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Daily Newsletter, Monday, 08/16/2004

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PremierInvestor.net Newsletter                   Monday 08-16-2004
                                                    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:  Green Day
Watch List:   Airlines to Pizza

===============================================================
MARKET WRAP  (view in courier font for table alignment)
===============================================================
     08-16-2004            High     Low     Volume Advance/Decline
DJIA     9954.55 +129.20  9967.08  9825.35 1.45 bln   2247/ 559
NASDAQ   1782.84 + 25.62  1789.49  1759.58 1.28 bln   2074/ 994
S&P 100   527.30 +  6.58   528.14   520.72   Totals   4321/1553
S&P 500  1079.34 + 14.54  1080.66  1064.80
RUS 2000  528.06 + 10.67   528.06   517.39
DJ TRANS 3051.14 + 84.22  3051.54  2967.90
VIX        17.57 –  0.41    19.28    17.42
VXO        17.39 -  1.38    18.98    17.39
VXN        26.72 -  0.74    28.22    26.20
Total Volume 3,020M
Total UpVol  2,539M
Total DnVol    397M
52wk Highs      69
52wk Lows      217
TRIN          0.37
PUT/CALL      0.85
===============================================================

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

Green Day
Jonathan Levinson

The Nasdaq led again, on this time it was to the upside on a
rally that added 1.31% to the Dow and 1.46% to the Nasdaq.
Volume was on the lighter side of moderate at 1.172B NYSE shares
and 1.269B Nasdaq shares, 10:1 in favor of advancing shares on
the NYSE and just over 4:1 on the Nasdaq.

The day's advance was an overdue correction within the intraday
cycles, and had little impact on either the daily or weekly cycle
downphases.  The weekly cycle downphase is in its "mature
adolescence" here with more room to the downside, while the daily
cycle is oversold and showing hints of a bullish stochastic
divergence.  If today's gains do not get strongly reversed this
week with a retest of last week's low, the daily cycle should
firm up and begin to generate at least the chop that would
ideally proceed the next daily cycle upphase.  Bear in mind,
however, that the last daily cycle upphase at the end of July
proved to be a bull trap, aborting early before plunging under
the influence of the broader weekly downphase.


Weekly Dow Chart


The weekly cycle downphase yielded a retest of 9800 for the Dow,
and support held, with today's rally adding 128 points to close
at 9953.  Other than the slight bullish divergence on the weekly
Macd histogram noted on the chart, the weekly cycle remains lower
and the lower falling channel, still a potential bull flag but
growing long in the proverbial tooth, has untested support just
above 9600.  A break of 9800 would signal that the weekly cycle
downphase means business and would target that lower level next.
9944-50 is a significant confluence level, followed to the upside
by 10020-40 and the 10200-250 level.  It appears that the daily
cycle is trying to assert itself and a move to that upper level,
significant not just on a trendline basis, would likely threaten
the weekly cycle downphase currently in progress.


Daily Dow Chart


The Dow's 1.31% gain was sufficient to violate the primary
downtrend in price but not the upper descending trendline that
contained the August highs, currently lined up with confluence at
10020.  A break above that level should be sufficient to generate
a buy signal on the daily cycle oscillators, and the bullish
divergence setup is still present on the 10-day stochastic if the
advance continues.  Downside support at 9800 is key for bulls
hoping to realize on that bullish divergence- a move below it
would take out the currently higher low on the oscillator.  9940-
50, which held back last week's highs, should now act as support
above which a test of 10020 should prove inevitable.


Weekly Nasdaq Chart


The Nasdaq's key 1760 support level remains key support, having
been tested at the lows of the current move.  Price continues to
walk down the lower channel descending trendline, and last week's
doji star at the lows of the move sets up a perfect either-or
dilemma of accumulation versus distribution.  Today's gain sets
up this op-ex week for a possible correction within the
descending price trend, but there's strong resistance between
1840 and 1890 on the way to upper channel resistance at 1920.  A
break of 1920 would be required to threaten the weekly cycle
downphase and open the door to a possible bull wedge breakout.
The last daily cycle upphase attempt failed very early, and bulls
will need to make a more substantial attempt in order to abort
the current weekly downphase shown here.


