PremierInvestor.net Newsletter Tuesday 03-23-2004 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: Good Signs Watch List: LH, SPLS, SANM, NOVL Market Sentiment: Demoralizing ================================================================= MARKET WRAP (view in courier font for table alignment) ================================================================= STATS ================================================================= =========== Market Wrap =========== Good Signs The markets rebounded strongly at the open and celebrated that support had held and terrorists had disappeared again. Unfortunately that celebration lasted about as long as the opening bell. It was not a good sign that the indexes almost returned to Monday's lows before rebounding to the highs of the day around 3:PM. It was not a good sign that they failed at those highs for the second time and sold off once again in the last hour. It was not a good sign that we closed on support instead of resistance. It was not a day for good signs. Dow Chart - Daily Nasdaq Chart - Daily The only economic report for the day was positive but did not excite traders. The Retail Sales Snapshot rose +0.2% for the week and pushed the year over year growth to +7.1%. Most of that growth is due to very weak comparisons last year. Helping the gains for the week was mild weather and the approach of Easter. The majority of retailers said sales were at or ahead of plan for the month. Target said same store sales were on track to exceed expectations and Wal-Mart said they expected to hit the high end of their forecast for +4% to +6% growth. Consumers my be saying they are concerned about jobs and the economy but they are continuing to spend. As tax refunds start to flow we can expect those sales to rise even more. Wednesday will make up for the lack of economic reports with a flurry of events. 7:00 Mortgage Application Survey (last 1,117.1) 8:30 Consumer Comfort Index (last -22) 8:30 Durable Goods (est +1.7%, last -1.8%) 10:00 Chicago Fed National Activity Index (last 0.49) 10:00 New Home Sales (est 1.084M, last 1.106M) 10:00 Monthly Mass Layoffs (last 2,428) The only really material report is the CFNAI at 10:00. This will give us a peak at what the next ISM may look like. Personally I don't think any of them will matter. The economics are not what's moving the market. The markets are moving on news, negative news. All the good dog and pony show positioning for the day was worthless. The GE CEO was on CNBC and said this was the best economy in over four years. He said plastics orders up +20%, appliances +12%, airplane parts +15% with nine of their eleven businesses growing by double digits and the stock closed down and at the low of the day. The markets are definitely in the midst of a phase where changes are being made. They appear to be headed south and nothing is going to stop them. All sectors, all stocks all sizes are all going the same direction. I heard one commentator today mention market correlation at turning points. Normally markets trade more or less in the same direction but move in different tangents according to the individual stocks in the indexes. Housing stocks may be up while biotechs are down, etc. Very rarely do all markets trade exactly the same way and that is happening now. This suggests it is not a fundamental change. Earnings are still rising and warnings have been nonexistent. That is not the problem. The problem is the new risk paradigm and funds are liquidating stocks across the board. We have the "new" terrorist threat from Al Qaeda. I say new because they could be planning on influencing our elections with specific attacks after their success in Spain. We have the new Hamas threat where they are claiming they will get back at us for their leaders death. We have the new threat that Bush might be vulnerable to losing votes because of the 9/11 commission and the Clarke attack. The markets are afraid Kerry might actually win. The uncertainty from all these events is causing serious indigestion for traders. Bonds are continuing to rise, money is rotating out of stocks and funds are seeing cash outflows. In short either the bull died or maybe it is just sick but pulse is definitely missing. The Dow tried twice today to climb out of the Monday hole and failed both times. Twice today it failed at 10125 and closed very near the low of the day at 10050. We still have not touched the 10K level but came very close at 10012 on Monday without any material bounce. The Nasdaq came within one point of Monday's lows at 1397 and also closed near its lows for the day. Today should have been a dead cat bounce, relief rally, bargain hunting rebound, etc. Pick your own label. When we have a very big drop on 10:1 down volume that punctuates several days of losses the normal reaction is a gain the following day. Obviously these are not normal conditions. The lack of a rebound and the velocity of the sell off at the close should be telling us not to sleep in tomorrow. After the close futures continued to slip without any additional news. Tomorrow could start out with a loss and with the indexes right on the edge of the support cliff any material loss could easily break that support. The Dow closed at 10066 and the Nasdaq at 1901 with the S&P already under support at 1094. In non technical terms this could get ugly quick. Should the Dow move