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Daily Newsletter, Monday, 05/03/2004

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PremierInvestor.net Newsletter                   Monday 05-03-2004
                                                    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:  Waiting for the Fed
Watch List:   ISIL, HOV, SNDK, SLVN

===============================================================
MARKET WRAP  (view in courier font for table alignment)
===============================================================
     05-03-2004            High     Low     Volume Advance/Decline
DJIA    10314.00 + 88.43 10329.05 10227.13 1.94 bln   1722/1118
NASDAQ   1938.72 + 18.57  1954.62  1926.09 1.99 bln   1367/1389
S&P 100   545.85 +  4.97   546.95   540.88   Totals   3089/2507
S&P 500  1117.49 + 10.19  1118.72  1107.30
RUS 2000  565.48 +  5.68   568.38   559.80
DJ TRANS 2923.48 + 36.66  2923.21  2885.60
VIX        16.62 -  0.57    17.72    16.61
VXO        16.63 -  0.93    17.69    16.61
VXN        25.72 -  0.01    26.24    25.35
Total Volume 4,284M
Total UpVol  2,671M
Total DnVol  1,558M
52wk Highs      88
52wk Lows      232
TRIN          0.74
PUT/CALL      0.81
===============================================================

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

Waiting for the Fed
Jonathan Levinson

Monday kicked off on a positive note after Friday afternoon's
deep selloff in the futures.  The Semiconductor Industry
Association (SIA) announced that March chip sales had risen to
$16.8B, up 4.4% from April's level on increased demand for
computers and communications devices.  Optimistic projections
were included in the release, with the SIA saying that 25% growth
for the year is looking "more and more likely."  The SOX was
leading the markets to the upside (though it later gave back all
its gains and closed in the red), the indices were recovering
from their deeply oversold condition from Friday afternoon, and
all looked rosy for a relief rally, or at least a tradeable
bounce.

There was more good news for the markets at 10AM, with March
construction spending increasing by 1.5%  (estimates were for
0.5%) to a record $944.1 billion seasonally adjusted annual rate.
February's reading was revised upward to a 0.4% gain from a 0.1%
decline.  Spending rose 7.9 percent in the past 12 months. While
the jump was in large part attributable to public sector (read:
non-productive) spending, that fact was not part of the
headlines, which bullhorned the high overall reading.   Private,
nonresidential projects dropped by 0.2%, and residential spending
came in above unchanged.

Also at 10AM was the release of the Institute for Supply
Management's Factory activity report for April, which registered
62.4, missing estimates by 3 pennies and down a hair from the
62.5 reading for March.  This makes it sixth consecutive months
during which the index has held above 60.

The combined effect of the 10AM reports was a fleeting spike,
followed by a drop that stopped at a higher low 20 minutes later
as the indices followed through on the anticipated technical
bounce generated by the oversold 30 and 60 minute cycle
oscillators from Friday's steep decline.

Daily INDU candles


The Dow closed higher by 88.43 points or .86% at 10314.  As noted
in the Market and Futures Monitors, the bounce was anticipated
based on the deeply oversold 30 and 60 minute cycles, but the
daily cycle downphase was not interrupted by today's gains.
Bollinger support has crept lower to 10220, which is also price
confluence above the more significant trendline support at 10150.
As is so often the case ahead of a major event such as tomorrow's
Fed announcement, the price is stuck beneath resistance and above
support, with the oscillators assuming an ambiguous
configuration.  This jibes well with the pennant that has
developed, which tends to be a continuation pattern but can break
in either direction.  The daily cycle oscillators favor further
downside, but a move above 10365 on a closing basis would abort
the downphase.  Resistance above is at 10330, followed by 10365
and 10460.

Daily COMPX candles


The Nasdaq rose 18.5 points or .96% to close at 1938.7.  It is
set up more ambiguously than the Dow, having printed an inside
day following Friday's wide-ranging selloff.  This harami pattern
is often bullish, and the unfilled opening gap higher from the
open is a very encouraging pattern for bulls.  However, the long
upper doji shadow above the candle body is a rejection of higher
prices, and the futures dipped following the 4PM cash close.
Once, again the stage is set for Greenspan to break the deadlock.
As with the Dow, the cycle configuration suggests lower prices,
but support is in play and a directional move will lead the
oscillators whichever way traders choose to take it following the
2:15 announcement.  Support is at 1933, followed by 1920 and
1900, while resistance is at 1940, 1965, followed by 1982 and
1995.

In corporate news, JPM and ONE named the board of directors to
lead the company upon completion of their $60 billion merger.
Shareholders from the two banks will vote on May 25. James Dimon,
CEO of ONE and JPM's William Harrison will serve on the board,
Harrison as Chairman.

