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Daily Newsletter, Monday, 05/17/2004

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PremierInvestor.net Newsletter                   Monday 05-17-2004
                                                    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:  Market Skids Lower
Watch List:   Bears' Delight

===============================================================
MARKET WRAP  (view in courier font for table alignment)
===============================================================
     05-17-2004            High     Low     Volume Advance/Decline
DJIA     9906.91 -105.96 10009.92  9862.77 1.72 bln    836/2016
NASDAQ   1876.64 - 27.61  1887.74  1865.40 1.49 bln    734/2654
S&P 100   530.40 -  5.07   535.47   528.27   Totals   1570/4670
S&P 500  1084.10 - 11.60  1095.70  1079.36
RUS 2000  535.34 -  8.42   543.76   530.68
DJ TRANS 2812.33 - 36.56  2848.09  2785.50
VIX        19.96 +  1.49    20.45    19.65
VXO        21.03 +  2.10    21.42    20.32
VXN        29.19 +  0.15    29.85    29.05
Total Volume 3,707M
Total UpVol    527M
Total DnVol  3,137M
52wk Highs      39
52wk Lows      337
TRIN          2.59
PUT/CALL      1.22
===============================================================

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

Market Skids Lower

The head of the Iraqi Governing Council Izzadine Saleem, was
killed today in a car bombing near a U.S. checkpoint in central
Baghdad and sent the markets to a late morning plunge. The
killing was the second member of the U.S.-appointed council
killed since last year and has dealt a blow to U.S. efforts to
stabilize Iraq and the handover of sovereignty to the Iraqis that
is supposed to happen on June 30. A previously unknown group, the
Arab Resistance Movement has claimed responsibility for the
bombing, saying that its fighters carried out the operation
against "the traitor and mercenary" Mr. Saleem.

Then if that wasn't enough to make the market skiddy, a roadside
bomb containing sarin nerve agent exploded near a U.S. military
convoy in Iraq where two people were treated for minor exposure,
however, no serious injuries were reported.

But even before the news came out of Iraq, stocks started a
decline overnight in Asia when India's markets took the biggest
one day plunge in its 129-year history on the first trading day
after an election. The Bombay Stock Exchange fell as much as
16.6%, before recovering late to close 11.1% lower at 4505.16.
Economists and traders are concerned about the economic policies
of the government of Sonia Gandhi, whose party and its communist
allies took over Parliament Friday.

Closer to home the Wall Street Journal announced the U.S. has
been filling its oil reserves since September 11, 2001 and, along
with other nations, have amassed 1.4 billion barrels. Some are
saying these reserves need to be released to bring oil prices
down, others are saying if Bush releases these reserves it is
because it is an election year. However, U.S. policy dictates
that the strategic reserve be used for a crisis, not to lower
prices. Some look at oil at 41.50/bbl as a crisis.

On to the markets.


The retracement brackets I have placed on the following charts
are from the March lows 2003 to the March highs 2004. I have also
put in a retracement level at 28.65%, which is 1/2 way between
19.1 and 38.2%. The teal MA line is the 200 EMA.

NYA.X (New York Stock Exchange Index)



The NYA has been bouncing off the 200 EMA since May 10th and
needs to break above March lows of 6364, which happen to be the
19.1% retracement, before I see a trend change.

After a drop like we have seen in this market you would expect
MACD to be showing at least a little positive divergence but alas
it is not. I cannot see much bullishness in the NYA chart other
than the 200 EMA is holding.

If the NYA were able to break above its March lows I would turn
neutral, not bullish and not bearish. To turn bullish I would
need to see a series of higher highs and higher lows and a break
of the swing high at 6568

SPX.X (S&P 500 Index)



The SPX is very similar to the NYA and needs to get back above
its 19.1% retracement and March lows before I switch from a
bearish stance to neutral. Until then the path of least
resistance is down. However, the SPX is showing a possible
positive MACD divergence so this market is not quite a bearish as
the NYA but I still don't see a lot of bullishness in this chart.
Here also to turn bullish the last two swing highs at 1103 and
1128 would have to be breached.