under 10K and hold the rats will be fighting each other to abandon ship. News driven changes in market sentiment can take on a life of their own and they almost always over react and over reach. Once the herd smells smoke and begins to move away from danger it can easily turn into a stampede. Despite the 10:1 down volume on Monday the selling was orderly. Until it becomes disorderly it may not provide the capitulation event needed to end the selling. This suggests we could break current support and we could see another drop again tomorrow. If it does not happen on Wednesday then there is a chance we could dodge the bullet. Once traders take time to catch their breath the greed principle will return and the selling pressure should ease. On Wednesday AMAT will host its annual meeting and we could get some positive news from that sector. After the close Micron will post earnings and there are some rumors that DRAM chips are available on an allocation basis only for the first time in eight years. Any news on this from Micron should help the SOX which is fighting to hold above six month lows. After the bell today PMCS said Q1 revenue would be at the high end of its prior guidance. They also said their book-to-bill for the March quarter was already over with orders rising. It is news like this that should be lifting techs but instead it has been ignored. Goldman Sachs was the star of the day when they posted profits that best estimates by 85 cents at $2.50 a share. They said equity related business as well as an increase in corporate activity levels added to their gains. GS was thanked with a nine cent gain in the stock price. If you are like me and have been waiting for EBAY to pull back for an entry then today was your day. My alarm at $65 went off this morning after a negative article in Business Week suggested the company was over priced. EBAY traded over $69.50 on Friday and under $65 today. That is about the biggest two day drop in recent memory. The 100 dma is just under $64 and has not been touched since Nov. If you like EBAY this may be a buying opportunity for a stock that refuses to drop. Unfortunately when markets are weak for external reasons even good stocks sink with it. Look for evidence the drop is over before making a bid on this auction. I would be especially cautious about entering new positions until the volatility eases and "normal" markets return. Of course that depends on what your definition of normal may be. With the current overnight sentiment indicating we may open down on Wednesday I would look for something that resembled a capitulation event to go long. Look for heavy volume and a large imbalance on the internals and the appearance of a bottom being formed. There is no guarantee we will get one or that there will be a rebound but that would be my target for a long entry this week. Until then trade the trend. Enter Passively, Exit Aggressively. Jim Brown Editor ================================================================== WATCH LIST ================================================================== 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. STOCKS WORTH WATCHING --------------------------------- Laboratory Corp. - LH - close: 38.48 change: +0.45 WHAT TO WATCH: Over the past 6 weeks, LH appears to have worked off the euphoria that drove it up to the $44 level in early February and it looks like a near-term double bottom is forming near $37.50. Note how the stock has been riding higher over the past several sessions along the 100-dma. Use a trigger over $39.75 for entry, as that would represent a move through both horizontal resistance and the 200-dma. A conservative target would be for a return to $42 resistance, while more aggressive traders can target the $44 level. --- Staples Inc. - SPLS - close: 23.96 change: -0.69 WHAT TO WATCH: It has taken long enough to come to fruition, but it looks like shares of SPLS are in the final stages of building a major top, having left behind a double top just below $28. The selling of the past few weeks has broken key support and today's high-volume slide under the 200-dma looks bad. Use a trigger under today's low for entry and target a fill of the August gap down to the $20.50 level. Note that it is very likely we'll see a near-term bounce from the top of the gap near $22.50 on the way down, so more conservative traders will want to enter as that rebound attempt rolls over. --- Sanmina SCI Corp. - SANM - close: 10.32 change: -0.01 WHAT TO WATCH: Friday's market-wide selloff finally cracked the bottom of SANM's support at $10.75, and the stock has continued to fall the past two days, finally closing under the 200-dma today. There should now be very strong overhead resistance in the $10.50-11.00 area and a failed rebound there should provide an excellent bearish entry point. Alternatively, a break below the $10 level should usher in the next leg of the decline, which should carry the stock down towards the $9 level. --- Novell Inc. - NOVL - close: 9.46 change: -0.06 WHAT TO WATCH: Selling in the Technology sector has not been kind to shares of NOVL, which have been testing key support at $9.30 for nearly 2 weeks. If that support breaks, the stock should fall to next support near $8.20 with a very real possibility of dropping all the way to the 200-dma at $7.40. Use a trigger of $9.25 for entry. =================== On