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PremierInvestor.net Newsletter                   Monday 08-09-2004
                                                    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:  The Day After
Watch List:   A Full Radar Tonight

===============================================================
MARKET WRAP  (view in courier font for table alignment)
===============================================================
     08-09-2004            High     Low     Volume Advance/Decline
DJIA     9814.66 -  0.67  9858.68  9811.12 1.30 bln   1284/1530
NASDAQ   1774.64 -  2.25  1787.44  1774.48 1.25 bln   1209/1777
S&P 100   522.42 +  0.59   524.73   521.83   Totals   2493/3307
S&P 500  1065.22 +  1.25  1069.46  1063.97
RUS 2000  518.38 -  1.27   522.56   518.15
DJ TRANS 2970.08 +  4.00  2987.32  2962.52
VIX        18.89 -  0.45    19.97    18.63
VXO        18.37 +  1.87    19.76    18.06
VXN        27.45 +  0.00    28.38    27.18
Total Volume 2,816M
Total UpVol  1,369M
Total DnVol  1,379M
52wk Highs      31
52wk Lows      443
TRIN          0.88
PUT/CALL      0.93
===============================================================

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

The Day After
Jonathan Levinson


The dust from Friday had a chance to settle today, with equities
rising weakly throughout the session and bonds, metals and
foreign currencies pulling back.  Friday was a big day, with news
released today from the Chicago Mercantile Exchange confirming
that Friday saw record volume for Eurodollar future contracts and
the second largest volume ever overall.  The CBOT reported record
volume for 10-year treasury note options and its third highest
overall volume ever.

The weak rise reversed at the close with the SPX closing slightly
positive and the Dow and Nasdaq finishing slightly negative.
Volatility fell sharply for the OEX (as reflected in the VXO),
aided not just by the absence of a sharp continuation drop but by
the absence of almost any action whatsoever.  Volume was lighter,
and the action looked and felt corrective.  I would have guessed
at a larger bounce following Friday's drop, and the intraday
oscillators rose from very bullish configurations.  But the price
refused to cooperate and the only thing that ran was the clock.

Weekly Dow Chart


The 10200-10250 level about which I was writing last week and the
rising weekly trendline held back last week's high, and bears
successfully ran the fumble to lower descending support on the
attempted weekly bull flag.  9800 support held, but the bounce
today, even before it reversed, was weak and entirely
uninspiring.  The weekly cycle oscillators resolved their
ambiguity to the downside, following the Nasdaq's lead, and new
lows for the year were set.  However, the drop in price got ahead
of the 10-week stochastic and while a downphase is in place, a
reversal from here would result in a bullish oscillator
divergence against the higher stochastic low.   That being said,
the weekly price and oscillator trend is down, and the only
source of strength is in the intraday cycles.   Round number
resistance at 9900 and at the Fibonacci levels of 10020 and 10150
are the levels to watch on any bounce.

Daily Dow Chart


The Dow held a miniscule gain through the session and almost
squeaked through with a small bullish harami. It was not to be,
however, and a small doji printed on the Dow's failure at the
highs and fractional closing loss.

The drop last week wiped out the daily cycle upphase that had
until then been delivering slow but steady gains.  Barring a
strong snapback rally tomorrow, the 10-day stochastic will
complete its bearish rollover and signal a new daily downphase
from a much lower price and oscillator high.  This action
confirms what the weekly chart above is telling us, as the weekly
cycle downphase crushes the daily cycle's upward attempts.  A
move above 9900 would likely be insufficient to avert the bearish
cross on the 10-day stochastic, while a break above 10175-10200,
in addition to baffling bulls and bears alike, would reverse the
current downphase, leaving a steep bullish stochastic divergence
and possibly threatening the weekly downphase as well.  That's
obviously the less likely scenario.  More likely is a
consolidation of the recent losses, a possible bounce to a lower
high below 10200, and a continuation of the downward influence of
the weekly cycle downphase.

