Option Investor

Daily Newsletter, Tuesday, 01/27/2004

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PremierInvestor.net Newsletter                  Tuesday 01-27-2004
                                                    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:      Volatility Returns
Watch List:       NCC, IACI, STX, EP
Market Sentiment: No Shortage

MARKET WRAP  (view in courier font for table alignment)
      01-27-2004           High     Low     Volume Advance/Decline
DJIA    10609.92 - 92.60 10701.77 10609.92 2.10 bln   1405/1835
NASDAQ   2116.04 - 37.80  2152.75  2116.04 2.14 bln   1336/1936
S&P 100   567.15 -  6.29   573.44   567.15   Totals   2741/3771
S&P 500  1144.05 - 11.32  1155.37  1144.05 
W5000   11177.42 -104.40 11281.80 11177.42
RUS 2000  595.17 -  6.33   601.50   594.93 
DJ TRANS 3041.22 - 25.50  3074.18  3033.34   
VIX        15.35 +  0.80    15.44    14.74
VXO (VIX-O)15.32 +  1.00    15.41    14.75
VXN        23.03 +  2.04    23.07    21.60 
Total Volume 4,634M
Total UpVol  1,533M
Total DnVol  3,054M
Total Adv  3139
Total Dcl  4258
52wk Highs  905
52wk Lows     6
TRIN       1.19
NAZTRIN    2.02
PUT/CALL   0.87

Market Wrap

Volatility Returns

After a +134 point gain on Monday to a new two year high the
Dow slipped -92 today as put buyers outweighed call buyers 
almost 3:1. The Nasdaq gave back all its gains from Monday
and returned to the low 2100s on weakness in the semiconductor
sector. Volatility may have been higher today but it is still
at relatively low levels. Considering our markets are at two
year highs this is not surprising. When the bulls are running
the volatility gets trampled.

Dow Chart - 120 min

Nasdaq Chart - Daily


The economic calendar was slim today with only two reports.
The Chain Store Sales showed a jump of +1.1% for the week
after three weeks of decline. The Southwest was the strongest
region as blizzard conditions and severe cold hampered those
consumers in the Northeast. The ICSC raised it estimates for
all of January to a gain of +4.0% to +4.5%. This is a +1% 
gain over the prior +3.0% to +3.5% estimates. 

The Consumer Confidence hit an 18 month high at 96.8 but 
was less than consensus expectations at 98.5. The December 
decline was reversed on the strength of a gain in the 
present conditions component. Not all components were rosy.
Plans for new purchases slipped slightly and availability
of jobs only increased slightly. The lower than expected
headline number may have been influenced by the blizzards
across the country. Fighting the elements tends to depress
consumers and makes them less receptive to shopping. We all
know shopping is a mood elevator for at least half the
population. Confidence should continue to rise as long as
employment continue to improve. Once the tax refunds start
flowing the urge to spend will also grow.

Kraft (NYSE:KFT) did not help confidence when they announced
they were cutting -6,000 jobs including 1,300 salaried jobs
over the next three years. They will take a charge that will
impact their earnings for these layoffs. 

The news was all about Martha Stewart and earnings today. 
Since we are all Martha'ed out I will not bore you with 
what she had for lunch or how many powder room breaks she
had. We will concentrate instead on the real news with 
several Dow stocks announcing earnings. 

Merck (NYSE:MRK) announced a fourth quarter profit that 
fell -26% due to a decline in sales and charges for recent
job cuts. MRK posted +62 cents per share and reaffirmed its
2004 full year estimates. MRK traded up fractionally for
the day and up +1.50 for the week to $47.35. It looks like
new life is coming back into the stock after being a Dow
dog for the last six months. Drug stocks are normally
defensive and MRK could be benefiting from the rotation
out of chips. 

Another Dow component, DuPont, lost -50 cents despite 
beating the street and issuing an upbeat outlook for the
year. SBC lost -74 cents to close at $26 after posting a
drop in profits and rising employee costs. The results
were inline with estimates and were uninspiring. Investors
are watching the decline in the telecom sector as each of
the major players reports. Wire lines are dropping and 
with them the monthly and long distance revenues. 