the RADAR Screen =================== MSFT $24.15 - Conspicuous in its complete inability to show any strength, MSFT once again closed at multi-month lows and it looks headed for a test of the 2002 lows in the $21-22 area. The stock looks heavily oversold currently, so our expectations would be for a bounce any day now. There should now be strong resistance near $25 and a rollover near that level looks good for bearish entries. DELL $33.17 - While holding up much better than MSFT, DELL isn't looking very healthy, having been in a descending trend since October. Currently stalled below the 50-dma, the stock is looking that much weaker with the recent cross of the 50-dma below the 200-dma. A rollover below the 200-dma looks like a viable short entry, targeting a drop back to support near $31. CSCO $22.36 - Completing the Big Cap Tech Trifecta, CSCO continues to look sickly, as each rebound attempt fails at a lower high as the stock tries desperately to hold above its 200- dma. A break below recent support at $22 and the 200-dma should have the stock vulnerable to a test of the October lows near $19. =============================== Market Sentiment =============================== Demoralizing - J. Brown Ouch! After two days of heavy losses the markets were hoping for an oversold bounce from support and we got it but it failed to last. By the close nearly every index large and small was painting a failed rally pattern suggesting more weakness in store for us tomorrow. The good news is that the Dow Industrials and the NASDAQ are still above key support levels but they'll probably be challenging them again tomorrow. Looking through the list of major indices several of them have joined the NASDAQ in the fight to hold their 200-dma's. The Dow Transports, the GHA hardware index and the GSO software index are all hovering just above their 200-dma's. The SOX has closed for the second day under this technical level but is still holding support at the 450 mark. Sectors that have seen a lot less profit taking are hitting their own support levels. The BTK biotech index, the RLX retail index and the IUX Insurance index are all trading under their 50-dma's. Today's decline adds the OIX oil index and the OSX oil services index to the under-the-50-dma list. Overall market internals were mixed. Advancing stocks stumbled past decliners 16 to 11 on the NYSE but just barely edged past losers 1570 to 1500 on the NASDAQ. Up volume did outweigh down volume on the NYSE but it was mirrored by a jump in down volume on the NASDAQ. Hopefully tomorrow's durable goods orders and new home sales numbers will offer Wall Street some positive news to focus on. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 10753 52-week Low : 7929 Current : 10063 Moving Averages: (Simple) 10-dma: 10186 50-dma: 10501 200-dma: 9804 S&P 500 ($SPX) 52-week High: 1163 52-week Low : 843 Current : 1093 Moving Averages: (Simple) 10-dma: 1111 50-dma: 1136 200-dma: 1055 Nasdaq-100 ($NDX) 52-week High: 1559 52-week Low : 1014 Current : 1370 Moving Averages: (Simple) 10-dma: 1405 50-dma: 1478 200-dma: 1379 ----------------------------------------------------------------- These volatility indices all hit new relative highs on Monday and this morning's bounce in the market pulled them all back but the trend appears to be up. CBOE Market Volatility Index (VIX) = 20.67 -0.91 CBOE Mkt Volatility old VIX (VXO) = 20.45 -0.95 Nasdaq Volatility Index (VXN) = 26.84 -0.31 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.68 819,911 554,977 Equity Only 0.57 641,833 366,452 OEX 0.94 29,159 27,484 QQQ 1.29 74,206 95,709 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 70.1 - 2 Bull Correction NASDAQ-100 38.0 - 6 Bear Confirmed Dow Indust. 80.0 + 0 Bull Correction S&P 500 73.8 - 4 Bull Correction S&P 100 82.0 - 3 Bull Correction 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: 1.67 10-dma: 1.71 21-dma: 1.66 55-dma: 1.19 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 points. ----------------------------------------------------------------- Market Internals -NYSE- -NASDAQ- Advancers 1633 1570 Decliners 1179 1500 New Highs 76 66 New Lows 19 30 Up Volume 935M 818M Down Vol. 799M 964M Total Vol. 1763M 1800M M = millions ----------------------------------------------------------------- Commitments Of Traders Report: 03/16/04 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 Hmm... there's been a lot of action in the commercial traders' positions the last few weeks. It's almost like they can't decide what direction to go. The latest data shows them switching from net bearish to net bullish again. Small traders are more consistent and remain net bullish although less so than recent weeks. Commercials Long Short Net % Of OI 02/24/04 417,490 416,502 988 0.0% 03/02/04 411,932 418,936 (7,004) (0.1%) 03/09/04 418,394 433,237 (14,843) (1.7%) 03/16/04 454,635 449,505 5,130 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 02/24/04 141,559 85,171 56,388 24.9% 03/02/04 148,383 84,135 64,248 27.6% 03/09/04 155,947 88,317 67,630 27.7% 03/16/04 159,054 115,023 44,031 25.3% 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 Whoa! Commercial traders have turned very bearish on the S&P e-mini's. Contract volume in both longs and shorts have soared but they bought almost 90K new shorts pushing bearish sentiment to new levels not seen in weeks. Small traders also