PremierInvestor.net Newsletter Weekend Edition 09-12-2004 section 1 of 3 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: Bush Wins! Market Sentiment: Grab Those Seatbelts! Watch List: Networking to Trendy Apparel ================================================================= MARKET WRAP (view in courier font for table alignment) ================================================================= WE 9-10 WE 9-03 WE 8-27 WE 8-20 DOW 10313.07 + 52.87 10260.2 + 65.19 10195.0 + 84.91 +284.79 Nasdaq 1894.31 + 49.83 1844.48 - 17.61 1862.09 + 31.07 + 73.80 S&P-100 546.25 + 5.19 541.06 + 0.18 540.88 + 4.84 + 15.32 S&P-500 1123.92 + 10.29 1113.63 + 5.86 1107.77 + 9.42 + 33.55 W5000 10936.32 +115.44 10820.9 + 65.86 10755.0 +106.22 +344.09 SOX 383.61 + 25.77 357.84 - 24.50 382.34 - 3.66 + 19.35 RUT 569.91 + 13.67 556.24 + 4.57 551.67 + 3.75 + 30.53 TRAN 3224.38 + 82.53 3141.85 + 33.05 3108.80 + 17.93 +123.95 ================================================================= =========================== Market Wrap =========================== Bush Wins! by Jim Brown No, there are no newspaper headlines claiming a win before the final ballots are cast but the markets appear to already be trading on the news. With the polls showing a widening gap between Kerry and Bush the Republican market was celebrating early on Friday. At least that is what the talking heads on CNBC would have you believe. Dow Chart – Daily Nasdaq Chart – Daily SOX Chart - 60 min The economics were positive on Friday with the PPI at -0.1% well below the expected +0.2% level. Don't let that lower inflation number surprise you because falling prices on new cars was primarily the reason. The auto manufacturers are literally giving away cars to keep the production lines busy. Food prices also continued to fall with a -0.2% drop for the month. The core rate continued to rise at +1.0% and stretched the string of gains to thirteen consecutive months. This will keep the Fed on track for a continued rate hike program. International Trade reversed half of last months $8.9 billion deficit increase with a drop of -$4.9 billion in the current July report. Exports increased and imports fell with exports increasing +7.8%. Imports decreased -1.5%. Obviously falling oil prices accounted for the majority of the decrease in imports. The recent soft patch in the economy should continue to undermine imports and that should continue to help the ratios for the next several months. China is still growing at a +8% clip and we are supplying much of their raw materials and basic components which should keep our export numbers at the present level or higher. Market sentiment was also positive on Friday despite an earnings warning by Alcoa and several chip stocks. The Alcoa warning knocked the Dow back under support at 10250 with a -2.50 drop in the Dow component. The Dow rebounded and held just over 10250 until 2:15 despite several attempts to push it lower. At 2:15 a major buy program hit and pushed the index back into positive territory and back over 10300 resistance. The SOX roared out of the gate with barely even a token dip from the three chip warnings since yesterday's close. The SOX tacked on another +12 points, +3.4% to Thursday's +5% gain. The SOX closed at 383 and well above the 351 low on Wednesday. Chip analysts are scratching their heads on the rebound and wondering about the validity of their mass downgrades three days earlier. The Russell has exploded from the 520 low back on August 19th to close at 570 on Friday. Volume in the small caps has been growing daily and there appears to be no end in sight. The volume on the Nasdaq where most R2K stocks trade has risen to over 1.6B shares for the last two days and levels not seen in nearly a month. The Nasdaq has rebounded from its August low of 1751 to close just below 1900 on Friday. Much of the Nasdaq bounce this week has been related to the SOX rebound. The SOX rebound helped the Russell, which in turn helped the Nasdaq. They are all interrelated and one does not move far without the others. After the smoke cleared on Friday I sat there looking at the charts in amazement. We had expected a post Labor Day rally but not the way it was delivered. The beginning of the week was weak at best with the SOX dragging down all the techs. The Nasdaq traded in a very narrow 1850-1865 range up until noon on Thursday when the buy programs began their rapid fire launch. The Dow gapped open on Tuesday and then declined to Friday's low in an exact reversal of the Nasdaq move. Remember this chart I posted on Thursday night? Dow Chart - 15 min I explained that a break of the support at 10275 could put the Dow at risk to 10150. That support broke and the Dow traded in negative territory all day until 2:15. At 2:15 a buy program hit that added +1100 issues to the A/D line and lifted all markets. You can clearly see from the chart above that the buying was not retail activity. It was clearly a very strong buy program very similar to the one on Sept-2nd. Ok, here is the million-dollar question. Why buy? What overriding reason was there to launch a program covering 1000 different stocks on Friday afternoon before the 9/11 anniversary? There were many reasons mentioned on the various services I monitor. Oil was initially given as the primary reason. Positive comments from OPEC knocked oil off it's $44.95 high for the day and into a -$2.50 freefall. It closed at $42.65 and gave back all the gains from Thursday. That may have induced some portfolio managers to add to positions but I doubt it was reason for that major buy program. You only have to look at the oil volatility for the week to realize the gyrations in oil prices did not translate into stock prices. Oil Chart - 15 min Another reason given was Bush gains in the opinion polls. According to one major survey Bush now has a +9 point lead over Kerry. While the market is commonly thought of as Republican I have a hard time seeing this as a death bed conversion sort of