McDonalds gained +17 cents inline with expectations on an
increase in sales due to a restructured menu. Salads and
chicken are beating out hamburgers as the high profit 

The biggest loser on the Dow was Caterpillar despite a
surge in revenue to $6.47B from $5.38B and beating estimates
by +3 cents. The drop in stock price was due to the retirement
of their CEO and new guidance. The company said they did
expect 2004 earnings to jump +40% and revenue +12%. They
did not give short term guidance as they had in the past 
and simply said 2004 will be strong. This prompted some
analysts to suggest they were hiding a weak first half. 
Also, much of their gains were due to currency translation
benefits from the weak dollar. 

Other major earnings of note with misses or lowered 
guidance included BK, LMT, CNF, RTN and DJ. After the bell
we saw another flurry of tech earnings and most were positive.

AMZN est +0.29, act = +0.29 inline, raised guidance  
BRCM est +0.16, act = +0.19 beat 
FLEX est +0.14, act = +0.17 beat, raised guidance +3 cents 
AFCI est +0.09, act = +0.10 beat    
ADVP est +0.55, act = +0.55 inline 
EFII est +0.21, act = +0.27 beat
CYMI est +0.00, act = +0.04 beat   
ERTS est +1.20, act = +1.26 beat  
MENT est +0.31, act = +0.30 miss   
MLNM est -0.31, act = -0.30 beat     
MGAM est +0.48, act = +0.48 inline  
PXLW est +0.09, act = +0.06 miss  
NTIQ est -0.01, act = -0.04 miss     
HRS est +0.49, act = +0.50 beat
ELX est +0.23, act = +0.24 Raised guidance +2 cents
RHI est +0.03, act +0.03 inline
NET est +0.21, act +0.26 beat 
AV est +0.05, act +0.07 beat 

The two biggest newsmakers were AMZN and BRCM. Amazon did
report blowout 4Q revenue and its first ever back to back
quarterly profit. Proforma earnings were 29 cents and that
was inline with the consensus estimates. They raised the
Q1 revenue estimates to $1.39B to $1.49B and well above 
prior estimates at $1.32B. Unfortunately they did not 
provide profit estimates. Analysts are expecting +16 cents
for Q1 and with higher sales you would think they would be
inline or maybe even beat. Analysts were worried that 
margins may not be as good in the 1Q due to product mix. 
Also the company benefited greatly from currency translation
issues in the 4Q. $98 million in revenue and $6 million in
profit came from currency gains. With the decline in margins
and higher shipping costs there were plenty of questions 
for AMZN. They also said there was a disturbing rise in 
inventory levels which could be pointing to a slow down
in sales. AMZN traded down -$3 in after hours. 

BRCM beat the street by +4 cents but the stock dropped
sharply on news they were going to issue $750 million in
new stock or debt. That was quickly reversed when they 
raised guidance on the conference call and suggested sales
could grow as much as +10% in the 1Q. The +10% number works
out to $527 million and well above the prior estimate of
$463 million. The company said they saw substantial new
bookings late in the 4Q and early in the 1Q and that new
enterprise spending could provide a big opportunity. They
are planning on issuing 30 million new shares to enable
a future acquisition. Four companies bought more than
48% of Broadcom's output. Dell, Cisco, HPQ and Motorola
each bought more than 10% with HPQ the most at 15%.

MSFT dropped -55 cents on news that the EU may issue a
negative ruling against Microsoft and try to substantially
change the way Microsoft does business. This is old news
but the European Commission did confirm it was wrapping
up its investigation. The EC has a draft decision and those
are normally used to exercise leverage against the company
in advance of the final ruling. Microsoft said it was in
active talks to insure a positive resolution. Sounds like
they are in a tight spot and the EU/EC is applying the
screws. The EU has threatened to force Microsoft to strip
Media Player out of Windows to give RealNetwork and Apple
a more competitive opportunity.

Overall earnings have been very strong. The best in ten
years according to some analysts. First Call said earnings
were coming in at +25% so far and could rise to as much as
+27% as some smaller companies announce next week. This is
a very strong quarter and helped by a weak comparison to
Q4-2002. The average company beating estimates is beating
by +19% compared to an average of +6% in normal quarters.
The only problem is in the guidance. Because the good 
results have been expected for two months many stocks are
seeing their prices battered when they announce. When 
expectations are so high it takes almost super human
guidance to attract new buyers after the announcement. 
Guidance has been good with quite a few companies raising
their outlook but it has not been exceptional. 

