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Daily Newsletter, Monday, 05/10/2004

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PremierInvestor.net Newsletter                   Monday 05-10-2004
                                                    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:  Dow 10K, S&P 1100, Naz 1900 Fall
Watch List:   Broken Support

===============================================================
MARKET WRAP  (view in courier font for table alignment)
===============================================================
     05-10-2004            High     Low     Volume Advance/Decline
DJIA     9990.02 -127.32 10116.28  9932.74 2.29 bln    317/2634
NASDAQ   1896.07 - 21.89  1907.98  1880.32 1.86 bln    697/2443
S&P 100   532.68 -  4.67   537.35   528.74   Totals   1014/5077
S&P 500  1087.12 - 11.58  1098.70  1079.63
RUS 2000  537.86 - 10.70   548.56   533.51
DJ TRANS 2810.01 - 36.17  2842.53  2789.03
VIX        19.77 +  1.64    20.20    18.99
VXO        19.74 +  0.67    21.29    19.43
VXN        27.91 +  2.41    28.15    26.75
Total Volume 4,800M
Total UpVol    953M
Total DnVol  3,768M
52wk Highs      32
52wk Lows     1181
TRIN          0.84
PUT/CALL      1.28
===============================================================

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

Dow 10K, S&P 1100, Naz 1900 Fall
Jonathan Levinson

The selling began after the cash close on Friday and resumed in
the futures last night.  The markets gapped lower at the open,
ran to their lows just before noon and then bounced, moving
sideways in a range for the duration of the session.  Volatility
was sharply higher as premium increased in the options market,
while bonds traded mixed to lower.  Today's close was the lowest
close of the year for the indices.

Despite the 1%+ losses on the Dow, SPX and Nasdaq, bellwethers
such as GE and MSFT finished in the green.  Whether this was a
legitimate heads-up on a market turn to come, or mere tape-
painting by mutual funds and the Fed's 23 dealers using the 6B in
repo money added today, remains to be seen.  The intraday indices
were oversold and trying to turn up off the lows at the close,
and whether it's a deadcat bounce or a 30 minute cycle upphase, a
bounce is due in all the intraday timeframes.  The trouble for
bulls is not the intraday cycles, however, but rather the longer
ones, the daily, weekly and monthly, all of which are in
synchronous downphases.


Daily Dow Chart


The Dow violated trendline support at 10180 and never looked
back, falling below confluence and psychological support at 10K
and closing below it.  There's confluence support from 9930 to
9800 accumulated over the years, and I don't expect the bears to
have an easy go of further downside in that range.  But price
never reacts to support the same way twice, at least not
predictably, and I'm not inclined to blindly trust these levels
for bullish trades.  The longer cycles remain firmly down, and
the daily shows no sign of having bottomed yet.  If, however, a
meaningful bounce can launch off the intraday cycles (not shown),
as those shorter oscillators are suggesting, and the move is
sufficient to turn the daily cycles up from here, there will be a
bullish oscillator divergence and the move should have good
upside force.


Monthly Dow Chart


I've zoomed out to a three year monthly view of the Dow to show
the 3-crows bearish pattern as well as the sell signal on the 10
month stochastic.  The issue for me on this monthly timeframe is
whether the bulls can put together a sufficiently strong daily
cycle upphase to retest either broken bear wedge apex or the
descending trendline at 10650ish.  If this is a significant top
forming, a "return to the scene of the crime" distribution rally
would not be out of the ordinary.  However, for the moment, the
combination of the daily, weekly (not shown) and monthly
downphases is producing extreme weakness, and for the moment the
trend on these longer timeframes remains down.


Daily Nasdaq Chart


The Nasdaq closed at 1896.  It would be premature to conclude
that 1900 is history, particularly given the potential for a
bullish oscillator divergence on the daily chart.  Support came
at a low of 1880, but the selling was sufficiently constant to
prevent any of the clear, directional moonshots that we've come
to expect since 2003 on tests of critical support.  Below 1880,
there's support at 1845.  As with the Dow, a strong intraday
upphase based on the 30 and 60 minute charts, due to commence
imminently, could set up a strong launch on the daily.  A failure
to bounce tomorrow would constitute a "crash" in the 30 minute
timeframe as the market trends lower.  Given the weakness in the
daily, weekly and monthly oscillators, traders trying to play
that countertrend bounce need to be close with their stops and
nimble, as the afternoon chop today showed us.