Weekly Nasdaq Chart


The Nasdaq cracked last week as well, plunging to new lows for
the year.  The Fibonacci and confluence support at 1760 remains
key support below which the bullish interpretation of this year's
decline off the highs will be invalidated.  As with the Dow, the
weekly cycle has resolved itself into a clear downphase, the
plunge breaking the prior week's lows and reversing all of its
gains with a bearish engulfing candle for the week.  The weekly
cycle wants more downside, and the Fibonacci levels line up well
price confluence on the way down.  Any bounce from here would be
corrective within this timeframe, but with the decline still
availing itself of a bull-flag interpretation, bears need to be
vigilant for any daily cycle reversal to the upside that could
rise sufficiently to challenge the 1920 level.  There's strong
resistance from 1840 to 1890, however, and the powerful moves
have so far been to the downside.

Daily Nasdaq Chart


The Nasdaq's small loss resulted in weak doji as well-  it would have
been a gravestone doji had the upper range been higher, but there was
insufficient strength to result in so strong a reversal.  Volume was
considerably lower than we saw on Friday's breakaway downside gapper,
and as with the Dow, barring a very strong rally tomorrow, it's only a
matter of time before last week's steep drop reflects itself in an
equally steep stochastic downphase.  In retrospect, the daily cycle
upphase lasted just long enough to generate confirmation signals before
it fell apart.  While my personal feeling is that the vast majority of
news doesn't disrupt the cycles for long, in this case the overarching
weekly downphase helped to exacerbate the damage done by Friday's
employment report.  Furthermore, the decline was already in progress
before Friday- the drop only continued it, breaking the prior week's
lows.

Weekly TNX Chart


Last week's rally in bonds followed through on the previous
week's bullish reversal.  On the ten year note yield (TNX) chart,
that action is reflected as a bearish gravestone doji top in the
yield 2 weeks ago, followed by last week's precipitous plunge in
the TNX.  Today, the TNX closed higher by 2.7 bps at 4.244% as
part of what looked and felt like a corrective move across most
markets, but it's difficult and imprudent to judge the week's
candle after only one day out of 5's trades.   Resistance above
is at 4.34%, 4.4%, 4.48%, 4.5% and 4.65%, while support is at
4.18% and 4.0%-4.02%.  A break of that lower support of 4% could
turn out to be a bear wedge breakdown that would project an
implied target at the 2003 lows for the TNX (2003 highs for 10-
year treasury bonds).  The weekly cycle oscillators so far
suggest that such would be an overly-optimistic target for the
current move, but it remains a possibility.

The Commerce Department announced at 10AM that U.S. wholesale
inventories increased by 1.1% in June while sales were flat. May
inventories were revised up to 1.4% from 1.2% and sales were
revised down to 0.3% from the 0.5% previously reported.  The
inventory-to-sales ratio rose from 1.13 in May to 1.15 in June,
the highest reading since February 2004. In June, inventories of
durable goods increased 1.4% after a 1.9% increase in May, whiles
sales of durable goods rose 0.5% in June from May's flat reading.
The buildup of inventories against flat or declining sales
suggests an excess of optimism of companies producing more supply
than required by existing demand, and the market responded
negatively to the news on its initial release.  If the trend
continues, we would expect to see softness in future industrial
production and capacity utilization readings.

Oil was once again strong and in the news throughout the session,
with supply concerns dominating.  News of a Shiite Muslim
uprising targeting two pipelines that combine to deliver all of
Iraq's 1.9M bpd of exports was reported, and crude oil prices
spent the session above the 44 level and broke briefly above 45.
Iraq announced that it would halt production at the Southern Oil
Company in Basra because of threats from al-Sadr's Mehdi Army
militia, and that such halt would remain in effect until the
threat is over.

News that Russian YUKOS' deadline to pay transport fees is set to
expire on August 10th, and the consequent expectation of
uninterrupted supply of oil and refined products by rail from
that day forward didn't help.  This positive spin reported by
Reuters was countered by negative interpretations of the same
news to the effect that production would interrupted in the
interim due to the state-owned railway's refusal to deliver oil
for YUKOS on credit.  Further worries about the upcoming
Venezuelan election and possible challenges to Hugo Chavez also
made the news and were interpreted negatively for
supply/positively for price.

The overriding concern, however, appears to be the fact that OPEC
is currently pumping at its highest levels since 1979.  OPEC
accounts for half the global supply of crude oil, and while
there's talk of the cartel's willingness to consider increasing
production by 1 to 1.5M bpd at its September 15th meeting, there
is so far no evidence of weakness in the crude rally that today
challenged the $45 level.  It continues to appear that business
risk, terrorist threats, consumer demand and geopolitical
instability all mitigate in favor of higher oil, and the results
continue to be seen in the ongoing extension of the oil rally.