SOX Chart - Daily


Some of the stocks getting hit the worst on good news have
been the semiconductor stocks. The sector is well off its
highs with the SOX dropping -7% in just the last five days.
This includes the monster gains from Monday's romp that
were completely erased on Tuesday. At 517 the SOX is very
close to ending the month with a loss. The high of 560 was
set back on the 12th. NVLS posted earnings on Monday night
and dropped -5.85 on Tuesday. KLAC lost -1.70, PHTN -3.66,
MXIM -3.05, CCMP and UTEK about -$3 each. SNDK continues
to sink lower with another -2.20 today. If the SOX is the
leading indicator for the Nasdaq then it is no surprise
that the Nasdaq gave back all its gains from Monday and
is down for the week with a -37 point drop today. There 
was a rumor making the rounds today that PMCS was seeing
an order slowdown from Cisco, which is its biggest 

Are we doomed to drop from here? Not necessarily. Remember
earnings are excellent. It is just that investor profits
are in the excellent category as well. Remember also that
we have a Fed meeting underway that will end at 2:15 
Wednesday afternoon. There is high risk that the Fed will
change its bias statement and traders are just taking some
profits off the table in advance. I am just surprised it 
did not happen on Monday. The afternoon buy program that
triggered the short squeeze was entirely out of character.
The bounce that ensued simply gave investors one more 
chance to exit at two year highs and dodge a fickle Fed 

Tomorrow afternoon we will either get the "considerable
period" statement or we won't. With the market at two year
highs and earnings the best in ten years my bet is we get
a new bias. If they are ever going to get a free shot this
is it. The bullish sentiment is still so strong it is
nearly bulletproof. According to Fed watchers there is
almost no chance of a rate hike so they are playing the 
rate lottery with OTM options. As long as there is a 
"considerable period" statement they are looking at six
months before the Fed will hike rates. Should that 
statement disappear and language about strong economy and
rising employment appear in its place then bonds will die. 
By changing the statement they are loading the rate hike 
gun. It does not mean they are cocking it but just the 
presence of a loaded gun is enough to strike fear in the 
bond markets and by association the equity markets. Nobody
expects any hikes this year so this is all just positioning
and speculation but the best of all worlds is already priced
into the market. Any change in the bias could cause temporary
movement. That movement could be a couple hours or a couple
days but is not likely to be lasting. Bond yields have 
already spiked up over the last three days on fear in 
advance of the meeting. 

Any market shakeup should be brief based on the current
bullish sentiment. That sentiment could change at any time
but it won't be because the Fed says the economy is strong.
If it changes it will simply be due to the overbought 
conditions and lack of a catalyst to move higher. Let's
face it, Monday's move was very bullish. The Dow moved
over two year resistance highs to close at 10700. This
clears the way to 11,000-11,300 for the next serious 
resistance. The Tuesday drop held over 10600 and still 
in bullish territory. The flaw in Monday's rally was the
Nasdaq which stopped at 2150 resistance once again and the
Russell which stopped at 600 resistance. These are strong
levels for both indexes considering their overbought 

The market drop on Tuesday was literally led by the SOX.
This sunk the Nasdaq and dragged IBM and INTC and the Dow
down with it. CAT did not help either. However, help is on
the way. The SOX got help from the BRCM earnings tonight 
and the 517 close is only +2 points above support at the 
50 dma. This is the key point to watch in the morning. As
long as the 50dma at 515 holds the Nasdaq is not going 
very much lower. The Nasdaq has strong support itself in 
the 2085 to 2110 range. We do not need to start worrying
until the Nasdaq trades below 2085. 