thing. With the Dow teetering on the edge of a major drop all day why would the poll news which had been out all day suddenly prompt a major buy program? I doubt some fund manager just walked into his office from a golf outing to hear the news and then shout buy stocks into his intercom. I agree with the various surveys showing the market tracking with the ebb and flow of Bush's chances but not on an intraday basis. Other analysts suggested that the bad news for the third quarter was already priced in and traders had decided the worst was over. If this is the case then it would be contrary to most Septembers in recent memory as most late September declines come on the exact earnings weakness we are seeing now. If this was the case then why was the buying not broader and longer throughout the day? It would have been a more general sentiment and not something that could be exactly measured to the minute on the charts. Look at the chart above. It was not widespread market sentiment but only a single event. Let me repeat the question. Why would a major buy program appear late on a Friday afternoon the day before the 9/11 anniversary? I think the key to the answer is in the question. Why would Al Qaeda release a new video tape two days before the 9/11 anniversary? It is simple. They wanted to remind the world of the attack and try to exert some terrorist pressure on the world scene. They would have liked nothing better than to see our markets sell off in fear of an anniversary attack. I believe there was a market support program running on Thursday and Friday that was planned to prevent any pre-9/11 decline. Call it anything you want and put any entity you want behind it but I believe it existed. You can choose to believe or not but it does not change the facts. We saw underlying support on Thursday and every dip was met with just enough volume to prevent a Dow meltdown. The Alcoa news broke that deadlock on Friday morning. The Dow and SPX were weak all morning but every dip was met with strong order flow in the futures market. It was constantly lurking just under the bid and prevented a continuation drop from the morning gap down. For the two hours before the buy program appeared volume slowed to a crawl. The internals weakened several times but each time just enough volume appeared to prevent a dip. As the clock ticked down the selling pressure increased and a huge battle began at support. Volume increased on both sides but regardless of the amount of selling pressure the volume at bid was always just enough to maintain the status quo. I don't care how long you have been trading it does not take an Einstein to realize this was not normal activity for a September Friday. I believe the 2:15 buy program was insurance to prevent an end of day volume surge on the sell side. Instead of waiting for everybody else to pull the trigger on the sell side the best defense is a strong offense. A sharply rising market is a strong offensive move against those that might be scared to hold over the weekend. Once the massive program triggered, those already short and waiting for the end of day decline, were forced to cover and the spike became self perpetuating. An excellent chess move by whomever was orchestrating the event. Again, believe me or not, it does not matter. What matters is how we react to it for Monday. "IF" it was an artificial bounce and done for market support reasons prior to 9/11 then what happens when that support is withdrawn? Even if it was just a valid buy program from some large fund or a large asset allocation program it is just history now. Each day we get to start over with a clean slate. The excesses of the prior day are forgotten as new strategies are implemented based on millions of different variables by millions of investors. The only things constant are the long term historical trends and the current market sentiment. There are few market trends more constant than the relationship of the VIX to the markets. When the VIX is low it is time to go. When the VIX is high it is time to buy. This adage has survived years of market cycles and while it should not be used as an instant indicator of market direction it is a very valuable tool in a traders toolkit. Extreme swings normally produce the expected reaction within a very short period of time. Friday was an extreme swing day and the VXO (old VIX) set a new 52-week low. This was a climax low after four weeks of declines from the August-13th high of 20.03, which corresponded EXACTLY with the SPX low of 1060 and the Dow low of 9783. Had you been watching the VXO then and acted upon it your results over the last four weeks would have been very strong. The challenge is knowing when a high is a high and a low is a low. Those things are not normally known until several days later. The touch of a new 52-week low on Friday is a major warning signal for the bulls. In the following chart I have highlighted each time the VXO neared 14.0 over the last year. I contrasted it with the SPX. Obviously the more dramatic the move from the VXO highs to the lows the more dramatic the reversal in the SPX. VXO:SPX Chart – Daily The next chart compares the VXO to the Dow and adds the downtrend resistance since February. By comparing the VXO levels to the resistance levels on the Dow we are able to narrow our focus and predict a higher correlation of expected events. VXO:DOW Chart Adding in the VXN in comparison to the NDX chart gives us a broader view and another correlation of the same event. The VXN has only broken below 20 three times in the past year. In late June it stayed below 20 for nine consecutive days before the July-1st correction began that knocked over -200 points off the NDX and -300 points off the Nasdaq Composite. During those nine days the NDX added points but the strain was beginning to show. VXN-NDX Chart What I want to get across today is the warning signal. I am not suggesting that Monday will begin an implosion that takes us back to new lows. I