Monthly Nasdaq Chart


The monthly Nasdaq chart is more difficult to read because of the
higher peak in spring 2000.  But again, the monthly cycles are
rolling over.  A strong daily cycle upphase could whip the price
back up to the year highs as a distribution top, but such could
also set up a reverse head and shoulders below 2100 or a simple
bull flag breakout.  I cite these setups despite the sell signal
on the 10 month stochastic and the anticipated signal on the Macd
to show both sides of the coin.  Bulls see this move as a
correction of the 2003 rally, while bears see the 2003 rally as a
correction of the 2000-2002 decline.  While the intraday cycles
want a bounce tomorrow, the top of that bounce is going to
determine a lot for the Dow and Nasdaq.  A lower high suggests a
weak daily cycle, which suggests that the weekly is also bearish,
which suggests that the monthly is indeed in a new bearish phase.
A higher high could launch a daily cycle rally that could
challenge the breakdown, if not the year highs.


Weekly chart of the OEX:VXO ratio


Another perspective on the current downleg is by viewing the
ratio of the S&P-100, the OEX, to its corresponding volatility
index, the VXO (the old VIX).  By measuring the OEX:VXO ratio, we
can chart the OEX' price trend relative to option volatility.  As
we know, option volatility tends to rise when price declines, and
vice versa.  By placing this relationship on a single chart, we
can view the general trend, which here is in a clear downphase on
the weekly chart. We see that the OEX:VXO is at a confluence
level at current levels, which should provide support for the
OEX/ resistance for the VXO.  Next support is in the 18 area.


Weekly chart of the QQQ:QQV ratio


The QQQ:$QQV ratio is also locked in a weekly downtrend and also
in a support zone.  It's worth noting, as with the OEX:VXO, that
this ratio has not reached these levels of oscillator weakness
since 2002, indicating that the force of the drop in
price/increase in volatility exceeds any we've seen in 2 years.


Weekly chart of NYSE New highs-new lows


Here's one last perspective on the recent action.  The chart of
new highs minus new lows for the NYSE is a simple snapshot of
breadth.  The internal damage appears to be far worse than the
price declines would otherwise indicate.

It was a quiet news day overall, with no major economic news to
report and the markets trading on their own.  Before the bell, it
was announced that C would incur a $1.6B charge to settle
litigation with Worldcom shareholders without admission of
liability.  C closed lower by 2.8% at 45.41.  Combined with
general rate-hike-related malaise, banks were weak, with the $BKX
closing lower by 1.6%.

President Bush made a statement at the Pentagon after receiving a
briefing from his national security team, coming out strongly in
defense of Secretary of Defense Rumsfeld:  "You are courageously
leading our nation in the war against terror, you are doing a
superb job, you are a strong secretary of defense and our nation
owes you a debt of gratitude."  He warned that that there remain
hardships and sacrifices to come, and that the US will continue
to aggressively oppose militants in Iraq.    The statement was no
doubt in response to the fireworks from Rumsfeld's appearance
before the Senate Armed Services Committee on Friday, but also
came on the heels of a scathing editorial in The Army Times, a
Gannett Co. Inc. (GCI) newspaper that reports on the U.S.
military.  The editorial asserted that both Rumsfeld and Joint
Chiefs Chairman Myers are guilty of professional negligence in
the affair.

Crude futures were weak and led the CRB lower, with the move
being credited to news that Saudi Arabia said OPEC should raise
its production quota by 1.5 million barrels per day.  Saudi
Arabian Oil Minister Ali al-Naimi said that OPEC should increase
its production target by over 6% when it meets on June 3.  "We
[...] do not want to see prices rise to the level that they
negatively affect the growth of the international economy or the
demand for oil.  It is apparent that demand, especially that of
Asia, has and will continue to increase in the second half of
this year."

The Federal Reserve fined one of its primary dealers, UBS, $100M
for its business dealings with Cuba, Iran, Libya and Yugoslavia.
The Fed's 3 page order asserted that "certain former officers and
employees of UBS engaged in intentional acts aimed at concealing"
bank transactions with these countries. UBS agreed to pay the
fine without admitting to any of the allegations.