Google Inc. filed its "love-in" letter from the founders with the
SEC last week, in which lofty proclamations and promises
reminiscent of the New-Economy dotcom bubble from the late-'90s
were offset by a tip-of-the-hat to Warren Buffett.  The founders
received praise from the Oracle himself over the weekend.
Buffett did not go so far as to recommend the IPO, but was
reportedly flattered by the attention from Google's founders.
There was further news this morning to the effect that Google had
canned Goldman Sachs for talking to Kleiner Perkins, one of
Google's large investors.  The theme here continues to be one of
the rejection of "old ideas" and "old banking relationships" in
Google's quest for innovation, based on the assumption that old
is bad and new is good.  While I prefer Google to all other
search engines and have for years, respecting both the product
and the obvious talent that created it, I had thought that the
Dotbomb collapse that helped tank the Naz in 2000 had also
refuted the "we are the world" tech-bubble mentality that
embraces innovation for its own sake.  I strongly urge traders to
recall history.  Be it tulips in Holland, electronics in the
1960's, routers or websites in the 1990's, the old rules of human
emotion married to market supply and demand always apply.  A new
world is not being heralded by the Google IPO, though another
bubblemania milestone may well be.

The management of Taser International (TASR), the stock has
killed countless bears and bulls alike, was talking up its shares
this morning in response to a Barron's article that questioned
its valuation.  The company, assuming the role of investment
bankers, stated that it believes that it merits a forward p/e
ratio of "more than 50", with such a multiple being appropriate
for such a "rapidly growing" company.  It cited taser programs
initiated by 25% of law enforcement agencies, while reportedly
only 6.2% of officers actually have taser guns.  I personally
didn't see the article, but I suspect that Taser, whose ordinary
course of business is NOT the valuation and pricing of
securities, didn't include a discussion of rising bond yields or
other such factors that might otherwise impact the markets or
even its stock.  TASR was lower by 1.10 at 31.24 as of this
writing.

Warren Buffett was also on the wire announcing that he had
increased his purchases of foreign currencies in recent months,
based on concerns about the US current account deficit.  In
March, he had announced that his fund had invested $12B in
foreign currencies, seeing little in the way of bargains among US
assets.  These comments from the world's second richest investor
contrasted with John Snow's bullish comments on the US economy
early this afternoon, in which he cited encouraging economic
trends and predicted a "long period of good above potential
growth."

Just prior to the 4PM close SEBL announced that founder and CEO
Tom Siebel would be passing the torch to J. Michael Lawrie,
former group executive for worldwide sales and distribution at
IBM.  Siebel will stay on as non-executive chairman.  Shares rose
sharply on the news, the stock trading 10.60 as of this writing.]

Tomorrow will be a quiet day for economic data, as we await
Factory Orders for March scheduled for release at 10AM, estimated
at 2.4%, which is significantly higher than the previous .3% in
February.  However, all eyes will be on the Federal Reserve's
Open Market Committee announcement at 2:15PM.  Observers appear
divided on what the Fed will or will not do, citing signs of
economic strength and more particularly the uptick in employment.
On the other hand, capacity utilization has been holding
stubbornly nearly the 75% mark, with the April 16th reading
coming in at 76.4, and this is a number to which the Fed has paid
close attention in the past.

I'm not eager to guess at what the Fed will or will not do next,
but I would be surprised to see anything substantial announced in
either direction.  We have spent a few years now watching the
Bank of Japan jawbone the markets and then fail to deliver as
traders frontrunning the promised action do the Central Bank's
work for it. I'm thinking that the Fed will be following that
example tomorrow.  The US consumer remains saddled with historic
levels of debt, and interest rates remain at multidecade lows.
Despite the uptick in the employment numbers, there's anything
but wage inflation in the US, and higher interest rates continue
to pose a serious threat to debt-saddled consumers. The fear of
the Fed (and the market's acknowledgement of the asset inflation
that Bernanke and Greenspan have so vigorously denied) has
already led to a very substantial correction in the bond market,
with the TNX up nearly 100 bps in the past month.

Whether the Fed hikes the overnight rate by 25 bps tomorrow is a
minor question, and I believe the markets will be listening more
closely to the bias statement.  Will the Fed continue to be
generous with its open market operations?  Will it pick up the
slack left by the deceleration of Asian central bank purchases of
US debt?  Will it act to reign in the inflation it's been
denying, evident in the multidecade highs in the CRB, the bond
and real estate markets, and even the prices paid component of
the ISM which reached a high not seen since 1979?  I believe that
we've seen a fear of a tighter Fed bias getting baked into the
markets for the past month, and it will take strong words from
the Fed to substantially spook bonds or even equities tomorrow.
My guess is for gentler words, perhaps the abandonment of the
"patient for a substantial period" language, and some sort of
relief rally-  and with that said, the stage is now set for a
major dislocation to prove me wrong.