am only suggesting that next week could be dangerous. Consider the facts. September is the worst month of the year followed by October which is the second worst. The majority of earnings guidance we have been seeing has been negative. The economy is going to lose billions in Q3 earnings, wages and GDP as a result of the hurricanes. It will eventually add billions more in GDP as the rebuilding effort gets underway but that will not be seen until Q4. The SOX has rebounded well above reasonable expectations and to strong resistance at 385-390. The next ten points will be more difficult. The Russell is way overextended from its +50 point rebound and at resistance at 570. The SPX has resistance dating back to January at 1125 and it closed at 1124. The Dow has resistance at 10315 and exactly where it closed on Friday. The Nasdaq has strong resistance at 1900-1925 and closed at 1894. Moving higher from here will not be easy. Not impossible but not easy. The scenario as I see it can go two ways. The Friday buy program was just another of many real efforts to get invested before the election and funds are going to disregard the historical Sep/Oct weakness. If this scenario is correct a move over 1125 on Monday will attract a lot of short covering and buyers wanting to be long before fall will have to race to chase prices. This is a very valid scenario and would result in new lows on the volatility indexes and increasing pressure in the marketplace. Eventually the volatility spring must release and it is only a question of when not if. Still we could be 100 points higher by then and buyers can't risk standing idly by and watching the train leave the station. The second scenario assumes the Friday buy program was a unique event and not something that will be repeated on Monday. The rebound on the SOX will lose traction at 385-390 and resume its decline or at least see some profit taking from the short covering bounce. This will pressure the Nasdaq and the Russell and the bubble will burst into a normal September decline. This decline will be bought aggressively once the profits are harvested. We definitely want to be long before mid October and with everyone having the same game plan that could mean early October. How much investors will ignore the October earnings cycle is still under discussion. We think we know how bad Q3 earnings will be and we hope Q3 was the end of the soft patch. However, until we begin to get Q4 guidance from the early October earnings reports the outlook is still cloudy. There are no material economic reports next week and the Fed does not meet until the following Tuesday. There is nothing to stimulate a higher move but fear of missing the train but there could be plenty of warnings to push us lower. Regardless of your market bias next week should be an exciting week in the market. Volume is increasing and large moves are possible. I hope I have accurately painted both sides of the picture and not hopelessly confused you. We are in the best four months of the year for traders and it is time to place your bets. Enter Very Passively, Exit Very Aggressively! Jim Brown ================================================ Market Sentiment ================================================ Grab Those Seatbelts! - J. Brown Hold on to your hats! September 2004 is ready to move. The question is which way? Will the markets ignore September's historical weakness based on falling oil prices, improving economic data and new confidence that the incumbent will win the White House? Or will historical trends reassert themselves thus proving this past week to be nothing but a big bull trap? Therein lies the true question. Unfortunately, we have a lot of conflicting data points. If you're feeling bullish, and many of you are, then the recent breakouts this past week are pretty exciting. Check out some of these moves: The SOX semiconductor index has led the pack with an 8.8 percent rally in the last two days. Most believe this is panicked short covering that won't last but we'll see. The chips have inspired the rest of the tech sector to new relative highs. The NWX networking index has climbed through resistance at 220 and its simple 50-dma. The GHA hardware index has bust through resistance at 240 and its simple 200-dma. The INX Internet index has pushed through resistance at 170 and its simple 50-dma. Last and certainly not least the GSO Software index has soared through resistance at 135 and its simple 50-dma. Want more? The OIX oil index and OSX oil service indices are at new all-time highs and new three-year highs respectively, despite the drop in crude oil Friday. The UTY utility index and XNG natural gas index are not far behind with both near new two-year highs. Plus, the DFI defense index is resting near new all-time highs. Yes, it has definitely been a bullish week. But it's been bullish for several weeks in a row. Many of these sectors are now moving into their third, fourth even fifth week of gains. That's usually when the rallies start to fade and we can encounter some steep profit taking. Even the S&P 500 index is in its fourth (actually fifth) week of consecutive gains. Should we really be planning new bullish positions now or should we be looking to lock in gains? This would be a good spot to discuss the volatility indices, investor sentiment and spotting market tops and bottoms. However, Jim has down such a great job in this weekend's market wrap I'll just point you to his commentary. http://members.OptionInvestor.com/MarketWrap/mw_091204_1.ASP I will admit that with all the bullish breakouts and the market's ability to shrug off the Alcoa earnings warning and several chip stock warnings that it would be easy to feel more enthusiastic here. Plus, the recent round of economic news was positive and lifts investor sentiment toward a more stable economy. However, and you knew there was a however, I am not at all convinced that we'll avoid the traditional September weakness. With the amount of