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Daily Newsletter, Monday, 07/12/2004

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PremierInvestor.net Newsletter                   Monday 07-12-2004
                                                    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:  Doji Day
Watch List:   Software Still Weak

===============================================================
MARKET WRAP  (view in courier font for table alignment)
===============================================================
     07-12-2004            High     Low     Volume Advance/Decline
DJIA    10238.22 + 25.00 10257.10 10162.18 1.34 bln   1519/1271
NASDAQ   1936.92 -  9.41  1941.24  1921.40 1.49 bln   1253/1763
S&P 100   543.70 +  1.07   544.52   539.74   Totals   2772/3034
S&P 500  1114.35 +  1.54  1116.11  1106.71
RUS 2000  562.24 -  1.49   564.56   558.29
DJ TRANS 3091.62 +  3.65  3093.18  3066.66
VIX        14.96 -  0.82    15.61    14.61
VXO        16.07 +  0.58    17.13    15.80
VXN        21.73 -  0.62    22.51    21.48
Total Volume 3,114M
Total UpVol  1,173M
Total DnVol  1,894M
52wk Highs      92
52wk Lows      178
TRIN          1.48
PUT/CALL      1.17
===============================================================

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

Doji Day
Jonathan Levinson

Both the Dow and the Nasdaq test last week's lows, the Dow
holding and the Nasdaq falling below, and both reversed to the
upside to close near the upper end of their day ranges.  It was
truly a tale of two markets, with the Dow posting a key outside
upside reversal day, breaking Friday's low but closing above
Friday's high.  The Nasdaq, however, despite the doji bottom
still closed below Friday's range, adhering to what is turning
out to be a precipitous daily downtrend off the end-of-June
window-dressing high.

Volume was at the lower end of "light" on both exchanges (see
data above), and volatility was wild, with the VXO and QQV
diverging higher as the VIX and VXN moved lower, the first taste
of this month's op-ex week antics.  Morgan Stanley was out
predicting a retest of the May lows, despite Abby Joseph Cohen's
reiteration of her previous almost perfectly-timed contrarian
bullish recommendation from the previous week.


Weekly Dow Chart


The Dow tested the rising weekly support line with today's low at
10162.  It's very early in the week to be assessing the current
1-day old weekly candle, but today's intraday doji bottom behaved
exactly as one would expect for a support line that wants to
hold.  While the weekly cycle oscillators are a mixed bag, they
did not decline last week, and the case can be made for a weekly
cycle upphase trying to form from a higher price and oscillator
low.  As is so often the case with key trendlines, the move that
breaks them is often a high volume, high drama gapper, and given
that this one has been in place since the March 2003 lows, I
would expect no less.  As has been occurring with increasing
regularity lately, the oscillators are in an ambiguous state
waiting for price to resolve the dilemma.  A weekly close below
Dow 10150 or above 10200 will likely determine direction to the
downside or upside, respectively-  that is the range that I'll be
watching this week. A closing break above 10400 would set the
stage for a retest of the year high at 10795.


Daily Dow Chart


Today's print was a very bullish candle.  A close higher within
the range would have left a bullish hammer, but the bullish doji
star closing above Friday's candle body is bullish enough for me.
The move was strong enough to bury most of the sellers since
Wednesday and gave the first suggestion of an upturn in the 10-
day stochastic from a higher price and oscillator low.  10260-
10300 is key resistance, but the overhang from the June top from
10330-10350 should prove to be very stiff resistance.


Weekly Nasdaq Chart


The cycle ambiguity in the weekly Dow is apparent in the weekly
Nasdaq as well, but the price is a little more generous in
providing clues.  The 10 week stochastic points up while the Macd
points uncertainly south, but the price, holding as it is below
the 1970 level, suggests a failure below the rising support line
off the October 2002 low.  The Nasdaq has been full of false
breaks, and we'll want to see a high volume close below the
rising support line this week to confirm the bearish break.
Support from the previous weekly low coincides with lower
Bollinger support at 1884, while resistance at the apex of the
broken pennant is up to 1990.