IBM announced new software for corporate desktops to provide
open-source alternatives to Microsoft Office. The company said
that the new server-managed software package would permit users
to deploy business applications and data on desktops, laptops,
and hand-held computers, and is designed to support Microsoft
Windows, Unix, Linux and other operating systems with Mac support
to be added later. Being a satisfied user of the free
"OpenOffice" suite, I find it encouraging to see open source
competition for this critical software space.  I believe that
end-users are the ultimate beneficiaries of competition, both in
terms of price and quality.

XMSR was very weak throughout the session on news of its Friday
filing for the resale of 10M shares owned by GM at a warrant
strike price of $3.18 exercised in April 2004.  XMSR finished
lower by 6.05% at 21.62.

For tomorrow, I'm keeping an open mind.  On the one hand, it
would be reasonable to expect the oversold bounce mandated by the
60, 30 and short cycle oscillators.  On the other hand, the
internals look so awful and the daily, weekly and month
stochastics are so uniformly bearish that if there were to be an
intraday trending move or "crash" in the intraday cycles, it
would not be surprising here.  Bellwethers such as GE and MSFT
were strong and finished green despite the broader market
destruction, either because they were being used to prop the
indices price-wise, or because funds and traders were loading up
in anticipation of that short cycle bounce.

Crashes, even on the 30 and 60 minute timeframes, are less common
events as oscillators tend not to trend in oversold or
overbought.  The odds favor a bounce here.  If it doesn't occur,
then bears need to be sufficiently nimble and flexible to let
their stops take them out of it.  Don't get caught the wrong
side, whichever side that turns out to be.


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

Broken Support

Juniper Networks - JNPR - close: 22.25 change: -0.84

WHAT TO WATCH: With old support apparently becoming resistance,
shares of JNPR rolled over last week from the $24 level, which
just happens to be the bottom of the January gap.  The stock
appears headed to lower levels, first to $20 and then to $18.
Aggressive traders can enter on a break under the $21.50 level,
while the more conservative approach will be to wait for a
breakdown below the 200-dma.  Target strong support near $18.




---

SanDisk Corp. - SNDK - close: 23.34 change: -0.11

WHAT TO WATCH: Despite broad losses in the Technology market on
Monday, the Semiconductor sector actually managed a minor gain.
That reality was probably responsible for helping SNDK to bounce
from its low, right at the key $23 support.  With weakness still
the primary theme, we're looking for SNDK to break down later
this week.  Use a trigger under $23 and target a drop to strong
support near $20.




---

D R Horton Inc. - DHI - close: 25.57 change: -1.36

WHAT TO WATCH: So much for support at the 200-dma!  When we
looked at DHI as a bearish play a couple weeks ago, we were
expecting the 200-dma to be a downside target.  Well, that has
been soundly smashed and now DHI is on the verge of yet another
breakdown.  Look for a break below $24.50 as the trigger for new
bearish positions and target a drop to next support in the
vicinity of $21.50-22.00.




---

Intersil Corp. - ISIL - close: 19.36 change: -0.28

WHAT TO WATCH: Given the weakness throughout the world of
Technology over the past week, shares of ISIL have done a
remarkable job of holding at support near $19.  Despite that
resilience, the fact that the stock has been unable to make any
upward progress suggests that it isn't as strong as it might
appear on the surface.  Should support fail, it could be a quick
trip down to next support near $16.  Use a trigger at $18.90 and
target the top of the April 2003 gap near $16.40.





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

GNSS $14.48 - Despite the rebound in the Semiconductor sector,
GNSS just continued to deteriorate, rolling over without even
challenging the 200-dma resistance.  Key support now is at $14.00
and once that breaks, we're looking at next support near the $12
level.  Use the break under $14 as the trigger to play the
downside.

SPW $42.17 - That breakdown we've been watching for is drawing
nearer by the day, as SPW finds itself pressured by the weakness
in the overall market.  Key support resides at $41.50 and when
broken, it will make a convenient point to trigger new bearish
entries.  Look for that breakdown to lick off a decline down
towards the $35 support level.

TDW $25.81 - Despite continued strength in the price of Crude
Oil, shares of TDW can't escape the sellers and the stock is
right on the verge of another major breakdown.  Use a trigger
under $25.50 and target the 2002 lows just over $23.