earnings warnings we've already seen we'll certainly hear more. Plus, the volatility indices are seriously suggesting we're at a new top. Plus, the COT data below shows that commercial traders or so called "smart money" have been steadily growing more bearish on the S&P 500 (check the e-mini data). Looking ahead we can remain bullish short-term. The Stock Trader's Almanac reports that the Monday before September's triple-witching option expiration Friday (actually it's quadruple witching now with single stock futures) has been up 9 out of the last 13 years. That's the good news. Yet by Friday history turns bearish with the markets down on expiration Friday 8 out of the last 13 years. ----------------------------------------------------------------- Market Averages DJIA ($INDU) 52-week High: 10753 52-week Low : 9230 Current : 10313 Moving Averages: (Simple) 10-dma: 10232 50-dma: 10120 200-dma: 10274 S&P 500 ($SPX) 52-week High: 1163 52-week Low : 990 Current : 1123 Moving Averages: (Simple) 10-dma: 1112 50-dma: 1099 200-dma: 1114 Nasdaq-100 ($NDX) 52-week High: 1559 52-week Low : 1301 Current : 1413 Moving Averages: (Simple) 10-dma: 1383 50-dma: 1385 200-dma: 1440 ----------------------------------------------------------------- CBOE Market Volatility Index (VIX) = 13.76 -0.25 CBOE Mkt Volatility old VIX (VXO) = 13.48 -0.27 Nasdaq Volatility Index (VXN) = 19.56 -1.02 ----------------------------------------------------------------- Put/Call Ratio Call Volume Put Volume Total 0.89 688,108 609,139 Equity Only 0.61 573,043 351,284 OEX 1.43 22,576 32,353 QQQ 1.09 44,880 48,879 ----------------------------------------------------------------- Bullish Percent Data Current Change Status NYSE 59.1 + 0.4 Bear Confirmed NASDAQ-100 39.0 + 1.0 Bull Alert Dow Indust. 56.6 + 0 Bear Correction S&P 500 57.0 + 0.4 Bear Correction S&P 100 55.0 + 0 Bear Correction Bullish percent measures the number of stocks in an index currently trading on a buy signal on their point and figure chart. Readings above 70 are considered overbought, and readings below 30 are considered oversold. Bull Confirmed - Aggressively long Bull Alert - Cautiously long Bull Correction - Pause or pullback in upward trend Bear Alert - Take defensive action if long Bear Confirmed - High risk if long, good conditions for shorting Bear Correction - Pause or rebound in downtrend ----------------------------------------------------------------- 5-dma: 1.02 10-dma: 1.12 21-dma: 1.05 55-dma: 1.28 Extreme readings above 1.5 are bullish, and readings below .85 are bearish. These signals don't occur often and tend be early, but when they do, they can signal significant market turning points. ----------------------------------------------------------------- Market Internals -NYSE- -NASDAQ- Advancers 1613 1891 Decliners 1178 1084 New Highs 128 94 New Lows 13 35 Up Volume 1024M 1326M Down Vol. 502M 259M Total Vol. 1535M 1602M M = millions ----------------------------------------------------------------- Commitments Of Traders Report: 09/07/04 Weekly COT report discloses positions held by small specs and commercial traders of index futures contracts at the Chicago Mercantile Exchange and Chicago Board of Trade. COT data can be found at www.cftc.gov. Small specs are the general trading public with commercials being financial institutions. Commercials are historically on the correct side of future trend changes while small specs tend to be wrong. S&P 500 Commercial traders did add to positions during the most recent week of data but there was zero change in their slightly bearish bias. Meanwhile small traders also added to both their longs and shorts and scaled back their bullish attitude just a bit. Commercials Long Short Net % Of OI 08/17/04 398,472 416,109 (17,637) (2.2%) 08/24/04 402,599 420,478 (17,879) (2.2%) 08/31/04 406,637 416,778 (10,141) (1.2%) 09/07/04 415,952 426,342 (10,390) (1.2%) Most bearish reading of the year: (111,956) - 3/06/02 Most bullish reading of the year: 23,977 - 12/09/03 Small Traders Long Short Net % of OI 08/17/04 138,550 97,792 40,758 17.2% 08/24/04 135,151 100,351 34,800 14.7% 08/31/04 144,120 114,343 29,777 11.5% 09/07/04 157,732 130,817 26,915 9.3% Most bearish reading of the year: (1,657)- 5/27/03 Most bullish reading of the year: 114,510 - 3/26/02 E-MINI S&P 500 We're starting to see some big numbers line up on the short side from the commercial traders. This is not good news for the S&P 500 as the "smart money" grow more bearish on the market. Naturally small traders are walking the opposite direction by increasing their longs and bullish stance. This sort of tug-o-war usually ends up with the small trader losing. Commercials Long Short Net % Of OI 08/17/04 404,065 457,372 ( 53,307) ( 6.2%) 08/24/04 392,065 473,911 ( 81,846) ( 9.4%) 08/31/04 372,071 543,100 (171,029) (18.7%) 09/07/04 371,111 600,593 (229,482) (23.6%) Most bearish reading of the year: (354,835) - 06/17/03 Most bullish reading of the year: 133,299 - 09/02/03 Small Traders Long Short Net % of OI 08/17/04 192,939 92,361 100,578 35.3% 08/24/04 211,995 76,184 135,811 47.1% 08/31/04 258,624 77,036 181,588 54.0% 09/07/04 286,194 80,075 206,119 56.2% Most bearish reading of the year: (77,385) - 09/02/03 Most bullish reading of the year: 449,310 - 06/10/03 NASDAQ-100 Surprisingly the commercial trader added to his or her long positions and increased their bullish bias a tad. Small traders also added to their longs but the jump in short positions decreased the overall bullishness. Commercials Long Short Net % of OI 08/17/04 44,743 41,535 3,208 3.7% 08/24/04 48,624 43,222 5,402 5.8% 08/31/04 48,167 43,411 4,756 5.2% 09/07/04 51,814 44,179 7,635 7.9% Most bearish reading of the year: (21,858) - 08/26/03 Most bullish reading of the year: 25,160 - 06/01/04 Small Traders Long Short Net % of OI 08/17/04 12,256 8,352 3,904 18.9% 08/24/04 11,666 10,068 1,598 7.3% 08/31/04 14,635 10,572 4,063 16.1% 09/07/04 16,817 12,561 4,256 14.5% Most bearish reading of the year: (20,270) - 06/01/04 