at 1130 and
well below strong resistance at 1160-1175. If we do see
some profit taking soon there are several estimates (not
mine) that any dip will see 1000-1010. That would put the
1200 UBS estimate +20% off the lows. Without that dip the
1200 target would only be a +6% gain for the year. Currently
more than 90% of the S&P are trading over their 200 dma. 
You have to go back to 1983 for the last time this happened.

The indexes closed right at very strong resistance and 
right in front of the December Jobs report. Talk about
asking for trouble. The consensus estimate for jobs is now
+127,000. The whisper number last week was for something in
the +50,000 range but in less than a week that has changed
significantly. I am hearing numbers as high as +250,000. 
This bullishness has no basis in fact. It is simple hype
on top of hype but then considering the recent market action
it is right in line. Needless to say the good news is already
priced into the market. I went back to last year to see if
there were any trends to the hiring patterns. In Dec 2002
jobs lost dropped to -156,000 from November's loss of -81,000.
December was largest drop in 2002 since the -165K loss in
Feb-2002. You cannot compare 2001 because that was the 
recession period. Also, comparing 2002 to 2003 is difficult
considering the strong rebound in the economy in the last
six months. Still some analysts are suggesting caution in
front of Friday's report. Obviously nobody is listening to

The Nasdaq edged up to touch 2100 after the close as the
final trades settled. This is very strong resistance as 
2099 was the high for all of 2002. Moving over this level
should be hard but not impossible considering the already 
extended conditions. The Nasdaq NDX Bullish Percent is back 
to 80 and the level where it has paused for the last six 
months of 2003. 
Nasdaq Weekly Chart

Nasdaq 100 Bullish Percent

Nasdaq 100 Bullish Percent PNF

I am not suggesting the Nasdaq cannot move up from here but it
will be defying gravity and some very strong resistance to do 
so. The Dow did not reach its key resistance level at 10600 but
came very close ending at 10592. The index broke out over the
down trend line from Jan-2000 currently a 10550 and pulled 
within 8 points of 10600. The resistance band from 10600 to
10650 represents the highs from late 2001 and all of 2002. This
is very strong resistance considering the current extended 

Dow Weekly Chart

DJIA Bullish Percent

DJIA Bullish Percent PNF

While the Dow and Nasdaq are the most followed indexes the
broadest market indicator is the Wilshire 5000, $TMW.X or 
$WLSH depending on your chart service. This index succeeded
in touching the key 11000 level intraday and then edged over
that level after the close when market on close orders were
settled. First, this is very bullish if it can continue its
upward progress. It is at the top of its uptrend resistance 
as well as its horizontal resistance and a breakout here could
attract even more buyers. The 11000 level was the high for all
of 2002. Are you seeing a common theme here? Dow, Compx and 
Wilshire are all at 2002 resistance highs. 

Wilshire 5000 Weekly

Here comes the hard part. Back in mid December I predicted the
Wilshire would hit 11000 the first week in January. That happened
on Thursday and that brought us to a critical point in the markets.

You know I have been suggesting the highs for January would be
made this week. So far so good. Now we are at that critical point
and those resistance highs will either hold or they will be broken.
If they hold then normal historical trends would still be in play. 
If they are broken with the indexes at this already extended level
it would be very bullish. I am not the only one expecting a buying
opportunity in January. If we move up from here it could mean that
buying opportunity is not going to appear and those waiting on the
sidelines could begin rushing in to chase prices even higher. 
Those who have been shorting this rising resistance all week will
be squeezed even harder and this already extended market could 
take off like a rocket. 

While I personally do not expect a strong gain from here there 
are those who feel the market is just getting its second wind.
Volatility has collapsed with the VXO setting a new multi year
low of 14.42 and showing a complete lack of fear in the market.
The bullish percent on the NDX is 80% and 86% on the Dow. Traders
point to the rapidly increasing volume on the NYSE as proof that
the rally is real. Let me quickly point out that 500 million 
shares on Wednesday and 400 million shares today have been in 
Lucent and Nortel alone. Take 500 million off the totals for
both days and you still have strong volume but far from 

Still while almost every indicator is grossly oversold the 
buyers just keep coming. The internals are extremely positive
with 1131 new 52-week highs on Thursday. Only one day this week
has been under 1000 new highs and even at 814 it was still 

So how do we rationalize this situation? We are at very strong
resistance but the market does not seem to care. Resistance
levels have been failing for weeks. Even key resistance has
buckled. Does that mean this resistance will as well? Nobody
knows but the answer is clear. The bulls are stampeding and 
nothing is stopping them. Even the cautious TV commentators
that were suggesting restraint just last week are now tripping
over their tongues to praise the market internals. It seems
the world has converted to a buy only mentality and until 
something happens to shock everyone back to reality the sky
is the limit. 