RUT.X (Russell 200 Index)



The Russell 2000 is without a doubt weaker than the SPX and NYA
trading below its 200 EMA and all the way to the 28.65%
retracement. (The 28.65 retracement is 1/2 way between 19.1 and
38.2.) To repaint the above chart with bullishness, this market
needs to break its last swing high at 552, which just happens to
be the March lows and the 19.1% retracement and then next swing
high at 575. A break of the down trend line would definitely be
bullish but not necessary to turn me bullish on this market.

COMPX.X (NASDAQ composite)



The COMPX not only needs to break above its March lows but back
above the 200 EMA. It has spent way too long below this level and
it is making NASDAQ bulls very nervous. If/when it breaks these
levels, it then has the job of making higher highs, which would
be a print above 1970 and then 2060. The only thing I see bullish
about this chart is the possible positive MACD divergence.

NDX.X (Nasdaq 100 Index)



The NDX is the only major index to NOT break its March lows. It
is below the 200 EMA and trading at the 28.65 retracement but not
below its March lows. And it also could be making a positive MACD
divergence. However, (there is always a however isn’t there?) NDX
needs to prove bullishness to me just like the other markets need
to do. It needs a higher high above the last swing high at 1426,
which would put it above its 200 EMA, then it needs a sustained
move above the 19.1% retracement level at 1442. A break of the
down trend line would be very bullish but I don't think necessary
to repaint this chart bullishly.

This is the market that you would be looking to for leadership
when making a bottom. Why you ask? NDX's relative performance to
the performance of the SPX measures the willingness of market
participants to take on risk. This is because the stocks that
populate the NDX usually have higher growth and higher risk
profiles than the stocks in the S&P.  So when investors are
becoming less risk averse and becoming more concerned about
capturing potential upside than avoiding potential downside the
NDX trends higher relative to the SPX. Conversely, when investors
start to become more concerned about downside risk than upside
potential the NDX begins to under-perform the SPX. So let’s look
at a chart gives us a picture of this relationship.

NDX/SPX spread



The top chart is the daily NDX and the bottom chart is what I
call the spread between the NDX and the SPX [the formula I use is
(NDX + SPX)/SPX] and measures the strength of NDX to SPX. NDX is
making lower lows today but the spread is not. This is the NDX
becoming stronger compared to the SPX.

TRAN (Dow Jones Transport Index)



Like the NDX, the Transport Index (TRAN) is another market that
has not breached its March lows. You would think the price of oil
reaching 41.55/bbl today, an all time high, would have had a
devastating effect on this index but it has not. I find this
quite bullish for the market overall.

All in all the market is bearish but in a holding pattern. The
fact that the transports and the NDX have not breached their
March lows keeps me optimistic but with a great deal of caution
built in. The individual markets will have to prove to me they
are worthy of my bullishness but not until then will I move out
of the bear camp.

I believe we are in for a relief bounce and where that bounce
takes us will tell us if it is just a relief bounce or a true
trend change. I have put forward where I think you could turn
neutral and then bullish in each of the major markets.

Jane Fox


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

Bears' Delight

SanDisk Corp. - SNDK - close: 22.25 change: -1.61

WHAT TO WATCH: We've been watching SNDK for signs of the
breakdown we've been expecting and today's plunged under the $22
level looks like a good start.  That's a big gap overhead, and
combined with broken support turning to resistance in the $23.00-
23.50 area, should provide a solid ceiling on any successive
bounce.  Target entries on a failed bounce near that resistance
area and then look for a decline down to the $20 area.  Use a
stop at $24.75, just above the 20-dma.