Weekly chart of Crude oil


Bear Stearns analyst David Strine was bearish on airlines today,
describing the sector as "broken" with oil above $40 per barrel.
The Amex Airline Index, XAL, was weaker through much of the
session as the broader indices rose but managed to close higher
by 20 cents at 401.  Strine felt that the index at current levels
would require oil at $30 to be attractively valued.  The XAL is
down nearly 30% since its end of June highs.  Just after noon, it
was reported that DAL would be dipping into its cash reserves to
pay certain current obligations, with 2004 cash flow being
compromised by lower yields and higher fuel prices.  DAL closed
lower by 28 cents or 6.81% as of this writing at 3.83, while
NYMEX September crude oil futures were trading 44.80 as of this
writing, with an intraday spike high of 45.25, a new contract
record.

There was trouble for UALAQ as well, with United's pilots union
promising to resist any move that would threaten its pilots'
pensions.  Captain Mark Bathurst, chairman of the pilots' union,
said that any such move could "potentially plunge labor relations
at United into years of hostility and chaos," countering bankrupt
UAL's effort to cut pension payments in an attempt to bolster its
cashflow.  UALAQ closed lower by .05 or 4.35% at 1.10.

Google announced that it would be adding an additional 1.06M
shares to its IPO for a total of 25.7M shares to be offered at an
estimated $108-$135 for estimated proceeds of max. $3.47B.  These
additional shares are to come from insiders of the company.  The
Company also announced that 2.7M shares with a maximum value of
$365M are to be issued under a settlement with YHOO pursuant to
which YHOO will dismiss its patent suit against Google and Google
will license several of YHOO's patents.  YHOO closed lower by
1.23% at 25.70.

For tomorrow, all eyes will be on the 2:15 FOMC rate
announcement, with the consensus expecting a 25 bp increase in
the overnight rate to 1.5%.  While the fates of most consumers
continue to be tied most directly to the market rates which have
declined since the April highs, the Fed's response to recent
economic data and, I imagine, asset prices most acutely
highlighted by the rally in oil will be closely watched across
all markets.  On the one hand, the recent wave of accommodation
and stimulus from the Fed has arguably spurred inflation
reflected in, among other things, housing, oil and other asset
prices.  On the other hand, as Friday's bleak employment report
emphasized, the productivity gains on which the Fed has been
focused have occurred while bypassing the key US labor market,
exposing the economy to the vulnerability of high levels of
consumer debt and a lack of wage inflation with which to offset
it.

The first order of business tomorrow will be the 8:30 release of
preliminary non-farm productivity for Q2, estimated at 2% from
Q1's 3.8% reading.  While at other points over the past year
we've seen disappointments in the economic data catching a bid in
the markets, presumably due to speculation that it would attract
further stimulus from the Fed, recent reactions have seen a
return to the more conventional behavior of buying good news and
selling bad.  With Q2 productivity obviously a key report in the
Fed's crosshairs, there's the potential for wild swings not just
at the 2:15PM FOMC announcement but also for the 8:30 data.
However, the Fed's open market operations of the past 2 sessions
do not suggest any great caution or fear on the part of the Fed,
with a net drain on Friday and a very slight add announced this
morning.  Based on this action, if forced to guess, I would think
that the 8:30 data will be inline with expectations.

Guessing aside, last week's move resolved a great deal of
uncertainty (ie. weekly timeframe) to the downside.  Today's
bounce was so weak that I could almost believe it to be a stealth
accumulation move toward a run higher.  However, the weekly and
daily cycles are both oriented bearishly here, and the widely
expected intraday bounce was of such a small range as to have
only been worthwhile on a scalp basis.  Until either the upper
resistance levels discussed above are broken or a surprise daily
cycle upside reversal occurs, bounces to resistance should be
sold.  While there's great bullish potential in catching the
bottom of a drop as steep as the one we saw last week, bullish
stochastic divergences and all, the risks of fighting the trend
and catching falling knives are the stuff of traders' clichis.
The trend is your friend, and any countertrend trades need to be
kept on a tight leash.