The Dow has strong support at 10600, 10500, 10400 and 
10300. We would have to see a serious trend change to
break all those levels. The biggest potholes in our future
are the Fed announcement at 2:15 and the GDP on Friday.
The economic calendar heats up beginning on Thursday and
continues into next week. Recently economics have been
market favorable and until that changes traders need not
fear the normal reporting cycle. The GDP has the biggest
potential. A number under +4.5% would be a shocker 
especially after the strong earnings. Analysts are now
expecting another blowout and that expectation could be
the biggest hurdle. The Fed will have advance notice of
the GDP in their meeting and will have already acted 

Expect some volatility to appear when the Fed announcement
is made at 2:15 and then a choppy market the rest of the 
day regardless of the announcement. Sanity should return 
by Thursday but that does not mean the markets will be
directional. Friday is month end and window dressing 
should keep us in the current range if there are no 
economic disasters. For the rest of the week keep your 
eyes on the SOX and 515. As long as we do not stray too
far away from that level we are still in striking distance
of a new high. Should it break that level on good news then
profit taking could take it down to 475 with a pause at
500. Use it as your market guide and you will not be far

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.


National City Corp. - NCC - close: 34.99 change: +0.04

WHAT TO WATCH: Weakness in the broad market kept shares of NCC 
rather subdued on Tuesday, but the stock still managed a positive 
close and look very close to a bonified breakout. The stock has 
been trading strongly since issuing better than expected earnings 
on January 15th and it looks like there's more upside to come.  
Use a trigger over today's $35.20 high and look for a continued 
rally towards the $40 level.


InterActive Corp. - IACI - close: 32.99 change: -0.97

WHAT TO WATCH: Rolling over from the $35 resistance level last 
week, shares of IACI took one more stab at that level yesterday 
before being firmly rejected at the descending trendline that 
connects the highs since July.  The stock looks primed for a 
breakdown here and using a trigger at $32 should capture most of 
the move, while avoiding the potential risk of a rebound from the 
50-dma.  Target a drop to at least $30, with potential for a 
retest of the December lows near $28.50.


Seagate Technology - STX - close: 16.51 change: +0.26

WHAT TO WATCH: Was the selloff overdone?  Shares of STX got 
pummeled in the wake of last week's earnings miss, but rather 
than continue south, the stock has found support near $16 and 
looks poised to break into the gap left behind last Wednesday.  
Use a trigger of $16.75 and target a move near $19, where the 50-
dma currently resides.


El Paso Corp. - EP - close: 9.10 change: -0.39

WHAT TO WATCH: It looks like bullish enthusiasm of EP's sale of 
25 power plants on January 16th may have been overdone and the 
stock retraced sharply on Tuesday, nearing the top of the gap 
from the 16th.  Use a trigger under $9.00 for entry and target 
the bottom of the gap near $8.40 for a quick hit-and-run play.


On the RADAR Screen

MU $15.71 - Ignoring the weakness in the rest of the Chip sector, 
MU gapped sharply higher on Tuesday following an upgrade to Buy 
at Smith Barney.  While the stock couldn't hold onto all of its 
gains, it did manage to close above $15.50 for the first time in 
over a year.  Look for bullish follow through to the $17.50-18.00 

MXO $9.86 - In the wake of disappointing earnings, MXO fell 
sharply to the 200-dma where it has been trying to build support.  
But the stock weakened further the past two days, giving two 
consecutive closes below that average and it looks like lower 
levels ahead.  Look out for potential support near $9.40, after 
which a drop to the $8.50 area seems likely.

SOTR $34.54 - After a truly impressive run over the past couple 
weeks, SOTR ran out of steam in the midst of today's broad market 
decline.  But despite that dampening factor, the stock still 
managed to close in positive territory.  Use a near-term pullback 
near $33.50-34.00 to establish long positions ahead of the 
breakout over $35, with $37.50 being a viable target.

Market Sentiment

No Shortage
- J. Brown

There seems to be a growing number of analysts suggesting that 
investors begin to "trim" their portfolio.  Take some money off 
the table, maybe scale down or get rid of those stocks that are 
under performing.  Oh, it's not that they're bearish.  Most stock 
analysts you hear from are bullish but everyone keeps looking at 
the horizon for the long overdue correction.  Any event is 
suddenly a good excuse to do a little profit taking and this week 
has no shortage of events.  