Most bullish reading of the year: 19,088 - 01/21/02 DOW JONES INDUSTRIAL Commercial traders are still asleep here for the Industrials with very little movement. Meanwhile small traders are growing more bearish on the average. Commercials Long Short Net % of OI 08/17/04 30,271 22,809 7,462 14.1% 08/24/04 28,919 23,658 5,261 10.1% 08/31/04 29,143 24,147 4,996 9.3% 09/07/04 29,128 24,011 5,117 9.6% Most bearish reading of the year: (8,322) - 1/16/01 Most bullish reading of the year: 15,135 - 10/16/01 Small Traders Long Short Net % of OI 08/17/04 4,388 7,089 (2,701) (23.5%) 08/24/04 5,052 7,214 (2,162) (17.6%) 08/31/04 4,929 7,122 (2,193) (18.2%) 09/07/07 5,041 8,656 (3,615) (26.4%) Most bearish reading of the year: (12,106) - 3/09/04 Most bullish reading of the year: 8,523 - 8/26/03 ================================================================== 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 --------------------------------- Total Systems Svc Inc - TSS - close: 24.23 change: +0.41 WHAT TO WATCH: The tech rally has not been lost on shares of TSS. The stock has climbed steadily over the past couple of weeks and the overzealous bulls have pushed the stock through major resistance at the $24.00 level. Not only has TSS broken through the top of its seven-month trading range but its simple 200-dma as well. TSS still has a bearish P&F chart but this might be a candidate for more aggressive traders. Watch for overhead resistance at the bottom of its January gap down near $26.00. --- Foundry Networks - FDRY - close: 10.75 change: +0.80 WHAT TO WATCH: The breakout in the NWX networking index was boosted by an 8 percent rally in shares of FDRY. The stock not only managed to breakout over its simple 40 and 50-dma's but FDRY also pushed through heavy psychological resistance at the $10.00 mark. Volume was well above average and that's a bullish signal for traders. We wouldn't want to chase it here but a bounce from $10.00 or $10.25 might be tempting. The P&F chart is still extremely bearish but it looks like the downside target has been achieved. --- Dr. Reddy's Lab Ltd - RDY - close: 16.86 change: +0.69 WHAT TO WATCH: Biotech/drug stock RDY turned in an impressive performance on Friday. Shares filled and surpassed the gap down in early August while simultaneously breaking out over its simple 40 and 50-dma's. Volume was above average and the stock looks poised to run toward the $17.50-18.00 range. Watch out for some profit taking after the recent surge and consider buying a bounce from $16.25 with a tight stop. The P&F chart remains very bearish making this an aggressive strategy. Alternatively one could wait for a failed rally near $17.50 and consider new shorts. --- Urban Outfitters - URBN - close: 33.60 change: +2.97 WHAT TO WATCH: The back-to-school shopping season may be over but this trendy apparel retailer is still hitting new highs. Shares added almost 10 percent on Friday after Deutsche Bank started coverage on the stock with a "buy" and a $35 price target. Long- term URB has been a very consistent winner early January 2003. While the new high looks tempting for momentum traders and we expect some follow through on Monday readers may be better off watching for a dip back toward $30.00-30.50 and then buying a bounce. ================================================================= 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. 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PremierInvestor.net Newsletter Weekend Edition 09-12-2004 section 2 of 3 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 two: Tech Stocks New Bearish Plays: ARB Closed Bearish Plays: NVLS, VRTS Active Trader (Non-tech) New Bearish Plays: DPH Bullish Play Updates: MVK, SPN Bearish Play Updates: ETM, High Risk/Reward Bearish Play Updates: CTMI, ICOS, PCLN Stock Splits Announcements: PCBK ================================================================== Net Bulls (NB) Tech Stock section ================================================================== ========= NEW PLAYS ========= ----------------- New Bearish Plays ----------------- Arbitron Inc - ARB - close: 38.64 change: -0.03 stop: 40.01 Company Description: Arbitron Inc. is an international media and marketing research firm serving radio broadcasters, cable companies, advertisers, advertising agencies and outdoor advertising companies in the United States, Mexico and Europe. Arbitron's core businesses are measuring network and local market radio audiences across the United States; surveying the retail, media and product patterns of local market consumers; and providing application software used for analyzing media audience and marketing information data. The Company is developing the Portable People Meter, a new technology for radio, television and cable ratings. Arbitron's marketing and business units are supported by a research and technology organization located in Columbia, Maryland. Arbitron has approximately 1700 employees; its executive offices are located in New York City. (source: company press release) Why We Like It: Lack of participation in the rally had our bearish play sensors really flashing when we looked at ARB. The stock has been struggling under its simple 200-dma for the last three weeks and technical oscillators have turned bearish while the MACD has rolled over into a new "sell" signal. However, let's review a little history. In late June ARB gapped lower after news hit that Infinity Broadcasting (a division of Viacom) said it would not renew its contract with ARB. Shares of ARB continued to dwindle until they hit their lows in early August. In mid-August shares gapped higher after reaching an agreement, effective immediately, with Infinity to renew the contract in a multi-year deal. This of course allowed ARB to revise its earnings outlook higher. Now it would appear the excitement has faded and the stock looks vulnerable to some profit taking. The P&F chart is still bearish and points to a $23.00 target. Right now we'd be