What is it going to take to break the spell? With estimates
for market gains for 2004 at +10% to +12% we are already up
+5% in the first five days. What is left? Are we going to 
spend the next 355 days covering that 5-7% left or raise the
targets? We all know, whether we want to admit it or not, that
this cannot go on forever. Eventually something will happen to
break the spell and return us to normal market conditions with
alternating up and down cycles. On Friday the Jobs Report is 
officially expected to show +127,000 new jobs. The whisper 
numbers are up to +250,000. What if we only grew +50,000 jobs?
That is probably not drastic enough to matter. What if we lost
jobs? Does the market care. 

I think that is the key. The market did not care that Gateway
warned or Wal-Mart sales are slowing. It did not care that RYL
sold fewer homes or the ISM Services index fell. Remember the 
bubble? Nobody cared about the fundamentals. Buy stocks they
are going up. Once the Dow closed over 10,000 in mid December
Pandora's box was opened and the investing fever was loosed 
again. If the Dow is over 10,000 the market must be ok. Buy
stocks. Those that did not buy in December are chasing prices
in January. I do not know where it is going to end but every
feeding frenzy always ends. I can't in good conscience tell 
you to go long. That decision is up to you. I can only suggest
that if you do go long you take out enough insurance to protect
yourself. Fortunately with volatility at multiyear lows that 
put insurance is very cheap. 

I had a vision today, more of a flashback of a video clip 
they run on CNBC periodically. You know the one where they 
show the running of the bulls in Spain. Those in front of 
the herd are running for their lives and having a great time.
Those unable to stay ahead or slipping on the cobblestones 
get trampled or gored. There are always a greater majority 
safely on the sidelines watching as the scene plays out. 
Tonight I am short at Wilshire 11000. If the herd runs by 
me I will become a watcher from the safety of the sidelines.
I refuse to chase after the herd because I do not want to 
meet it head on when it changes direction.

Enter Passively, Exit Aggressively. 

Jim Brown


The PremierInvestor.net watch list is not designed to be read
as full fledged stock picks.  Rather we would prefer to offer
it as an extra tool in today's investor toolbox.  Think of it
as a radar screen with your own radar operator pointing out
interesting developments, technical patterns or potential plays
that you may or may not have seen on your own.  Due to time
constraints we do glance at the news but rarely do we have
time to fully read pertinent news stories, due background
research and other necessary screens that investors should do
before making a decision.  A common exercise is to read the
entry, glance at the sector and other stocks in that industry
and then compare what's happening in the stock to what's
happening in the broader market indices.  We hope you enjoy
the Watch List and that it proves to be a useful tool for your
own trading success.


MBNA Corporation - KRB - close: 26.34 change: +0.52

WHAT TO WATCH: Aided by the strength in the broad markets, shares 
of KRB finally broke from their recent consolidation yesterday 
and added to those gains with a 2% advance on Thursday.  That 
brings the stock right up to the site of its all-time highs, 
setting the stage for another breakout.  Use an entry trigger 
just above today's highs and target the $30 level.


Sears Roebuck Company - S - close: 46.19 change: +1.21

WHAT TO WATCH: With a slight decline in same store sales, S 
failed to inspire the bulls on Thursday and the stock looks 
primed for another rollover.  Look for the declining 30-dma to 
provide solid resistance and enter on a rollover below that 
average.  There will be some support found in the $43-44 area and 
then we can target the $40 level near the 200-dma.


GreenPoint Financial - GPT - close: 36.80 change: +0.79

WHAT TO WATCH: Financial stocks are breaking out all over, and 
GPT joined the party today, clearing the $36 resistance that has 
held since last summer.  Ideal entries will come on a pullback 
and rebound from the 436 area, confirming new support at old 
resistance.  Target a continued rally up to $40.