You could take last night's earnings reports from TXN or NVLS.  
Despite a decent report investors sold the news on TXN and they 
absolutely ran for cover after NVLS warned.  If chip stock 
earnings aren't your style then the Conference Board's consumer 
confidence index could be your event.  Economists were looking 
for a rise to 98.5 in January, up from 91.7 in December.  What we 
got was a rise to 96.8.  This is the highest consumer confidence 
since July 2002 but it's still a disappointment.  Not a big 
enough event?  There's nothing bigger than an FOMC meeting.  The 
current two-day meeting is schedule to end tomorrow and we'll get 
the Fed's decision on interest rates Wednesday afternoon.  No one 
expects any change in rates so the focus is all on their bias 
going forward.  Will they use the "considerable period" language 
or not?

Want more?  Tomorrow we'll get the Durable goods order for 
December.  Economists are expecting a rise of 2% to erase 
November's decline.  We'll also hear the new home sales numbers.  
Estimates are for a small rise to an annualized rate of 1.1 
million homes.  If this report misses expect some bloodshed in 
the homebuilders.  There is definitely a lot of investors to 
digest on top of the parade of earnings.  Speaking of which 
investor reaction has been rather normal.  After a huge eight-
week run higher in the Dow and S&P 500 investors are choosing to 
sell the news.  

Today's action certainly felt bearish.  Advancers lost to 
decliners 12 to 16 on the NYSE and 19 to 12 on the NASDAQ.  Down 
volume washed over up volume on both exchanges (3:1 on the 
NASDQ).  Technical oscillators for a large number of sector 
indices have turned or are rolling over into sell signals.  
Notable losers are the GHA.X, SOX.X, and the IUX.X.  Not because 
they had the biggest losses, well the SOX actually wins that 
honor with a 4.14% drop; but because their MACD's have the 
freshest sell signals.  Also notable was the XAU's gain of 1.92%.  
Gold was the strongest sector today but if you look at the XAU's 
performance it looks like a failed rally at 100.  Be careful 


Market Averages


52-week High: 10701
52-week Low :  7416
Current     : 10609

Moving Averages:

 10-dma: 10577
 50-dma: 10180
200-dma:  9436

S&P 500 ($SPX)

52-week High: 1155
52-week Low :  788
Current     : 1144

Moving Averages:

 10-dma: 1139
 50-dma: 1091
200-dma: 1014

Nasdaq-100 ($NDX)

52-week High: 1559
52-week Low :  795
Current     : 1519

Moving Averages:

 10-dma: 1537
 50-dma: 1454
200-dma: 1315


Volatility is creeping upward, which is expected after a down day 
in the markets.  Unfortunately, these indices aren't signaling
any major changes.

CBOE Market Volatility Index (VIX) = 15.35 +0.80
CBOE Mkt Volatility old VIX  (VXO) = 15.32 +1.00
Nasdaq Volatility Index (VXN)      = 23.03 +2.04


          Put/Call Ratio  Call Volume   Put Volume

Total          0.87        762,179       666,311
Equity Only    0.65        653,867       421,537
OEX            1.77         16,387        29,006
QQQ            5.67         18,722       106,156


Bullish Percent Data

           Current   Change   Status
NYSE          78.7    + 0     Bull Confirmed
NASDAQ-100    78.0    - 1     Bull Confirmed
Dow Indust.   93.3    + 0     Bull Confirmed
S&P 500       88.4    + 0     Bull Confirmed
S&P 100       88.0    + 0     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: 0.99
10-dma: 0.95
21-dma: 0.95
55-dma: 1.04

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    1247      1216
Decliners    1618      1908

New Highs     329       275
New Lows        9         2

Up Volume    827M      512M
Down Vol.   1181M     1631M

Total Vol.  2022M     2153M
M = millions


Commitments Of Traders Report: 01/13/04

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

Wow!  We've seen a mild reversal in the commercial traders'
positions.  They've moved from mildly net short to mildly net
long.  That's an encouraging sign for more strength in the
markets.  Small traders have grown a bit more cynical with
a slight increase in short positions but they remain net

Commercials   Long      Short      Net     % Of OI
12/22/03      400,066   405,240    (5,174)   (0.6%)
01/06/04      403,721   408,729    (5,008)   (0.6%)
01/13/04      405,558   411,361    (5,803)   (0.7%)
01/23/04      422,135   407,626    14,509     1.7%

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
12/22/03      147,537    81,596    65,941    28.8%
01/06/04      142,844    83,518    59,326    26.2
01/13/04      149,057    90,571    58,486    24.4%
01/23/04      141,107   100,090    41,017    17.0%

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

Commercials are starting to up their bets on the e-minis with
almost 40K new longs and 44K new shorts.  Small traders in
turn reduced their bets but remain net long.