happy with a drop to $34.00 but first we're going to use a TRIGGER to open the play. Our entry point will be $37.95 so ARB will have to break mild support at the bottom of its two-week trading range at $38.00. Annotated Chart: Picked on September xx at $xx.xx <-- see TRIGGER Gain since picked: + 0.00 Earnings Date 07/22/04 (confirmed) Average Daily Volume: 288 thousand ============ CLOSED PLAYS ============ -------------------- Closed Bearish Plays -------------------- Novellus - NVLS - close: 25.58 change: +0.95 stop: 25.01 It was a rough week for semiconductor bears. Texas Instruments' (TXN) mid-quarter update was mixed at best and despite negative comments shorts panicked. The ensuing two-day rally was tough to swallow as short covering sent the SOX up more than 5 percent on Thursday and up another 3.4 percent on Friday. NVLS was not left behind in the rebound and share crossed the $25.00 mark on Friday afternoon stopping us out. We don't have a lot of faith in this SOX rally, especially with the VXN near its lows, so we're not willing to chase chip stocks with longs nor are we willing to short them right here. Picked on September 05 at $23.39 Gain since picked: + 2.19 Earnings Date 07/12/04 (confirmed) Average Daily Volume: 5.1 million --- VERITAS - VRTS - close: 17.91 change: +1.21 stop: 18.01 Almost no tech stock was sparred from the short covering on Friday. News that Oracle had won its lawsuit against the government to pursue smaller rival PeopleSoft sent the software sector soaring on speculation news. The rebound in VRTS was exacerbated by news that the company has launched a $250 million share buyback program. Before the end of Friday's session VRTS had hit $18.09 tagging our stop loss and closing the play. Just our luck that shares were able to break resistance at its simple 40-dma and the $18.00 mark right before the close. We do not have confidence in this rally with the VXN this low and it wouldn't surprise us if VRTS is back near $16.50 by the end of next week. Picked on September 05 at $16.55 Gain since picked: + 1.36 Earnings Date 07/27/04 (confirmed) Average Daily Volume: 9.4 million ================================================================== Stock Bottom / Active Trader (AT) section ================================================================== ========= NEW PLAYS ========= ----------------- New Bearish Plays ----------------- Delphi Corp - DPH - close: 9.02 change: -0.34 stop: 9.41 Company Description: Delphi is a world leader in mobile electronics and transportation components and systems technology. Multi-national Delphi conducts its business operations through various subsidiaries and has headquarters in Troy, Mich., USA, Paris, Tokyo and São Paulo, Brazil. Delphi's two business sectors – Dynamics, Propulsion, Thermal & Interior Sector and Electrical, Electronic &, Safety Sector - provide comprehensive product solutions to complex customer needs. Delphi has approximately 186,500 employees and operates 170 wholly owned manufacturing sites, 42 joint ventures, 53 customer centers and sales offices and 34 technical centers in 41 countries. (source: company press release) Why We Like It: Automakers and the parts makers who supply them have had a rough couple of months. Wall Street firms have been downgrading both industries. Weak vehicle sales in August lead GM to cut its Q4 production numbers and as the largest automaker that affects a lot of part suppliers. Now Visteon (VC) a major supplier just issued an earnings warning after miscalculating how many cars Ford would produce. Investors are worried that DPH's earnings may be under pressure and the stock has reversed its recent bullish breakout and is trading back towards its eight-month lows. Technically shares don't look so great with rising volume on the declines, bearish turnovers in its oscillators like the RSI and stochastics and a potential new sell signal in its MACD soon. Plus, its P&F chart has reversed into a new sell signal with a $6.50 target. Despite all this bearishness we're not willing to short it just yet. We want to see a new relative low under support at $8.90. We'll use a TRIGGER at $8.89 with an initial target of $8.00 and a secondary target of $7.00. We'll use an initial stop loss at $9.41. Annotated Chart: Picked on September xx at $xx.xx <-- see TRIGGER Gain since picked: + 0.00 Earnings Date 07/16/04 (confirmed) Average Daily Volume: 1.3 million ============ PLAY UPDATES ============ -------------------- Bullish Play Updates -------------------- Maverick Tube Corp - MVK - close: 31.25 chg: -0.57 stop: 28.49 Oil and oil service stocks continued to do well this week although they did see some profit taking on Friday as crude oil prices slipped almost four percent giving back most of Thursday's gains. Shares of MVK still look strong near their all-time highs and above resistance at $30.00. We still like the triple-top breakout buy signal on its P&F chart. Should MVK see more profit taking next week we'd look for support at $30.00 and consider buying a bounce as a new entry point for longs. Remember, we were initially targeting a move to the $33.00 level and short- term traders can plan accordingly. Annotated Chart: Picked on September 01 at $30.60 Gain since picked: + 0.65 Earnings Date 07/20/04 (confirmed) Average Daily Volume: 713 thousand --- Superior Energy - SPN - close: 11.58 change: -0.44 stop: 10.90 It has been a volatile week for SPN. After spending a few days consolidating gains above resistance at $11.50 the stock soared on Thursday with the oil services group and crude oil prices. Unfortunately, the oil services sector was the worst performing group on Friday as crude oil prices gave back four percent. SPN lost all of Thursday's gains and once again tested new support at the $11.50 level. Please take note - while SPN is still above the pivotal $11.50 level the sharp reversal feels very bearish. The huge volume on Friday of 2.7 million shares versus the average of just 355 thousand smells