Questar Corp. - STR - close: 35.76 change: +0.74

WHAT TO WATCH: Welcome to the bull market in natural resource 
stocks!  STR is a major player in the Natural Gas market and with 
the price of Natural Gas soaring over $7.00 today, STR broke out 
to another new all-time high.  Pullback entries in the $34-35 
area would be ideal, but momentum traders can also play above 
today's intraday high.  Target a near-term move to the $40 level

On the RADAR Screen

GTK $51.25 - Breakouts are, well, breaking out all over.  GTK 
caught a solid rally over the course of the week and today's 
close over $51 represents another all-time high.  Look for 
possible resistance at the top of the rising channel ($52.50), 
but then the stock looks poised to break out towards the $55 

AIN $34.50 - Are you noticing the theme here?  AIN busted out to 
new all-time highs on Thursday and it looks like there is more in 
store, judging by the strong buying volume.  The stock is a bit 
of a slowpoke, but we should be able to ride it up to the $37-38 

AMT $12.86 - Wireless stocks were all the rage on Thursday and 
that was enough to propel AMT - involved in the antenna and tower 
side of the business - to its best levels since the fall of 2001.  
A retest of broken resistance in the $11.50-12.00 area will make 
for the best entry point.  Target a move to $15.

Market Sentiment

Will Investors Sell The News?
- J. Brown

Thursday was a banner day for the U.S. stock markets.  A better 
than expected earnings report from Taiwan Semiconductor (TSM) and 
a very strong earnings report from mobile-phone maker Nokia (NOK) 
helped set the mood.  The strong profit and revenue numbers from 
these tech companies was enough for investors to ignore the worse 
than expect initial jobless claims.  Economists had been 
expecting a small rise but instead received an increase of 14,000 
to 353,000 initial claims.  This number wasn't totally out of the 
ballpark and the markets shrugged it off.  

Today was all about tech and telecom stocks extending their lead 
and the markets trying to follow.  Overseas investment firm UBS 
got into the act by raising their 12-month target on the S&P 500 
to 1200 from 1150.  Overall the market internals were strongly 
bullish.  The NYSE saw 17 winners for every 11 losers.  The 
NASDAQ's advance decline ratio came in at 19 to 11.  New highs 
totaled 684 to just 8 new lows.  Up volume overwhelmed down 
volume 17 to 7 on the NYSE and 18 to 8 on the NASDAQ.  

Yes, it was a pretty strong day the bulls and Dow component Alcoa 
(AA) opened earnings season after tonight's closing bell by 
beating the estimates by 5 cents with a net income of 39 cents a 
share.  However, the major indices continue to look very extended 
and tomorrow's December jobs report would be the perfect excuse 
to sell the news, especially if the results are merely inline.  
Heaven forbid should the number disappoint.  Current estimates 
are for an increase of 150,000 new jobs in December, up from 
57,000 in November.  On a side note news that that IBM has 
received a "Wells Notice" from the SEC could influence investor 
sentiment.  A Wells notice means the SEC is considering civil 
action against the company for securities law violations.  

Trade carefully and protect your profits!


Market Averages


52-week High: 10592
52-week Low :  7416
Current     : 10592

Moving Averages:

 10-dma: 10457
 50-dma:  9998
200-dma:  9294

S&P 500 ($SPX)

52-week High: 1131
52-week Low :  788
Current     : 1131

Moving Averages:

 10-dma: 1113
 50-dma: 1069
200-dma:  997

Nasdaq-100 ($NDX)

52-week High: 1530
52-week Low :  795
Current     : 1530

Moving Averages:

 10-dma: 1480
 50-dma: 1428
200-dma: 1285


Holy Cow, Batman!  The volatility in the markets has crashed as 
the VXO has fallen from over 18 to close under 15 for the first 
time in years.  The VXN has fallen to another all-time low.  
Bears are probably groaning as readings this low "normally" 
suggest a market top, but then the market has not been very 
normal for months.  These volatility indices remain signals of 
caution for anyone willing to listen.