Commercials   Long      Short      Net     % Of OI 
12/22/03      128,801   213,021    (84,220)  (24.6%)
01/06/04      175,489   240,865    (65,376)  (15.7%)
01/13/04      196,858   263,845    (66,987)  (14.5%)
01/23/04      233,867   307,122    (73,255)  (13.5%)

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
12/22/03     125,248     43,482    81,766    48.5%
01/06/04     139,433     51,909    87,524    45.7%
01/13/04     191,241     62,711   128,530    50.6%
01/23/04     187,270     57,196   130,074    53.2%

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


There is very little change in commercial traders' positions
here and the same holds true for the small traders.

Commercials   Long      Short      Net     % of OI 
12/22/03       40,277     36,452     3,825    5.0%
01/06/04       42,892     37,801     5,091    6.3%
01/13/04       41,829     38,547     3,282    4.1%
01/23/04       42,823     39,442     3,381    4.1%

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
12/22/03       22,656    14,544     8,112    21.8%
01/06/04        8,035    17,911   ( 9,876)  (38.1%)
01/13/04        9,705    12,539   ( 2,834)  (12.7%)
01/23/04        9,180    11,371   ( 2,191)  (10.7%)

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


Commercials are also hesitant to make any big changes to their
net bullish stance on the Dow.  Meanwhile small traders grow
a little more bearish.

Commercials   Long      Short      Net     % of OI
12/22/03       14,088     9,998    4,090      17.0%
01/06/04       15,697     9,497    6,200      24.6%
01/13/04       16,501     8,724    7,777      30.8%
01/23/04       16,403     9,252    7,151      27.9%

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
12/22/03        6,915     8,983  ( 2,068)   (13.0%)
01/06/04        5,713     8,105  ( 2,392)   (17.3%)
01/13/04        6,496     9,970  ( 3,474)   (21.1%)
01/23/04        6,068    10,183  ( 4,115)   (25.3%)

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

PremierInvestor.net Newsletter                  Tuesday 01-27-2004
                                                    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

Stop Adjustments:  None
Play Updates:      AMAT
Closed Plays:      JNPR
Stock Splits:      CALM, CEO, EXC, MPX, SCHN, SLFI

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


Play Updates

Tech Stocks

  Bullish Play Updates

Applied Materials - AMAT - close: 22.02 change: -0.92 stop: 23.69

Investors decided to sell the news when it came to TXN's earnings
last night and they ran for the exits after NVLS' earnings
report.  This put selling pressure on the SOX index and AMAT
dipped to $21.86, triggering our play at $21.95.  While AMAT's
technical indicators are bearish we're cautious because of the
late day rebound back above the $22.00 mark.  As discussed in
Sunday's play description AMAT has a very long-term rising
trendline of support and it crosses right at the $22 level.
Until there is a confident breakdown through this level bears are
in danger of initiating plays right at a short-term bottom.
Trade carefully here.

Picked on January 27 at $21.95
Gain since picked:       +0.07
Earnings Date         02/18/04 (unconfirmed)
Average Daily Volume:       29 million

Closed Plays

High Risk/Reward

  Closed Bearish Plays

Juniper Networks - JNPR - close: 28.78 change: -0.58 stop: 30.00

It looked good on paper.  JNPR certainly had the potential to
break down as it neared the top of its post-earnings gap, but the
broad market strength yesterday negated that possibility and
today's early surge back above $30 spelled the end for this
aggressive play.  We'll count ourselves lucky that our entry
trigger was never hit, turning the play into nothing more than an
academic exercise.

Picked on January 25th at   $27.98
Change since picked          +0.80
Earnings Date              4/15/04 (unconfirmed)
Average Daily Volume =    9.72 mln

Stock Splits


CALM cracks open a 2-for-1 split

A couple of hours before this morning's opening bell Cal-Maine
Foods, Inc. (NASDAQ:CALM) announced that its Board of Directors
had approved a 2-for-1 stock split.