like major distribution (a.k.a. profit taking). There's also the potential that there may be some sort of news that hasn't hit the wires yet. We would be super cautious about consider new positions here. SPN still has rising support (see chart) of higher lows and it may test it. Annotated Chart: Picked on September 01 at $11.74 Gain since picked: - 0.16 Earnings Date 08/03/04 (confirmed) Average Daily Volume: 355 thousand -------------------- Bearish Play Updates -------------------- Entercom Comm. - ETM - close: 36.20 change: -0.15 stop: 38.51*new* ETM feels like one of the few stocks that didn't bounce on short covering this past Friday. Instead we're seeing some follow through from Wednesday's breakdown. We expected some support near the $35 and $36 levels so Friday's intraday bounce from its lows doesn't concern us. Volume was pretty strong the last two sessions and that's bearish for ETM. Should ETM bounce at all we'd look for resistance at $37.00-37.50 and use any failed rally there as a potential new entry point. The stock appears to be trading in a big bear flag pattern and our initial target at $32 has not changed. We're going to lower our stop loss to $38.51. Annotated Chart: Picked on September 08 at $37.00 Gain since picked: - 0.80 Earnings Date 08/03/04 (confirmed) Average Daily Volume: 463 thousand ================================================================== HIGH RISK/HIGH REWARD (HR) section ================================================================== ========= NEW PLAYS ========= -------------------- Bearish Play Updates -------------------- CTI Molecular Imaging - CTMI - cls: 8.61 chg: +0.05 stop: 9.51 If you're currently staring at an 11 percent "gain" or "drop" in this case since CTMI is a short or any sort of profit in this play it may be time to consider taking some money off the table. We're still bearish on CTMI and believe it could see further weakness but its technical oscillators are starting to edge higher. That's our early warning system and we want to pay attention. The first test in any bounce will be the simple 10- dma, currently at $8.90. The 10-dma has been resistance for the past few weeks and should hold again. More conservative traders may want to consider tightening their stops closer to the $9.00 level. We're not suggesting new shorts at this time but another failed rally under $9.00 could work. Annotated Chart: Picked on August 15 at $ 9.67 Gain since picked: - 1.06 Earnings Date 08/05/04 (confirmed) Average Daily Volume: 322 thousand --- ICOS Corp - ICOS - close: 24.25 change: +0.64 stop: 26.01 There were three reasons we put ICOS on the high risk/reward section. First, the stock is a biotech. They tend to be volatile and you never know what sort of headline risks exists if they announce some new cure. Second, the P&F chart is currently bullish and suggests a possible bottom. Third, there is/was a short-term trendline of possible support from its higher lows dating back to July. It looks like ICOS found that supporting trendline and bounced as the BTK biotech index reversed its recent rollover in spite of some very negative action in Amgen (AMGN) the BTK's biggest component. Now the longer-term trend in ICOS is still bearish and its MACD is still in its recent "sell" signal but we need to be careful here. We are expecting the bounce to continue for a little bit. Both the $25 and $26 levels offer some overhead resistance. We'd prefer to see ICOS bounce toward $25.00 and then begin to waver and roll over again. That would present a new bearish entry point. Momentum traders may want to wait for ICOS to hit a new low under $23.00 before considering positions. Right now ICOS could be building a bear- flag pattern but if that's the case it's not a short until it breaks the bottom boundary. Plus, we're dealing with conflicting indicators since the short-term stochastics are bullish compared to the bearish MACD. Our short-term target remains the $20.00 region. Annotated Chart: Picked on September 08 at $23.80 Gain since picked: + 0.45 Earnings Date 08/04/04 (confirmed) Average Daily Volume: 1.1 million --- Priceline.com - PCLN - close: 20.42 change: +0.33 stop: 21.75 We may not be happy with the two-day bounce in PCLN we can be happy with its under performance. The tech sector has been soaring the last few days and the INX has built on its trend of higher lows to breakout on Friday. The INX's rally on Friday put the stock at a new one-month high and above its simple 50-dma and exponential 200-dma. Meanwhile shares of PCLN have reversed back above round-number support/resistance at the $20.00 mark. The recent market action makes us cautious about new plays. Fortunately, the VXN volatility index for the NASDAQ 100 is at extremely low levels and predicting a short-term top in the market soon. Keep an eye on the VXN and consider new positions in PCLN under $20.00. Annotated Chart: Picked on September 07 at $19.85 Gain since picked: + 0.57 Earnings Date 08/02/04 (confirmed) Average Daily Volume: 478 thousand ================================================================== Stock Splits ================================================================== Announcements ------------- PCBK declares 5-for-4 stock split This morning before the opening bell Pacific Continental Corp. (NASDAQ: PCBK) announced that its Board of Directors had approved a 5-for-4 stock split of its common shares. The split will be paid on October 15th, 2004 to shareholders on record as of September 30th. Any fractional shares resulting from the split will be paid in cash. Post-split the number of shares outstanding will be 8.5 million. This split comes exactly one year after its last stock split. About the company: Pacific Continental Bank is the operating subsidiary of Pacific Continental Corporation. The bank delivers its highly personalized services through ten banking offices in western Oregon including Eugene and Portland, the state's two largest commercial markets. Pacific Continental targets the banking needs of community-based businesses, professional service groups, and not-for-profit organizations. (source: company press release) ================================================================= 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 (c) 2001-2004 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