The markets are poised for a decisive move in either direction
here.  The COMPX broke a 5 day losing streak today but is still
locked within a steep shorter-term downtrend.  The Dow hasn't
sustained nearly the same degree of damage as the Nasdaq, but
both are near rising support on the daily and are not
particularly oversold on their key daily cycles.   There is thus
ample evidence on both sides of the trade, and the Fed is in the
unenviable position of having to talk up the economy while
justifying the low rates on which it has been maintained.  We
have seen weak economic data result in bond and equity rallies
due to the expectation of further Fed stimulation.  On a trading
basis, I expect this confusion to result in the usual whipsaws
and headfakes immediately preceding and then following the 2:15
announcement.  Even the most nimble traders will want to keep a
safe distance until the froth has been shaken out.  My preference
here is for countertrend longs at rising pennant support, with
active stops/short entries just below.  Just as a bounce from
support could be ferocious, so could the plunge if it fails.


==================================================================
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
---------------------------------

Intersil Corp. - ISIL - close: 19.29 change: -0.62

WHAT TO WATCH: With earnings in late April failing to provide the
necessary bullish catalyst, Semiconductor stocks continue to fall
towards strong support.  ISIL broke below key support near $20.50
late last week and even the broad market bounce today couldn't
slow the selling, with the stock falling below the $19 level at
one point.  ISIL looks destined for a test of strong support near
$16.50 and any failed bounce below the 10-dma looks good for new
bearish entries.




---

Hovnanian Enterprises Inc. - HOV - close: 36.24 change: +0.27

WHAT TO WATCH: Despite a slight bounce in the Housing sector on
Monday, shares of HOV are still precariously perched on key
support near $35.  Last week's break of the 200-dma looks ominous
and with the FOMC meeting sure to rock interest rate sensitive
issues tomorrow, this looks like a good point to be eyeing a
breakdown play in the stock.  Use a trigger at $35 (just under
last week's lows) and target a drop to the $31-32 area.




---

SanDisk Corp. - SNDK - close: 23.58 change: +0.43

WHAT TO WATCH: Today's feeble oversold bounce did little to
relieve the bearish look of SNDK's chart and Friday's break below
$24 still looks ominous.  Bearish continuation entries look
favorable on a rollover in the $24-25 area, with the logical
target being strong support at $20.




---

Sylvan Learning Systems - SLVN - close: 37.09 change: +1.87

WHAT TO WATCH: It looks like the post earnings drop in shares of
SLVN has run its course with today's strong 5% rebound pushing
the stock back up near its all-time highs from a couple weeks
ago.  Use an entry trigger at $38.25 and target a rally into the
$41-42 area.




---


===================
On the RADAR Screen
===================

TECH $40.79 - Buyers helped TECH to claw its way back from
Friday's break of the 100-dma and the strength of the rebound
suggests a potential breakout attempt.  Use a trigger over the
$42.60 area and then look for a rally towards strong resistance
at $50.

KMRT $43.12 - There's no denying that KMRT had a strong rally
throughout the February-April timeframe, but it feels like a case
of too much too soon.  The price action looks like a top has been
built and now we just need to see the breakdown get underway.
Use a trigger at $41.75and target a drop back to $38 and then
possibly $36.

TRID $12.73 - Investors in TRID got a one-day reprieve from the
selling after the company reported earnings, but since then the
downtrend has only picked up speed as volume continues to rise.
Key support at the March lows appears likely to be tested later
this week, now that the 200-dma has been soundly broken.  Use a
trigger under $11.60 and target a drop to next strong support
near $9.


=================================================================
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 2004  PremierInvestor.net. and
The Premier Investor Network.
Do not duplicate or redistribute in any form.





PremierInvestor.net Newsletter                   Monday 05-03-2004
                                                    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 Loss Updates:   MNT, LNCR (See Note)


Trading Ideas
  Value Plays With Bullish Signals
  Breakout to Upside (Stocks $5 to $20)
  Breakout to Upside (Stocks over $20)
  Breakout to Downside (Stocks over $20)
  Recently Overbought With Bearish Signals (Stocks over $20)


==================================================================
Stop Loss Updates
==================================================================

MNT - long
Adjust from $29.99 up to $30.45.

LNCR - Triggered
LNCR was Triggered when it hit 35.01 today, stop remains at 33.75.


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

XOM     Exxon Mobil Corp           43.68    +1.13
TOT     Total Sa (ADS)             94.05    +1.93
SC      Shell Transport & Trading  42.69    +0.62


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

None


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

CAH     Cardinal Health Inc        75.72    +2.47
OMC     Omnicom Group Inc          81.54    +2.03
ADBE    Adobe Systems Inc          44.00    +2.50


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

IACI    Interactivecorp            31.06    -1.19
TEVA    Teva Pharm Ind             60.35    -1.20
MBT     Mobile Telesys OJSC (ADS) 101.20    -6.76


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

ABT     Abbott Laboratories        42.32    -1.70


=================================================================
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 2004  PremierInvestor.net. and
The Premier Investor Network.
Do not duplicate or redistribute in any form.





DISCLAIMER

Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

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

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