Daily Nasdaq Chart


The Nasdaq is still well within the steep downtrend, but it too
has maintained that higher stochastic low so far and is a mere 18
points away from a test of 1800 trendline resistance.  However,
there's a gap to the 1825 level and given the degree to which the
daily cycle oscillators have declined, cautious bulls will want
to see a move hold above 1800 and preferably take out 1825-35
quickly in order to establish that the daily cycle upturn is not
just another whipsaw, such as we saw at the end of July.  1890 is
the more significant resistance level above, and the weekly cycle
downphase should barely detect a move that fails to at least
challenge it.


Weekly TNX Chart


The bond rally has been sputtering as the shorter timeframes work
off the overbought condition created by over two months' worth of
gains.  On the daily chart (not shown), the ten year note yield's
(TNX) daily cycle is trying to commence a new upphase within the
ongoing weekly cycle downphase.  The strong confluence support at
the 4% level is looking increasingly difficult to attain,
particularly given rising weekly Bollinger support at 4.11%.
However, the current bounce of the past 3 weeks is looking like a
flag within the ongoing weekly downphase, and until that trend is
broken, confirmed by an upturn in the 10-week stochastic, long-
timeframe bond-bears will have to wait.  A move above 4.4% would
likely set the stage for the next leg up on this weekly
timeframe, with next resistance at 4.48%, 4.65%, 4.8%, 4.88% and
4.2%.  For the day, the TNX rose 4.5 bps to close at 4.258%.

The National Association of Home Builders credited the dip in
rates with an increase in confidence as reflected in its
Homebuilder confidence index which rose from 67 in June to 71 in
August.   NAHB president Bobby Rayburn said that lower interest
rates "undoubtedly helped push builder optimism to its highest
level since October 2003 as potential buyers who might have been
sitting it out started diving back into the market when rates
headed downward."


Weekly chart of Crude oil



Crude oil declined today, closing at 45.95 following the victory
of Venezuelan President Hugo Chavez in a weekend recall
referendum that soothed fears of a disruption of Venezuelan oil
exports.  The decline started the week on a negative note for
September crude futures, but as can be seen on the weekly chart,
it's a mere correction well-within the apex of what is one of the
steepest wedges I've ever seen on a weekly chart.  The ascending
wedge is a bearish pattern that tends to break to the downside,
in this case with a potential implied target of 36.  With that
said, there's confluence support at 44 and then in the 40-41
range.

The ticker headlines used the word "plunges" and "plummeted" to
characterize the action of the New York Empire State Index data
released today at 8:30AM, which was down from 35.6 in July to
12.6 for August, the lowest level since May 2003 and well below
expectations of 31.8.  The drop resulted from steep declines in
both new orders (14.9 from 28.6 in July) and shipments (11.9 from
34 in July).  For all the drama of the downside surprise,
however, the reaction from the futures was muted, with the Nasdaq
futures staying positive as the Dow and S&P retreated briefly
into negative territory at 8:30AM.  The Empire State Index is a
relatively new index and is not a major market mover.  It is
based on a monthly survey of approximately 175 CEOs and
presidents of manufacturers in New York State, compiled and
released by the New York Federal Reserve Bank.

The Treasury Department announced that foreign long-term net
capital flows into the U.S. rose to $71.8B in June from $65.2B in
May, the first increase since January 2004.  Foreign gross asset
purchases of U.S. securities increased to $85.5B from $62.4B,
while U.S. residents sold $13.7 billion of foreign assets
net compared with a net gain of $2.8B in May.  Foreign central
banks purchased $18.3B of U.S. assets in June, up from $14.5B in
May.

The Air Transport Association announced that July's traffic rose
9.2% while capacity rose 7.7% from this time last year,
attributing the rise to aggressive ticket pricing and seasonal
factors.  The Amex Airline Index, XAL, was up strongly, adding
5.56% to close at 43.86.

Marketwatch reported that Comerica Bank released a study showing
that automobile prices measured against median family income
reached their most affordable levels in 25 years in Q2 2004 as
incomes rose faster than vehicle prices.  The average new
vehicle's total cost was $27,126 and took 20.6 weeks of median
family income to purchase at Q2 levels.