PremierInvestor.net Newsletter Weekend Edition 09-12-2004 section 3 of 3 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 three: Market Watch for Week of September 12th, 2004 - Major Earnings - Stock Splits - Economic Reports 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) ================================================================= =========================================== Market Watch for the week of September 12th =========================================== ----------------- Earnings Calendar ----------------- Symbol Co Date Comment EPS Est ------------------------- MONDAY ------------------------------- CBP Campbell Soup Mon, Sep 13 ---- N/A ---- 0.18 CKR CKE Restaurants Mon, Sep 13 Before the bell 0.20 SKY Skyline Mon, Sep 13 ---- N/A ---- n/a ------------------------- TUESDAY ------------------------------ IDR Intrawest Tue, Sep 14 ---- N/A ---- -0.21 ORCL Oracle Tue, Sep 14 After the close 0.09 PIR Pier 1 Imports Inc. Tue, Sep 14 Before the bell 0.11 POSS Possis Medical Tue, Sep 14 After the close 0.18 KR The Kroger Co. Tue, Sep 14 Before the bell 0.27 V Vivendi Universal Tue, Sep 14 ---- N/A ---- n/a ------------------------ WEDNESDAY ----------------------------- AXA AXA Wed, Sep 15 ---- N/A ---- n/a BBY Best Buy Co. Wed, Sep 15 Before the bell 0.51 BRC Brady Corp Wed, Sep 15 Before the bell 0.53 CLC CLARCOR Inc Wed, Sep 15 Before the bell 0.63 MLHR Herman Miller Wed, Sep 15 After the close 0.20 SKYE SkyePharma Wed, Sep 15 During the market n/a ------------------------- THUSDAY ----------------------------- COMS 3Com Corp Thr, Sep 16 After the close -0.07 CHTT Chattem Inc Thr, Sep 16 After the close 0.45 CTAS Cinas Inc Thr, Sep 16 After the close 0.42 PRGS Progress Software Thr, Sep 16 ---- N/A ---- 0.24 TEK Tektronix Inc Thr, Sep 16 After the close 0.30 VRTY Verity Thr, Sep 16 After the close 0.07 ------------------------- FRIDAY ------------------------------- BMET Biomet Fri, Sep 17 Before the bell 0.35 CC Circuit City Fri, Sep 17 Before the bell -0.11 VE Veolia Environment Fri, Sep 17 ---- N/A ---- n/a ---------------------------------------------- Upcoming Stock Splits In The Next Two Weeks... ---------------------------------------------- Symbol Company Name Ratio Payable Executable BLL Ball Corp 2:1 Sep 15th Sep 16th SF Stifel Financial 4:3 Sep 15th Sep 16th AMWD American Woodmark 2:1 Sep 24th Sep 27th LM Legg Mason Inc 3:2 Sep 24th Sep 27th CATY Cathay General Bancorp 2:1 Sep 28th Sep 29th WST West Pharma 2:1 Sep 29th Sep 30th NPBC National Penn 5:4 Sep 30th Oct 1st -------------------------- Economic Reports This Week -------------------------- We're just a little over a week away from the FOMC's next meeting. Economic data will continue to play an important role. We'll see three Fed manufacturing survey's this week plus the CPI report on Friday. Look for earnings from ORCL, V, and BBY this week. ============================================================== -For- ---------------- Monday, 09/13/04 ---------------- Kansas City Fed Mfg Index for August Monthly Treasury Budget statement for August ----------------- Tuesday, 09/14/04 ----------------- Richmond Fed Mfg Index for August Retail Sales for August ------------------- Wednesday, 09/15/04 ------------------- NY Empire State Mfg Index for Sep. Business Inventories for July Industrial Production for August Capacity Utilization for August ------------------ Thursday, 09/16/04 ------------------ Consumer Price Index (CPI) for August Core CPI (minus food & energy) for August Philly Fed Index for September Weekly Initial Jobless Claims - last reading was 319,000 SEMI Book-to-Bill numbers. ---------------- Friday, 09/17/04 ---------------- Michigan Sentiment/Consumer confidence (preliminary) September Option Expiration Friday Definitions: DM= During the Market BB= Before the Bell AB= After the Bell NA= Not Available ====================================================== 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. ----------------- Earnings Calendar ----------------- Value Plays With Bullish Signals --------------------------------- Ticker Company Name Close Change HD Home Depot 37.54 +0.53 MRK Merck & Co 45.77 +0.51 MWD Morgan Stanley 52.95 +0.99 UN Unilever N.V. 61.58 +0.82 DEO Diageo Plc (ADS) 50.80 +0.79 FDC First Data Corp 43.61 +0.75 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- VRTS Veritas Software 17.91 +1.21 PSFT PeopleSoft 19.79 +1.84 CVC Cablevision 19.57 +1.28 VSH Vishay Intertechnology 13.70 +1.08 QSFT Quest Software 11.27 +1.02 ODSY Odyssey Healthcare 19.20 +1.16 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- TXN Texas Instruments 21.94 +1.17 SAP SAP Ag (ADS) 39.18 +1.92 FDX Fedex Corp 85.66 +1.71 COF Capital One Financial 72.55 +2.94 A Agilent Technologies 22.71 +1.55 URBN Urban Outfitters 33.60 +2.97 ZQK Quiksilver Inc 25.90 +3.27 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- AMGN Amgen Inc 57.30 -1.76 AA Alcoa Inc 30.75 -2.54 MGA Magna Intl Inc 70.67 -2.99 MTG MGIC Investments 65.14 -3.30 PMI The PMI Group 40.17 -1.23 EAT Brinker Intl 30.11 -1.22 FFH Fairfax Financial 126.50 -5.87 AXL American Axle & Mfg 32.28 -1.09 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- AL Alcan Inccue Metal 43.17 -1.53 RI Ruby Tuesday 27.05 -1.46 GIVN Given Imaging 36.80 -1.24 PGR Progressive Corp 79.25 -0.69 CFC Countrywide Financial 36.05 -0.49 MAS Masco Corp 32.87 -0.22 PCAR Paccar Inc 62.57 -0.47 ================================================================= 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 (c) 2001-2004 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
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