CBOE Market Volatility Index (VIX) =  15.61 +0.11
CBOE Mkt Volatility old VIX  (VXO) =  14.46 -0.39
Nasdaq Volatility Index (VXN)      =  21.89 -0.02


          Put/Call Ratio  Call Volume   Put Volume

Total          0.65      1,160,572       753,665
Equity Only    0.52        970,355       500,507
OEX            1.00         36,216        36,247
QQQ            4.38         23,541       103,143


Bullish Percent Data

           Current   Change   Status
NYSE          77.7    + 1     Bull Confirmed
NASDAQ-100    80.0    + 1     Bull Confirmed
Dow Indust.   86.7    + 0     Bull Confirmed
S&P 500       86.8    + 1     Bull Confirmed
S&P 100       85.0    + 1     Bull Confirmed

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-dma: 0.86
10-dma: 0.87
21-dma: 0.92
55-dma: 1.06

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 they do, they can signal significant market turning


Market Internals

            -NYSE-   -NASDAQ-
Advancers    1726      1925
Decliners    1113      1180

New Highs     364       320
New Lows        8         0

Up Volume   1746M     1806M
Down Vol.    727M      821M

Total Vol.  1486M     2648M
M = millions


Commitments Of Traders Report: 12/22/03

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

Was it a one-week blip?  The surge in long positions by 
commercial traders have evaporated.  Was a sudden change of
heart or did they just get caught up in the holiday spirit?
Of course there was an equally strong disappearing act in
commercial short positions so maybe they're just confused.
Small traders have really cut back on their shorts and in
effect become extremely bullish.

Commercials   Long      Short      Net     % Of OI
12/02/03      394,531   414,223    19,692     2.4%
12/09/03      396,882   420,859    23,977     2.9%
12/16/03      448,103   460,670    12,567     1.4%
12/22/03      400,066   405,240    (5,174)   (0.6%)

Most bearish reading of the year: (111,956) -  3/06/02
Most bullish reading of the year:   23,977  - 12/09/03
Small Traders Long      Short      Net     % of OI
12/02/03      154,788    85,776    69,012    28.7%
12/09/03      172,178    99,484    72,694    26.8%
12/16/03      172,947   113,704    59,243    20.7%
12/22/03      147,537    81,596    65,941    28.8%

Most bearish reading of the year:  (1,657)- 5/27/03
Most bullish reading of the year: 114,510 - 3/26/02

E-MINI S&P 500

Wow!  The disappearing act in the full contracts (above)
is nothing compared to the drop in contracts below.  Commercial
traders really reduced their outstanding long positions in the
e-mini's and that's not a bullish development. Right on cue,
the small traders cut back on their short positions.

Commercials   Long      Short      Net     % Of OI 
12/02/03      283,199   268,833     14,366     2.6%
12/09/03      294,006   288,385      5,621     1.0%
12/16/03      330,273   361,316    (31,043)   (4.5%)
12/22/03      128,801   213,021    (84,220)  (24.6%)

Most bearish reading of the year: (354,835)  - 06/17/03
Most bullish reading of the year:  133,299   - 09/02/03

Small Traders Long      Short      Net     % of OI
12/02/03     119,555     77,609    41,946    21.3%
12/09/03     142,173     76,171    66,002    30.2%
12/16/03     177,193     73,694   103,499    41.3%
12/22/03     125,248     43,482    81,766    48.5%

Most bearish reading of the year: (77,385)  - 09/02/03
Most bullish reading of the year: 449,310   - 06/10/03


We see the same contract evaporation in the NDX futures as well.
Commercial long contracts lost 1/3 of their number but short
contracts were cut in half.  That actually sounds bullish.  

Commercials   Long      Short      Net     % of OI 
12/02/03       35,569     48,552   (12,983) (15.4%)
12/09/03       39,612     51,443   (11,831) (13.0%)
12/16/03       61,343     73,153   (11,810) ( 8.8%
12/22/03       40,277     36,452     3,825    5.0%

Most bearish reading of the year: (21,858)  - 08/26/03
Most bullish reading of the year:   9,068   - 06/11/02

Small Traders  Long     Short      Net     % of OI
12/02/03       21,594     9,429    12,165    39.2%
12/09/03       25,842    10,228    15,614    43.3%
12/16/03       28,676    15,197    13,479    30.7%
12/22/03       22,656    14,544     8,112    21.8%

Most bearish reading of the year: (10,769) - 06/11/02
Most bullish reading of the year:  19,088  - 01/21/02


This time it is the small traders that drastically reduced
their short contracts.  They probably got tired of losing 
money.  Commercials followed suit.