=================================================================
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 05-10-2004
                                                    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:   IGT, SINA
Closed Plays:        AAP, URBN
Split Announcement:  CEDC


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

IGT - short
Adjust from $40.00 down to $38.80

---

SINA - short
Adjust from $31.43 to$30.05


==================================================================
Closed Plays
==================================================================


  Closed Bullish Plays
  --------------------

Advance Auto Parts - AAP - close: 40.50 change: -1.28 stop: 41.00

Friday's breakdown in shares of AAP looked ominous, as we noted
over the weekend.  The negative tone on which last week ended
continued this morning, with the stock gapping down and drilling
almost to the $40 level before any hint of support appeared.
There wasn't much of a bounce, and with our $41 stop triggered
early in the day, there's no excuse to keep the play open at this
point.  AAP's breakout over the $43 level has now clearly failed
and with selling volume on the rise, we should now look for the
stock to continue down until it can find more substantial
support.  Better to be out and watching from the sidelines.

Picked on April 21st at     $42.90
Change since picked          -2.40
Earnings Date              5/19/04 (confirmed)
Average Daily Volume =       562 K




---

Urban Outfitters - URBN - close: 45.70 change: -0.61 stop: 45.00

As discussed over the weekend, URBN ended last week resting right
on critical support, just over the 50-dma.  It was either going
to bounce or fail and if it failed, it would spell the end of
this bullish play.  With the market opening in the red, URBN's
fate was sealed right from the opening bell.  The stock gapped
open below the 50-dma and then plunged all the way to $44.24
before rebounding, but even that rebound couldn't get the stock
back over the 50-dma.  Obviously we're dropping the play tonight,
as the pattern of finding support just over the 50-dma has now
been soundly broken.  For traders that didn't exit the play
today, any rebound should be looked at as a gift, offering
another chance at a favorable exit.

Picked on April 21st at     $47.13
Change since picked          -1.43
Earnings Date              3/11/04 (confirmed)
Average Daily Volume =       604 K





==================================================================
Stock Splits
==================================================================

Announcements
-------------

CEDC distributes a 3-for-2 stock split

Central European Distribution (NASDAQ:CEDC) announced a few hours
before the opening bell this morning that its Board of Directors
had approved a 3-for-2 stock split.

The payable date is May 28th, 2004 to shareholders on record as
of May 17th.  On a post split basis, CEDC will have approximately
16.2 million shares of common stock outstanding.

About the company:
CEDC is one of the leading importers of beers, wines and spirits,
as well as the largest distributor of domestic vodka on a
nationwide basis in Poland. The Company operates nine
distribution centers and 58 satellite branches throughout Poland.
It distributes many of the world's leading brands, including
brands such as Johnnie Walker Scotch, Stock Brandy, Jose Cuervo
Tequila, Sutter Home, Torres, Mondavi and Concha y Toro wines,
Corona, Beck's, Foster's, Grolsch, Budweiser Budvar and Guinness
Stout beers.


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

SLM     SLM Corp                   38.14    +0.51
LEH     Lehman Bros Hldg           71.97    +0.74
BSC     Bear Stearns Companies     77.72    +1.10
RYAAY   Ryanair Hldgs Plc (ADR)    30.94    +0.71
BLL     Ball Corp                  62.66    +1.33


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

None


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

None


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

C       Citigroup                  45.41    -1.31
TM      Toyota Motor Corp (ADS)    66.71    -2.99
NTT     Nippon Tel & Tel (ADS)     21.81    -2.19
PTR     Petrochina Co Ltd (ADS)    43.48    -2.62
JPM     JP Morgan Chase & Co       35.41    -1.07
UBS     UBS Ag. Ord Shares         68.89    -2.17


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

LLY     Eli Lilly & Company        74.38    -1.17
COP     Conocophillips             71.78    -1.36
CAH     Cardinal Health Inc        74.20    -1.34
CSR     Credit Suisse Group        34.54    -0.36
MAR     Marriott Internat Inc A    46.02    -0.67
TKP     Technip-coflexip (ADS(IPO))30.42    -3.12
WC      Wellchoice Empire Blue     40.34    -2.07


=================================================================
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.

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