---

Cabot Microelectronics - CCMP - close: 28.16 change: -0.79

WHAT TO WATCH: Even though CCMP is nearing its all-time lows near
$22, there hasn't been much in the way of bargain hunting in the
stock, as price continues to deteriorate.  The initial rebound
following the break of $30 support didn't amount to much and the
stock rolled over again on Friday and is on the cusp of another
break to new multi-year lows. Use a trigger under $28 and target
a drop to test those all-time lows.




---

Target Corp. - TGT - close: 42.21 change: -0.79

WHAT TO WATCH: Remember last week when we looked at the neutral
wedge that shares of TGT had been building?  Well, that wedge
broke to the downside today as the stock was pressured by the
weakness across the broad market.  A failed rebound near the $43
level (broken support, as well as the bottom of the broken wedge)
should provide a solid bearish entry point into the play.  Target
a drop to the 200-dma enroute to stronger support near $39.




---

Semtech Corp. - SMTC - close: 21.31 change: -0.67

WHAT TO WATCH: There certainly hasn't been much in the way of
strength in the Semiconductor sector lately and SMTC is feeling
the selling pressure.  While the stock is still in its neutral
wedge pattern, price action is pressing pretty hard on the bottom
of that pattern.  Aggressive traders can enter on a break of the
lower trendline at $21, while the more conservative approach will
be to wait for a break of horizontal support at $20.50.  Target a
drop to strong horizontal support at $18.00-18.50.  While the PnF
chart is currently bearish down to the $15 level, there is a
higher level of risk in this trade candidate due to the fact that
price is currently testing the bullish support line at $20.




---


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

PMCS $12.40 - With the weakness that has been dominating the
Semiconductor and Networking sectors lately, it's no great
surprise to see the price weakness in shares of PMCS.  The
initial rebound from the $12 level seems to have failed and we
could be looking at another pending breakdown.  Use a trigger
under $12 and target a drop to strong support near $10.

NEWP $14.14 - Another Networking stock that isn't looking very
healthy is NEWP, as the stock actually broke its 2-week
consolidation pattern to the downside this morning.  Entries look
favorable either on a failed bounce near the $14.50 level or on a
break below today's low.  Target a continued drop to next support
in the $12.00-12.50 area, so long as the NWX index remains weak.

THC $11.79 - After another major breakdown in mid-March, shares
of THC have been battling their way higher in what looks like an
obvious bear flag pattern that recently stalled at strong
resistance near $12.50.  A break below the bottom of the flag
(currently $11.40) should begin the breakdown process and lead
THC down to a retest of the March lows near $9.00.  Use a trigger
under the 50-dma, just over the $11 level.


=================================================================
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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 05-17-2004
                                                    section 2 of 2
Copyright (c) 2004, All rights reserved.
Redistribution in any form is strictly prohibited.


Stop Loss Updates:   JNPR, ISIL


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

JNPR - short
Adjust from $22.90 down to $22.55

---

ISIL - short
Adjust from $20.50 down to $20.20


==================================================================
  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 Corporation    43.27    +0.54
TOT     Total Sa (ADS)             94.18    +1.13
WFC     Wells Fargo & Co New       56.99    +0.89
MO      Altria Group Inc           49.88    +0.98
CVX     Chevrontexaco Corp         92.69    +0.82
BP      BP Plc                     52.93    +0.53


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

None


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

GD      General Dynamics Corp      95.19    +1.57
LTR     Loews Corp                 59.29    +1.05
ESRX    Express Scripts Inc        76.72    +2.69
FMX     Fomento Economico Mex      45.30    +3.70
SMG     Scotts Co CI A             64.36    +1.28


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

DELL    Dell Inc                   34.72    -1.08
UN      Unilever N.V.              62.30    -1.38
CAJ     Canon Inc (ADR)            48.13    -1.08
CAH     Cardinal Health Inc        73.44    -1.29
RTP     Rio Tinto Plc (ADR)        86.42    -3.43
NAB     National Australia Bank    98.62    -1.19


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

None


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