Commercials   Long      Short      Net     % of OI
12/02/03       21,128    12,379    8,749      26.1%
12/09/03       20,378    11,934    8,444      26.1%
12/16/03       23,509    13,880    9,629      25.8%
12/22/03       14,088     9,998    4,090      17.0%

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
12/02/03        6,667     9,302   (2,635)   (16.5%)
12/09/03        6,858    12,006   (5,148)   (27.3%)
12/16/03        9,497    19,633  (10,136)   (34.8%)
12/22/03        6,915     8,983  ( 2,068)   (13.0%)

Most bearish reading of the year: (10,136) - 12/16/03
Most bullish reading of the year:   8,523  -  8/26/03


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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:


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Copyright (c) 2004  PremierInvestor.net. and
The Premier Investor Network.
Do not duplicate or redistribute in any form.

PremierInvestor.net Newsletter                 Thursday 01-08-2004
                                                    section 2 of 2
Copyright (c) 2004, All rights reserved.
Redistribution in any form is strictly prohibited.

The entire newsletter is best viewed in COURIER 10 for alignment

Play of the Day:   Consolidation Over

Stop Adjustments:  ACE, CIT, MRO

Closed Plays:      NXTL, NVDA, PLCM

Stock Splits:      RMCF

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)

Play-of-the-Day  (Bullish)

ACE Ltd - ACE - close: 41.93 change: +0.73 stop: 40.50

Company Description:
ACE Limited is the Bermuda-based holding company of the ACE Group 
of Companies, one of the world's leading providers of insurance 
and reinsurance. The ACE Group provides a diversified range of 
products and services to clients through operations in nearly 50 
countries around the world.(source: company press release)

Why we like it:
Once again ACE leaves us a little perplexed.  The markets have 
been pretty strong the last few sessions but shares of this 
insurance stock have churned sideways in a very narrow range.  The 
IUX insurance index looks poised to climb higher into this 
weekend.  If ACE doesn't follow its peers we're likely to close 
it.  Time is money and we'd like to be playing something that's 

Why This is our Play of the Day
After pulling back from the spiky foray over $42 a week ago, ACE 
has been trading in a subdued manner in preparation for the next 
directional move.  That move appears to have gotten started today, 
with the stock rebounding smartly off the 10-dma ($41.32) to gain 
1.77% and close at its best level since the Spring of 2002.  
Traders that haven't yet established a position can look to enter 
on a breakout over $42.05 tomorrow.  The consolidation over the 
past week allowed the daily Stochastics (5,3,3) to pull back and 
today's rally created a bullish cross.  If today's bullish move is 
to be believed, then ACE is just beginning the next upward leg, 
that should push it up to the $44 resistance area, which is the 
site of the 2002 highs.  Raise stops to $40.50 tonight, which is 
just below the bottom of the past two week's trading range.

Annotated Chart of ACE:

Picked on December 22nd at  $40.05 
Gain since picked:           +2.29
Earnings Date             01/27/04 (unconfirmed)
Average Daily Volume:     1.31 mln

Stop Loss Adjustments

ACE - long
Adjust from $39.00 up to $40.50

CIT - long
Adjust from $35.00 up to $35.75

MRO - long
Adjust from $32.90 up to $33.25

Closed Plays

Closed Bullish Plays

Nextel Comms - NXTL - close: 28.78 change: -0.31 stop: 28.00

Our NXTL play ran up and touched the $29 level on Tuesday and 
after two days of trying to build on those gains, finally saw 
some weakness today, falling back to close near its low of the 
day.  This weakness is disconcerting due to the strong gains in 
the overall NASDAQ the past two days and particularly the 
strength in other Wireless stocks today.  Our profit target was 
for a move up to $29.50-30.00 to fill the gap from February 2001 
and we're going to call today's intraday high of $29.34 close 
enough.  With gains of more than 13% from our picked price, let's 
harvest those gains and head off in search of new plays.

Picked on November 26th at  $25.27
Change since picked          +3.51
Earnings Date              2/19/04 (unconfirmed)
Average Daily Volume =    12.9 mln


NVIDIA Corp. - NVDA - close: 25.11 change: +0.09 stop: 23.50

With the Semiconductor index (SOX.X) staging another strong rally 
and breaking out to new 52-week highs, the anemic performance of 
our NVDA play causes some concern.  We had originally been 
targeting the $25 level and recently advised conservative traders 
to lock in profits as the stock seemed to be stalled near that 
level.  We kept the play active in hopes that perhaps a rally to 
the $26-27 area would be in the works, but following today's lack 
of participation in the SOX rally, we're going to err on the side 
of caution and close the play here with a solid gain.  Aggressive 
traders can hold on for that upper target to be reached, but must 
keep a tight stop on the play -- we're recommending no lower than 
$24.30, just below yesterday's intraday low.