The media is now calling it the most expensive storm to hit the
US since Hurricane Andrew in 1992, with estimates of Hurricane
Charley's cost beginning to come in.  It was reported that 1
million homes are and could remain for weeks without power, with
2300 people in emergency shelters in the wake of the storm that
left at least 17 dead.  Federal Emergency Management Agency
director Michael Brown said that 11,000 people have already
applied for disaster relief.

Some sources have estimated the damage at up to $145B, making it
one of the most serious disasters in US history, but the majority
of estimates are less extreme.  German reinsurer Munich Re placed
the insured cost between 7B and 14B US, while the Florida
Division of Emergency Management estimated the cost of total
economic losses around $15B and the Associated Press reported
that the State of Florida is estimating losses at $11B.
Economic losses, which include both insured and uninsured losses,
are always substantially higher than insured losses alone.

All can agree, however, that impact from the storm was
substantial, and the markets treated it as mostly bullish for
prices.  Orange futures closed limit-up on the New York Board of
trade, rising nearly 8% on speculation of significant damage to
this year's crop.  Insurers also rose, with a number of companies
including ALL and AHL saying that the hurricane could be material
to current operations but would not threaten the companies'
overall financial condition.  ALL announced that the Florida
Hurricane Catastrophe Fund would cover the company's Florida
subsidiaries for 90% of their losses above an estimated retention
of $286M up to an estimated maximum reimbursement of $922M.  With
the broader markets higher, ALL managed a 1.35% gain, while AHL
was fractionally higher for the day.  HIG closed higher by 1.62%,
CB added 1.05%, PRU rose 1.26% and AIG gained 2.36%.  Florida
banks also rose on the anticipation of disaster relief funding
and rebuilding, as did the Dow-Jones Home Construction Index
(DJUSHB), which added 2.93% to close at 595.48, regaining its 200
day SMA for the first time since dropping below it in July.

MHC, which operates park model and RV resort communities also
lagged the broader market but was nevertheless higher for the
day, announcing the closure of two of its communities to reopen
for the winter and damage to 30 of its 84 properties.  The
company said that it does not expect the damage to be material to
its overall financial picture and maintained previous earnings
guidance.  MHC finished higher by .72% at 32.33.

In other news, GOOG announced that it has requested an effective
date of Aug. 17th after the close, which, if granted, would allow
GOOG shares to begin trading Wednesday morning.  After the bell,
however, it announced that the SEC and California securities
regulators are looking into its issuance of stock options, the
SEC in an informal inquiry.  The company has made a rescission
offer to repurchase the securities in question.

For tomorrow, we will see whether Friday's doji was the start of
a more significant move in the daily cycle, or just a
consolidation of last week's lows.  The strong upside move today
for the Dow and Nasdaq following a lower doji on Friday's higher
volume is a potential bottom formation, and the intraday move
today had an impulsive feel to it.  The trouble with cycle
analysis is that moves are always uncertain until they've been
confirmed with oscillator signals which, by their very nature,
always lag the price.  It's for that reason that we watch other
indicators, such as chart and candle formations and the intraday
Keltner channels covered in the Market Monitor.  Here, there's
reason for bullish optimism, but the downside price trend is very
strong and has not yet been reversed.

Provided that Friday's lows remain intact this week, I expect the
daily cycle to build a new upphase, complete with the bullish
divergence noted above.  With the weekly cycle downphase against
it, however, the onus will remain on bulls to keep the price
advancing long enough to threaten first the daily downtrend and
then the weekly downphase at the levels posted above.  So far,
the bounce we saw today was overdue and likely produced by deeply
oversold intraday and oversold daily oscillators.  A strong
showing from bulls this week will be required to build it into
something more.


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

Airlines to Pizza

Southwest Airlines - LUV - close: 14.50 change: +0.71

WHAT TO WATCH: One of the few profitable airliners, Southwest
Airlines could be an out performer if crude prices reverse
course.  The airline sector soared today on the possibility that
oil may have hit its high and LUV rose more than 5%.  Now there's
no guarantee that oil won't keep climbing higher but LUV might be
a play with the bounce from support near $13.00 and the bullish
technical picture on its daily chart.