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

A Full Radar Tonight

McDonalds - MCD - close: 26.16 change: -0.18

WHAT TO WATCH: Dow-component and fast-food giant MCD slipped
another 0.68 percent and confirmed the breakdown under its simple
200-dma on Monday.  This drop came in spite of news that its July
same-store sales rose 6.4 percent, which was above analysts'
estimates.  Technicals are negative but its P&F chart remains in
a very strong buy signal.  Furthermore MCD has a trendline of
support built of higher lows dating back to December 2003.  The
stock has rebounded from previous dips under the 200-dma in May
and July so we could see it happen again.  Look for a bounce from
$26.00 for bullish positions or a breakdown under $25.50 for
bearish ones.




---

MedImmune - MEDI - close: 21.85 change: -0.31

WHAT TO WATCH: MEDI has been stuck in a trading range between $22
and $26 since February 2004.  In the last month this trading
range has narrowed to $22-24.  Now the short-term trend of lower
highs has pushed MEDI to break support at the $22.00 mark.  The
close under this level is very bearish.  This looks like an entry
point for a drop toward very long-term support at $20.00.




---

Alaska Air - ALK - close: 18.88 change: -0.41

WHAT TO WATCH: The airline stocks are back to their losing ways
again and several stocks in the group are breaking down to new
lows.  ALK has recently broken support near $19.00-19.50 and has
hit new one-year lows.  Bears can look for a drop toward the
bottom of its long-term channel near $16.00.  An alternative
entry to current levels would be a failed rally near $20.00.




---

Chattem - CHTT - close: 27.12 change: -0.39

WHAT TO WATCH: Look out below!  CHTT has broken through various
levels of support at $28.00, its 50-dma, and its 100-dma.  The
stock looks poised to drop toward the $24.00 level, which
coincidentally happens to be near the exponential 200-dma.  Its
P&F chart has posted a "high-pole" warning.  Look for more
weakness in the BTK biotech index, which appears to be headed
toward the 440 level.





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

AFFX $25.02 -0.20 - We're still bearish on AFFX.  There wasn't
much of a bounce today and shares are closer to breaking support
at $25.00.

CPWM $29.98 +0.28 - We're still bearish on CPWM.  We recommended
that readers look for a new low as an entry point.  CPWM turned
in a failed rally under $31.00 instead.  A trigger under $29.65
still works.

NVLS $24.86 -0.04 - The chip sector still looks weak.  This is
NVLS' second close under the $25.00 mark in as many days.  This
looks like a bearish entry point.

LAD $21.17 -0.60 - Lithia Motors has fallen another 2.75% to hit
new nine-month lows.  Its technicals are bearish and its MAD is
in a new "sell" signal.  Look for a drop to its October lows near
$19.75.

IST $25.65 +0.91 - This steel/iron producer continues to defy
gravity for yet another day.  The stock is up more than 150% from
its May lows and up 1200% from its January 2003 lows. The company
just reported strong earnings today.  Sooner or later there will
be some profit taking.

NWAC $7.53 -0.29 - Airline stock looks very weak.  NWAC produced
a nice failed rally near the $8.00 level today.  This looks like
an entry point to short the stock toward the $5.00 region.


=================================================================
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 08-09-2004
                                                    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:   RSAS, CCBL

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

RSAS - tech stock long -
 RSAS continues to sink towards the simple
 and exponential 200-dma's.  We're looking for
 a bounce from $16.60.  Our stop remains at
 $16.50.

---

CCBL - tech stock short -
 Lower stop from $8.26 to 8.06


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

TOT     Total SA (ADS)             96.12    +0.67
SC      Shell Transport & Trading  43.52    +0.54
CVX     Chevrontexaco              94.63    +0.81
BP      BP Plc                     55.54    +0.59
COP     Conocophillips             75.09    +1.17


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

BID     Sotheby's Holding          15.99    +1.79


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

CME     Chicago Merc Exchange     135.42    +5.54
SPW     SPX Corp                   38.00    +1.35
GAS     Nicor Inc                  33.73    +1.05
PRA     Proassurance Inc           31.79    +1.59


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

AGN     Allergan Inc               69.32    +1.90
COH     Coach Inc                  36.12    +1.38
ATK     Alliant Techsystem Inc     57.79    -2.14
SMG     Scotts Co CI A             56.55    -1.31
WOOF    VCA Antech(ipo)            37.49    -1.15


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

MKL     Markel Corp               281.30    -4.60
JWA     John Wiley & Sons          31.00    -1.53


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