The split is subject to shareholder approval.  The Board has
suggested amending the number of authorized shares from 30 million
to 60 million for its common stock and 1.2 million to 2.4 million
for its Class A shares.

A special shareholders meeting is scheduled for April 14th, 2004
to vote on the increase in authorized shares.  Should it be
approved, the record date for the stock split will be April 14th.
No distribution has been set.

About the company:
Cal-Maine Foods, Inc. is primarily engaged in the production,
grading, packing and sale of fresh shell eggs. The Company, which
is headquartered in Jackson, Mississippi, currently is the largest
producer and distributor of fresh shell eggs in the United States
and sells the majority of its shell eggs in approximately 26
states across the southwestern, southeastern, mid-western and mid-
Atlantic regions of the United States
 (Source: Company Press Release)


CEO gushes with a 5-for-1 stock split

Hong Kong-based CNOOC Limited (NYSE:CEO) announced plans to split
its stock 5-for-1 so that each share of stock will be divided into
five new shares.  The CFO of the company said the split is
designed to increase liquidity and attract more retail investors.
There will be a shareholder meeting on March 16th, 2004 to vote on
the stock split approval.

Traders should note that CEO is traded on the NYSE as an American
Depository Receipts (ADRs).  If the split is approved each ADR,
which currently represents 20 shares of CNOOC's Hong Kong stock
(worth HK$0.10), will be increased to represent 100 subdivided
shares at HK$0.02.  No shareholder record date or payable date was
made available.

About the company:
Incorporated in Hong Kong in August 1999, CNOOC Limited (SEHK:
883; NYSE: CEO) is the dominant producer of crude oil and natural
gas offshore China. CNOOC Limited is also one of the largest
independent crude oil and gas exploration and production companies
in the world. As of December 31, 2002, its net proved reserves
were 2.0 billion barrels-of-oil equivalents and its net production
averaged 353,102 BOE per day for the first nine months of 2003.
CNOOC Limited has interests in 45 crude oil and gas properties in
four major producing areas: Bohai Bay, Western South China Sea,
Eastern South China Sea and East China Sea. The Company is a major
oil and gas company in China with slightly over 2,047 employees.
The Company has become the largest offshore producer in Indonesia
after the acquisition of Indonesian assets.
(Source: Company Press Release)


EXC charges up a 2-for-1 stock split

After today's closing bell Exelon Corp's (NYSE:EXC) Board of
Directors declared a 2-for-1 stock split of its common shares.
The board also announced a quarterly cash dividend of $0.55 per

The cash dividend is payable on March 10th, 2004 to shareholders
on record as of February 15th.  EXC's dividend rate has increased
20% over the past twelve months.

No record date or payable date was given for the 2:1 stock split.

About the company:
Exelon Corporation is one of the nation's largest electric
utilities with approximately 5 million customers and more than $15
billion in annual revenues. The company has one of the industry's
largest portfolios of electricity generation capacity, with a
nationwide reach and strong positions in the Midwest and Mid-
Atlantic. Exelon distributes electricity to approximately 5
million customers in Illinois and Pennsylvania and gas to more
than 440,000 customers in the Philadelphia area. Exelon is
headquartered in Chicago and trades on the NYSE under the ticker
EXC. (Source: Company Press Release)


MPX floats a 3-for-2 stock split

After Tuesday's closing bell Marine Products Corp (AMEX:MPX)
announced that its Board of Directors had approved a 3-for-2 stock
split of its common shares.  Shareholders will receive one extra
share for each two shares held.

The distribution date for the split will be March 10th, 2004 for
shareholders on record as of February 10th.  Fractional shares
will be paid in cash.

The Board also announced a quarterly cash dividend increase to 6
cents per share. The payable date for the cash dividend is also
March 10th but will be paid on a pre-split basis.  The record date
for the cash dividend is also February 10th.

About the company:
Marine Products is a leading manufacturer of fiberglass boats,
including Chaparral pleasure boats and Robalo sport fishing boats.
(Source: Company Press Release)


SCHN forges a 3-for-2 stock split

Twenty days after Schnitzer Steel Industries, Inc. (NASDAQ:SCHN)
reported its first quarter earnings numbers its board of directors
has approved a 3-for-2 stock split.