increased their positions but remain bullish. Commercials Long Short Net % Of OI 02/24/04 320,425 387,255 (66,830) ( 9.4%) 03/02/04 344,805 395,112 (50,307) ( 6.8%) 03/09/04 431,623 485,268 (53,645) ( 5.9%) 03/16/04 472,809 574,241 (101,432) ( 9.7%) 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 02/24/04 129,894 63,524 66,370 34.3% 03/02/04 119,382 67,453 51,929 27.8% 03/09/04 135,233 76,558 58,675 27.7% 03/16/04 192,136 96,691 95,445 33.0% Most bearish reading of the year: (77,385) - 09/02/03 Most bullish reading of the year: 449,310 - 06/10/03 NASDAQ-100 Commercial traders are continuing this bullish trend and hit another new high in bullish sentiment. Is everyone just buying the dip? Small traders may have taken notice as they nearly doubled their number of long contracts but then the more than doubled their short contracts. At least the brokers are making some money on commissions. Commercials Long Short Net % of OI 02/24/04 47,266 40,452 6,814 7.8% 03/02/04 49,959 41,059 8,900 9.8% 03/09/04 57,368 46,082 11,286 10.9% 03/16/04 68,285 54,899 13,386 10.9% Most bearish reading of the year: (21,858) - 08/26/03 Most bullish reading of the year: 13,386 - 03/16/04 Small Traders Long Short Net % of OI 02/24/04 12,388 7,310 5,078 25.8% 03/02/04 11,605 7,128 4,477 23.9% 03/09/04 15,533 8,070 7,463 31.6% 03/16/04 27,859 18,333 9,526 20.6% Most bearish reading of the year: (10,769) - 06/11/02 Most bullish reading of the year: 19,088 - 01/21/02 DOW JONES INDUSTRIAL Not too much change here for the commercial traders although they've become significantly less bullish than recent weeks. Small traders are moving the other direction and becoming less bearish! Commercials Long Short Net % of OI 02/24/04 27,176 13,918 13,258 32.3% 03/02/04 27,594 14,166 13,428 32.2% 03/09/04 26,867 12,845 14,022 35.3% 03/16/04 32,317 17,514 14,803 29.7% 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 02/24/04 6,509 14,919 (8,410) (39.2%) 03/02/04 6,898 15,874 (8,976) (39.4%) 03/09/04 7,053 19,159 (12,106) (46.2%) 03/16/04 10,002 20,970 (10,968) (35.4%) Most bearish reading of the year: (12,106) - 3/09/04 Most bullish reading of the year: 8,523 - 8/26/03 ----------------------------------------------------------------- ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to Contact Support ================================================================= DISCLAIMER ================================================================= This newsletter is a publication dedicated to the education of stock traders. The newsletter is an information service only. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. The newsletter picks are not to be considered a recommendation of any stock but an information resource to aid the investor in making an informed decision regarding trading in stocks. It is possible at this or some subsequent date, the editors and staff of PremierInvestor.net may own, buy or sell securities presented. All investors should consult a qualified professional before trading in any security. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. PremierInvestor.net staff makes every effort to provide timely information to its subscribers but cannot guarantee specific delivery times due to factors beyond our control. Please read our disclaimer at: http://www.optioninvestor.com/page/oin/aboutus/disclaimer.html ***************************************************************** ADVERTISING INFORMATION For more information on advertising in PremierInvestor.net Newsletter, or any Premier Investor Network newsletter please contact Contact Support. ***************************************************************** Copyright ) 2003 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
PremierInvestor.net Newsletter Tuesday 03-23-2004 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: RFMD, VRTS 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 ================================================================= RFMD - tech stock short lower stop from $9.00 to $8.71 --- VRTS - short Adjust from $29.35 down to $27.90 ================== 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 GCI Gannett Co Inc 87.66 +0.58 WLP Wellpoint Health Network 111.91 +0.68 MFC Manulife Financial 35.37 +0.61 AMX America Movil 37.36 +0.77 AET Aetna Inc 87.08 +0.96 ATH Anthem Inc 88.96 +0.89 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- RHAT Red Hat Inc 19.41 +1.08 SKIL Skillsoft Plc (ADR) 11.60 +1.62 PLMO Palmone Inc 17.99 +4.15 HBG Hub Intl Ltd 18.89 +1.26 VANS Vans Inc 13.50 +1.21 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- ELAB Eon Labs Inc 62.40 +1.45 WES Westcorp Inc 43.03 +2.43 AGY Argosy Gaming Co 34.21 +1.22 PLCE Children's Place 31.95 +1.87 LWAY Lifeway Foods Inc 22.91 +1.54 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- AMGN Amgen Inc 57.83 -2.28 DHR Danaher Corp 88.96 -1.83 PD Phelps Dodge 78.79 -2.31 FCX Freeport Mcmoran 38.94 -1.20 RIMM Research In Motion Ltd 86.64 -3.76 NTLI NTL Inc 54.59 -1.68 RDC Rowan Companies 21.12 -1.30 HSC Harsco Corp 43.91 -1.26 TARO Taro Pharmaceuticals 57.40 -2.41 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- TD Toronto Dominion Bank 34.63 -0.52 POSS Possis Medical Inc 27.49 -1.31 ================================================================= 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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