Daily Nasdaq Chart


The Nasdaq tried but just couldn't get it together, anchored by
weakness in the SOX.  I've drawn the most bullish interpretation
I see here, that of a falling wedge, but note that it's
unsupported by the oscillator picture which remains
overwhelmingly bearish.  The divergence between the Dow and the
Nasdaq is extreme- one of these two charts is going to the get
with the program, and one is leading the way.  Historically,
that's tended to be the Naz, but in this case I'm not at all
confident of that.  In any event, the cycle points lower for the
time being, with a low for the move printed today at 1920 with
next support conveniently located at 1900.  Resistance is at
1940, followed by 1960 and 1990.  If my wistful bull wedge
interpretation is correct, then an upside break would have an
implied target as high as 2050.


Weekly TNX Chart


Bonds rose today, with the ten year note yield (TNX) closing
lower by 2.3 bps at 4.443%.  The weekly cycles are on clear sell
signals following the double top at the year highs at 4.88%.
Support from last week is at 4.41%, with resistance to 4.5%.
Today's action looked and felt corrective against the weekly
cycle downphase, but there's also support from last autumn down
to the 4.2% level.  This uncertainty is reflected in the narrow
range since the drop two weeks' ago, and while the weekly
oscillators suggest that it will break to the downside, treasury
bulls have had a long wait so far.

There were no significant economic data released today, with the
market news dominated by earnings reports, up- and downgrades.

Crude oil futures began the day strongly, scoping 5 week highs
and trading above the widely-watched 40 level in the morning.
Despite the Fed's dismissal of this year's commodity inflation as
being fleeting, oil and the CRB have been returning to their
previous highs.  A story made the rounds concerning the impact of
higher gasoline prices on WMT's clientele, stating the obvious
point that consumers are feeling the pinch.  Reuters reported
that despite the high production accomplished by OPEC this year,
strong demand has left little capacity to absorb supply problems.
The article cited the problems at YUKOS, a strike in Nigeria,
sabotage attacks in Iraq and fires in Norway.  The promised
500,000 bpd increase in formal quotas by Saudi Arabia has done
little quell rising prices.  The article noted that OPEC has been
producing above its official limits and that Saudi Arabia intends
to hold production at 9.1M bpd, the third month at this high
level.  The $42 price seen earlier this year represented a 21
year high.  A late session reversal pulled oil futures back below
the 40 level to close 1.58% lower at 39.33, helped along by a
more than 4.41% decline in natural gas futures.

It's an obvious point that high oil prices will put the squeeze
on every level of the economy.  Demand for oil is inelastic, for
the most part, and higher prices mean that consumers and
businesses have less to spend on everything else.
Unsurprisingly, the decline in oil futures coincided with the
upward spike in equities in the afternoon.

Over the weekend, the Wall Street Journal ran a story on the US
budget deficit, discussing the well-worn but still-pertinent
issue of the negative impact of deficits on the economy in
general and taxpayers in particular.  It also raised the spectre
of a fall in foreign purchases of treasury debt.  This issue
strikes a chord as the US Dollar Index hangs at 5 month lows
following the more than 25% decline since its high at the
beginning of 2002.  The following chart from the WSJ
contextualizes the current budget deficit and the financing
thereof:


Chart of WSJ Fiscal Picture


Against this backdrop was a general malaise for techs ahead of
the INTC report due after the bell tomorrow.  A NY Times story
over the weekend highlighted what the author feels to be overly
optimistic positioning by tech companies as reflected in the
impressive year-over-year inventory builds taking place at Dell
(61% y-o-y increase), Seagate (+60%), Foundry Networks (+48%),
Cisco (+47%), TXN (+30%), Intel (+29%), Sun (+25%) and Micron
(+21%).  The point of the article was that demand is lagging far
behind the supply being accumulated by these producers, making
the industry vulnerable as a whole.