---

Papa John's Intl - PZZA - close: 28.12 change: -0.24

WHAT TO WATCH: Mmmmm pizza!  While most people love their product
investors seem to be full of the stock.  Shares are still
consolidating above support at the $28.00 level but PZZA is
coiling for a breakdown.  The P&F chart is bearish and points to
a $21.00 target.  We would consider using a trigger under $28.00
and targeting a quick drop to $26.00 first.




---

Intl Game Technology - IGT - close: 29.69 change: -0.38

WHAT TO WATCH: IGT was a huge winner for investors from July 2002
through April of this year.  Now investors seem to be selling the
rallies.  The stock did not bounce with the markets today.
Instead IGT traded lower and closed under support at the $30.00
level for the first time since October 10th, 2003.  This could be
a bad omen.  Look for some confirmation and consider the P&F
price target at $24.




---

Smith A O Corp - AOS - close: 27.00 change: -0.17

WHAT TO WATCH: The lack of participation in today's rebound for
tech stocks could be bad news for AOS.  Shares recently broke
down under significant support in the $27.85-28.00 level.  The
P&F chart is bearish with a quadruple-bottom breakdown sell
signal and a $22 target.  We would look for a new low or a bounce
back towards $28.00 and then short a failed rally with a tight
stop.





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

TR $30.09 +0.48 - TR was a recent bullish play.  Readers can
watch it for a breakout over $30.50.

ORCL $10.24 -0.01 - Hmm... the NASDAQ rallies 1.45% and the GSO
software index rallies 1.11% but ORCL rolls over intraday to
close in the red.


=================================================================
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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 08-16-2004
                                                    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:   CCBL CMTL, NATI SWIR, DLTR, OSI, AMR


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

CCBL - tech stock short -
 The oversold bounce today managed to fade under
 its simple 10-dma.  Bears are still in good shape here
 although we're still encouraging some profit taking by
 our readers.

---

CMTL - tech stock short -
 CMTL is now up three days in a row and right at its
 simple 10-dma.  This is dangerous.  If you didn't do
 some profit taking already you might want to.  We still
 expect the $18.00 level to offer resistance.

---

NATI - tech stock short -
 NATI completely ignored the market's rally today.
 Remember that we plan to exit on an intraday drop to $24.00

---

SWIR - tech stock short -
SWIR ignored the rally today as well.  This is good news
for the bears.   Lower stop from $27.40 to $26.49.

---

DLTR - non-tech short -
 Double check your stops.  Ours is at $23.71.

---

OSI - non-tech short -
 Good news.  OSI ignored the rally today as well.

---

AMR - high risk/reward short -
 Uh-oh!  This is looking more dangerous than ever.
 Oil may have hit new highs but then began to slip lower.
 A significant drop or the expectation of a drop in crude
 could send the airlines rebounding higher.  play carefully.


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

SI      Siemens Aktien             67.24    +1.22
UBS     UBS Ag Ord. Shares         67.90    +1.41
KFT     Kraft Foods Inc            30.43    +0.57
BP      BP Plc                     54.54    +0.70
SC      Shell Transport & Trading  44.26    +0.98
WB      Wachovia Corp              44.97    +0.55


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

PRV     Province Healthcare Co     19.25    +5.64
FLE     Fleetwood Enterprises      12.10    +1.24
ISLE    Isle Of Capris Casinos     17.90    +1.40
NANO    Nanometrics Inc            10.44    +1.34


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

LOW     Lowe's Companies Inc       49.14    +2.49
PNC     PNC Financial Svcs Grp     52.63    +1.62
WPPGY   WPP Group Plc (ADR)        45.17    +1.78
EK      Eastman Kodak Co           28.80    +1.33
KMRT    Kmart Holding Corp         76.05   +11.15


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

SYY     Sysco Corp                 31.00    -2.44
COG     Cabot Oil & Gas Corp       39.28    -1.15
LPNT    Lifepoint Hospitals        27.70    -5.04
UTI     Universal Tech Institute   25.85    -1.53


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

DRL     Doral Financial Corp       38.96    -0.10


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