The stock split will affect both its Class A and Class B common
shares.  The split will be payable as a stock dividend and the
dividend is payable on March 25th, 2004 to shareholders on record
as of March 4th.  Fractional shares will be paid in cash.

About the company:
Schnitzer Steel Industries, Inc. is one of the nation's largest
recyclers of ferrous metals, a manufacturer of finished steel
products and a leading self-service auto parts and dismantling
company. The Company, with its joint venture partners, processes
approximately 4.9 million tons of recycled ferrous metals per
year. In addition, the Company's steel mill has an annual
production capacity of approximately 700,000 tons of finished
steel products. The Company and its joint venture partners operate
primarily along the West Coast and Northeastern seaboard of the
United States.  (Source: Company Press Release)


SLFI announces 5-for-4 stock split

This afternoon Sterling Financial Corp (NASDAQ:SLFI) announced
record earnings for the quarter and a 5-for-4 stock split.  The
split will take effect as a 25% stock dividend.

The payable date for the split is February 20th, 2004 for
shareholders on record as of February 6th.  SLFI's last stock
split was also 5:4 and paid on June 4th, 2002.

About the company:
Sterling Financial Corporation is a family of financial services
organizations that operates 55 banking locations in south central
Pennsylvania and northern Maryland, through its affiliate banks,
Bank of Lancaster County, N.A., Bank of Hanover and Trust Company,
First National Bank of North East, Bank of Lebanon County, and
PennSterling Bank, located in Berks County, PA. In addition to its
banking affiliates, Sterling's affiliates include Town and Country
Leasing, LLC, Lancaster Insurance Group, LLC, Equipment Finance
LLC, a specialty commercial finance company, Sterling Financial
Settlement Services Company, Sterling Financial Trust Company,
which manages over $1 billion in assets, Church Capital
Management, a Registered Investment Advisor with assets under
management of nearly $700 million and Bainbridge Securities, a
NASD securities broker/dealer. In January 2004, Sterling announced
the acquisition of StoudtAdvisors, Inc.; an employee benefits
brokerage and consulting company.
 (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

WM      Washington Mutual          44.75     +0.73
CFC     Countrywide Financial      83.24     +1.01
DGX     Quest Diagnostic           82.82     +4.69
MGA     Magna Intl Inc             83.11     +0.64
ITT     ITT Industries             75.45     +1.09
LH      Laboratory Corp            41.65     +0.85

Breakout to Upside (Stocks $5 to $20)

XRX     Xerox Corp                 15.16     +1.21
SEM     Select Medical Corp        17.68     +1.09
TIVO    Tivo Inc                   11.00     +1.21
NGEN    Nanogen Inc                13.32     +1.71
TWTR    Tweeter Home               10.20     +1.26
PTIX    Performance Tech Inc       17.17     +1.11

Breakout to Upside (Stocks over $20)

AVY     Avery Dennison             61.18     +4.14
WAT     Waters Corp                38.86     +1.47
BLL     Ball Corp                  60.30     +1.27
FIC     Fair Isaac Inc             58.94     +3.94
TGN     Texas Genco Holdings       35.12     +1.67
SLAB    Silicon Labs               51.57     +7.57
GGG     Graco Inc                  47.87     +1.02

Breakout to Downside (Stocks over $20)

BK      Bank of New York           31.53     -1.56
BAX     Baxter Intl Inc            29.40     -1.81
RYAAY   Ryanair Holdings           49.31     -3.93
ROK     Rockwell Automation        33.29     -1.78
NVLS    Novellus Systems           34.40     -5.85
DJ      Dow Jones & Co             49.57     -1.90
PIXR    Pixar                      64.30     -2.23
XMSR    XM Satellite Radio         23.08     -1.79
LRCX    Lam Research               27.26     -1.19

Recently Overbought With Bearish Signals (Stocks over $20)

IR      Ingersoll-Rand             68.05     -3.42
CBE     Cooper Industries          56.30     -1.47
BMC     BMC Software               20.52     -1.02
OSG     Overseas Shipholding       36.00     -2.38
SYD     Sybron Dental Specialties  29.80     -1.85
UN      Unilever N.V.              68.11     -0.40
ARM     Arvinmeritor Inc           25.19     -0.61

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.


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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