Picked on December 24th at  $21.80
Change since picked          +3.31
Earnings Date              2/05/04 (unconfirmed)
Average Daily Volume =    5.43 mln


Polycom, Inc. - PLCM - cls: 22.90 change: +1.64 stop: 20.00

Exceeding our wildest expectations, PLCM broke out with a 
vengeance on Thursday, tallying up a 7.7% gain and decisively 
breaking out over its December highs.  With the stock ending near 
the high of the day and on very strong volume, it is certainly 
possible to argue for just raising the stop and holding for 
higher levels.  But with the NASDAQ closing at 2100, the site of 
very strong resistance, exiting here and booking a nearly 15% 
gain is definitely the more prudent course of action.  Today's 
rally puts the stock right in the midst of very strong resistance 
from 2001-2002 and it appears likely that there will be at least 
a mild retracement before continuing higher.  Let's err on the 
side of caution and take the money and run.

Picked on December 31st at  $19.52
Change since picked          +3.38
Earnings Date              1/28/04 (unconfirmed)
Average Daily Volume =    1.52 mln

Stock Splits


RMCF sweetens up shares with a 3-for-2 stock split

During today's trading session, Rocky Mountain Chocolate Co 
(NASDAQ:RMCF) announced that its Board of Directors has approved a 
3-for-2 stock split of its common shares outstanding.

The payable date for the stock split is set for February 1st, 2004 
to shareholders on record as of January 20th.  On a post split 
basis, RMCF will have approximately 3.8 million common shares 

About the company:
Rocky Mountain Chocolate Factory, Inc., headquartered in Durango, 
Colorado, is an international franchiser of gourmet chocolate and 
confection stores and a manufacturer of an extensive line of premium 
chocolates and other confectionery products. The Company and its 
franchisees currently operate 256 stores in 39 states, Canada, Guam 
and the United Arab Emirates. The Company's common stock is listed on 
The Nasdaq National Market under the symbol "RMCF."
(Source: Company Press Release)

  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

WB      Wachovia Corp              47.25     +0.58
VZ      Verizon Communications     37.12     +0.56
MWD     Morgan Stanley             58.37     +0.57
JPM     JPMorgan                   38.67     +0.65
BLS     Bellsouth Corp             29.80     +0.52
BAY     Bayer Aktien               31.44     +1.03

Breakout to Upside (Stocks $5 to $20)

ALA     Alcatel                     15.75     +1.63
CHU     China Unicom Ltd            11.55     +1.06
AV      Avaya Inc                   14.76     +1.09
AMT     American Tower              12.86     +1.18
ANDW    Andrew Corp                 17.50     +4.30
WFII    Wireless Facilities         18.15     +2.73

Breakout to Upside (Stocks over $20)
NOK     Nokia Corp                   20.47     +2.50
HPQ     Hewlett-Packard Co           24.69     +1.33
TXN     Texas Instruments            31.85     +1.90
QCOM    Qualcomm Inc                 58.95     +3.19
STM     STMicroElectronics           29.72     +1.44
ERICY   LM Ericcson                  21.11     +2.71
HIG     Hartford Financial Srvcs     62.09     +1.14

Breakout to Downside (Stocks over $20)

LLY     Eli Lilly & Co               68.10     -1.72
KSS     Kohl's Corp                  41.80     -3.70
CFC     Countrywide Financial        70.95     -2.05
CHIR    Chiron Corp                  50.75     -1.95
ADBE    Adobe Systems                38.00     -1.44
LEN     Lennar Corp                  89.46     -3.81
TIF     Tiffany & Co                 42.00     -1.06
CTX     Centex Corp                  99.38     -5.42
BRL     Barr Labs                    73.07     -1.57

Recently Overbought With Bearish Signals (Stocks over $20)

DNA     Genentech Inc                 90.72     -2.45
MLEA    Millea Holdings               66.19     -1.40
JBSS    John Sanfilippo & Son         47.53     -5.43
ASVI    A.S.V.Inc                     32.48     -6.62

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

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:


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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