NVLS reported Q2 earnings of 37.M or 25 cents per share, missing
estimates by a penny.  Excluding charges associated with its of
Angstron Systems, the company earned $43.9M or 29 cents per
share. Sales rose 41.5% in Q2 to $338.2M from $239.1M in Q2 2003,
beating estimates of $331.3M. The company cited strong demand in
its press release.  AMAT CEO Mike Splinter held forth at the
Semicon West industry conference in San Francisco: "We aren't
alarmed by any early indicators."  Merrill Lynch was out with a
downgrade for the semiconductor sector, stating that the stocks
(over 30 of them) "offer no upside from current levels" and cited
inventory builds as a major factor in contributing to its
opinion.  That view was countered by Bear Stearns, who said that
despite pockets of weakness in the sector, it still maintains a
favorable view of the sector.

Later in the session, the Semiconductor Equipment and Materials
International Group announced that the leading chip equipment
manufacturers surveyed in their most recent study anticipate a
sales increase 63% to $36.2B in 2004. CEO Stanley Myers said that
"The outlook is for growth to be sustained next year, although
not at levels as high as this year. SEMI members generally
believe the peak of this market cycle will occur in the second
quarter of 2005."  Out of the numerous conflicting signals as to
the fundamentals, the market was the final arbiter with the PHLX
semiconductor index (SOX) declining 2.21% to 441.18 for the day.

After the bell, LSI warned that its Q2 revenue would miss
estimates due to "softer-than-anticipated demand for
semiconductors in storage components and video game console
markets." The company lowered estimates from 455M-470M to 448M.

Domino's Pizza, the largest pizza chain in the US, is set to
price 24M shares tonight in the $15-$17 range in a bid to raise
408M for its IPO under ticker symbol DPZ on the NYSE.

A  $54M settlement was reached in a sex discrimination suit
between the U.S. Equal Employment Opportunity Commission (EEOC)
and MWD filed on behalf of a class of female officers and women
eligible for officer promotion in the firm's Institutional Equity
Division.  The settlement, made without admission of liability,
includes at least $2M to fund diversity programs to enhance the
compensation and promotional opportunities for female employees
at MWD and $12M in payment of the original complainant, bond
trader Allison Schieffelin.  EEOC Chair Cari M. Dominguez said
that "We are pleased that Morgan Stanley worked cooperatively
with us to resolve this litigation. With this settlement, Morgan
Stanley has taken an important leadership step in adopting
progressive programs to promote diversity that should serve as a
model for the financial services industry."

For tomorrow, we await the 8:30 release of the May trade balance
estimated at -48.3B, and at 2PM the treasury budget estimated at
16.3B.  The pace of earnings reports will pick up as well- INTC
reports after the bell at 5:30PM, as does JNPR and JNJ, though
the time of the release for JNJ has not been listed.  With the
Nasdaq printing as clear a bearish picture as the Dow's
potentially bullish one, I'm keeping my mind open.  I believe
that the easy money has been made on the current leg of this
decline.  While the daily Dow is not printing buy signals here
and gave bulls a beautiful doji, it did so on light volume.
Nevertheless, I believe that in the short term bears are pressing
their bets at these levels.  The charts do not indicate that it's
time to buy, but pressure is increasing with each downward tick.
A break to new lows from here could get very ugly, and with
earnings season ahead of us that's a distinct possibility.  Until
some clarity emerges, however, I counsel patience and caution.
The weekly oscillators are uncertain and the daily charts are
mixed.  The worst trades are those that you enter in frustration
after missing an entry.  Don't force your positions and wait, if
necessary, for the market to come to you. It's much easier to set
a stop loss and manage a position when you've gotten a good
entry, close to support or resistance.  I believe that we're
closer to daily support than resistance, but would personally
prefer to wait until the oscillators are more certain.


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

Software Still Weak

Oracle Corp - ORCL - close: 11.09 change: +0.06

WHAT TO WATCH: Software stocks were hammered hard in the last two
weeks under a series of earnings warnings.  Shares of ORCL, a
giant in the field, actually broke support at the $11.00 mark.
Yet once again the move appears to be a bear trap. Short-term
technicals like the RSI and stochastics are edging higher and
ORCL is definitely short-term oversold.  A bounce back to the top
of the trading range near $11.80-12.00 would not be a surprise.




---

Esterline Tech - ESL - close: 30.14 change: +0.20

WHAT TO WATCH: Defense stocks have been very strong this quarter
and ESL is a great example.  The stock has soared from the $23
range toward resistance at $30.00 in the last several weeks.
What makes ESL's relative strength even more impressive is Wall
Street's reaction or lack thereof to news last week that ESL
would pay $145 million in cash for privately held Leach Holding
Corp.  ESL is currently at a new closing all-time high.  We might
consider aggressive bullish positions but use a stop under
today's low near the 10-dma.




---

Midway Games - MWY - close: 9.90 change: -0.10

WHAT TO WATCH: Uh-oh!  Shares of this video game maker have
fallen sharply in the past couple of weeks and the consolidation
between $10.00 and its simple 50-dma appears to be nothing but a
speed bump on the way down.  Today's late afternoon drop back
under the $10.00 level has MWY poised to make a run toward its
simple 100-dma near the $9.00 mark.  More aggressive traders
might try for a drop toward potential support at $8.00.  Wall
Street expects MWY to report earnings on or about July 28th.




---

Ciber Inc - CBR - close: 6.97 change: -0.20

WHAT TO WATCH: Look out below!  CBR is in free fall.  Shares of
this software stock are down about four weeks in a row and
picking up speed.  Today's close under the $7.00 mark looks bad.
Of course you know what typically happens when something looks
like a sure thing - it goes the opposite direction.  Bears can
look for an oversold bounce back to the $7.40-7.50 level as a
potential entry point.  A potential target would be the $5.50
area above P&F support.  FYI the P&F target is actually $2.50.
Earnings are expected on July 28th.





-----------------------------------
RADAR SCREEN - more stocks to watch
-----------------------------------

NCR $51.81 +4.79 - NCR soared more than 10% today and broke
through heavy resistance at the $50.00 mark after pre-announcing
stronger than expected earnings.  A dip back toward $50 might be
buyable.

CQB $19.88 -0.29 - Heads up!  CQB looks ready to drop after
failing again at its simple 200-dma.  Its MACD is in a sell
signal and we're seeing some bearish crossovers in its short-term
technicals.  We would target a drop toward the $18.50-18.30
range.


=================================================================
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 07-12-2004
                                                    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:   QLGC, BORL, FRED, IMOS
Closed Plays:        SHW, ASKJ
Split Announcement:  RNT


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

QLGC - tech stock short -
 Don't forget that QLGC is due to report earnings
 on Wednesday, July 14th.  We will be closing this
 play on Tuesday afternoon.  We do not suggest
 holding over the announcement.

---

BORL - tech stock short -
 Good news!  BORL dropped another 2.87% and
 closed near its low for the session.  We are lowering
 our stop from $7.83 to $7.51.

---

FRED - non-tech stock short - (change entry to $19.75)
 We have been TRIGGERED with today's drop in FRED.
 The stock gapped down to open at $19.75.  This was
 under our entry point at $19.99 and thus becomes our
 new entry.  No change in our stop at $21.51 but keep
 a sharp eye on the $21.00 level, which we can use as
 an early warning.

---

IMOS - high risk/reward short -
  Lower stop from $8.00 to $7.26


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


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

Sherwin Williams - SHW - close: 40.37 change: -0.28 stop: 39.99

It was a valiant fight at the $40.00 mark but bears finally
pushed through support this afternoon.  After piercing the $40.00
mark and stopping us out SHW rebounded sharply back above support
but momentum stalled and volume remained light.  All in all this
play closed at breakeven.  Bulls may want to keep SHW on their
watch list for a bounce from the simple 100-dma.

Picked on June 20 at $39.96
Gain since picked:   + 0.41
Earnings Date      07/22/04 (confirmed)
Average Daily Volume:   777 thousand




  Closed Bearish Plays
  --------------------

Ask Jeeves - ASKJ - close: 32.75 change: +0.37 stop: 33.01

Most of the major Internet stocks tried to bounce today as the
NASDAQ rebounded from the 1920 level and ASKJ managed to pierce
resistance at the $33.00 level to hit $33.09 this afternoon.
That was enough to hit our stop loss at $33.01.  ASKJ continues
to have overhead resistance at $33, $34 and the $35 levels and
interested traders can keep an eye on it.

Picked on July 08 at $31.59
Gain since picked:   + 1.16
Earnings Date      07/28/04 (confirmed)
Average Daily Volume:   3.9 million




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

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

RNT declares another 3-for-2 split

This afternoon Aaron Rents, Inc (NYSE:RNT) announced that its
Board of Directors had approved a 3-for-2 stock split of its
common stock in the form of a 50% stock dividend.

According to the press release shareholders will received 1/2 new
share for each share held.  The distribution date will be August
16th, 2004 to shareholders on record as of August 2nd.  Post-split
RNT will have approximately 41.2 million shares of its common
stock outstanding.

RNT last split 3-for-2 in August of 2003.


About the company:
Aaron Rents, Inc., based in Atlanta, currently has over 945
Company- operated and franchised stores in the United States,
Puerto Rico, and Canada for the rental and sale of residential and
office furniture, accessories, consumer electronics and household
appliances. The Company also manufactures furniture, bedding and
accessories at 10 facilities in four states. (source: company
press release)


==================================================================
  Trading Ideas
==================

This section contains stocks that meet criteria which may make
them of interest to long and short side traders.  These are not
recommendations, nor have they been reviewed by PremierInvestor
editors for investment potential.  However, each of them has
technical and fundamental characteristics that make them worthy
of further review by traders and investors looking for fresh ideas.
New stocks will appear daily following the market close.

Value Plays With Bullish Signals
---------------------------------
Ticker  Company Name               Close     Change

NTT     Nippon Tel & Tel (ADS)     26.36    +0.53
BAC     Bank of America Corp       84.74    +0.83
IBM     Internat Business Mach     84.84    +0.95
FNM     Fannie Mae                 70.23    +0.55
AIG     American Internat Group    70.57    +0.60
WM      Washington Mutual Inc      38.72    +0.54


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

CALM    Cal-Maine Foods Inc        15.62    +1.53
IPSU    Imperial Sugar Company     14.65    +1.03
KEYW    Essex Corp                  9.80    +1.07
BNSO    Bonso Electronics Int'l     8.99    +3.69


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

STI     Suntrust Banks Inc         65.54    +1.16
MTB     M&T Bank Corp              91.36    +3.46
NCR     NCR Corp                   41.72    +4.70
CBH     Commerce Bancorp Inc NJ    55.20    +1.06
LUK     Leucadia Natl Corp         50.01    +1.08


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

ZMH     Zimmer Holdings            82.60    -2.61
CAH     Cardinal Health Inc        47.49    -1.45
AGN     Allergan Inc               82.10    -3.08
MCHP    Microchip Technology Inc   26.29    -2.00
CME     Chi Mercantile Exchange   134.95    -3.78


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

CP      Candian Pacific Ltd        24.52    -0.05
OSG     Overseas Shipholding Grp   42.50    -1.18
SOR     Source Capital Inc         64.25    -1.60
ENSI    Energysouth Inc            39.18    -0.58
VIDE    Video Display Corp         23.91    -3.96


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

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