PremierInvestor.net Newsletter Monday 09-20-2004 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: Naz Pulled up by the SOX Watch List: Chips to Diamonds and more =============================================================== MARKET WRAP (view in courier font for table alignment) =============================================================== 09-20-2004 High Low Volume Adv/Dcl DJIA 10204.89 - 79.57 10283.87 10187.19 1.46 bln 1078/1705 NASDAQ 1908.07 - 2.02 1921.50 1900.24 1.55 bln 1239/1765 S&P 100 541.93 - 3.87 545.80 541.08 Totals 2317/3470 S&P 500 1122.20 - 6.35 1128.55 1120.34 SOX 399.90 + 11.40 404.55 384.80 RUS 2000 570.74 - 2.43 573.97 569.86 DJ TRANS 3242.33 - 15.06 3259.17 3239.23 VIX 14.43 + 0.40 15.29 13.98 VXO (VIX-O)13.78 + 0.23 14.69 13.78 VXN 20.56 + 0.43 21.49 20.02 Total Volume 3,016M Total UpVol 1,326M Total DnVol 1,582M Total Adv 2317 Total Dcl 3470 52wk Highs 203 52wk Lows 54 TRIN 0.78 PUT/CALL 0.92 =============================================================== =========== Market Wrap =========== Naz Pulled up by the SOX Jonathan Levinson The Nasdaq tested last week's highs, following the SOX which closed higher by 2.93% and broke week's high on a closing basis. The Nasdaq failed to hold its gains, closing fractionally negative at 1908, while the Dow and SPX remained in negative territory for the duration and closed lower by .77% and .56% respectively. The Dow's loss was notable alongside the Nasdaq and SOX strength, with the Dow breaking and closing below last week's lows. Weekly Dow Chart The weekly charts provide the most bullish view of the markets at current levels, with the bullish divergent buy signals still in place on both the Dow and Nasdaq despite their inability to break the descending weekly resistance lines. The Dow's loss today kicked off this week's weekly candle below 10300 trendline resistance, with an intraday high of 10284. The weekly cycle oscillators remained on buy signals, but the indicators undrew part of the uptick that was showing as of last Friday. The 10300-10350 level is shaping up as the key battleground between bulls and bears. The current descending channel has been confounding bulls and bears all year- it's either a complex top at a low high, or the bull flag off the rim of a bullish cup and handle formation. A break above 10300-10350 on a weekly closing basis would rule strongly in the latter's favor, while a failure from here will set up a tense retest of 9900 and ultimately 9700 support. The weekly cycle oscillator upturns are quite bullish here, but even the 10-week stochastics lag the action considerably and are only reflecting the recent gains. Bulls need to break the 10300-10350 line in order to confirm the new weekly upphase, while a rollover from and a move below 10150 support should be enough to whipsaw the upphase back down. Daily Dow Chart The Dow daily is the most bearish of the bunch today, with today's decline leading its peers to the downside and breaking below last week's lows on a closing basis. Bulls are eyeing the support to 10180, being the lower descending trendline support level under what appears to be a bull flag. While the daily cycle oscillators are in a clear downphase, that downphase will require that the 10180 level break this week. A bounce from here would target the 10300 on the way to a test of 10350 and descending resistance at 10380 on this chart. A move above 10300 on a daily closing basis would most likely stall or abort the daily cycle downphase currently in progress. Weekly Nasdaq Chart The Nasdaq was a tower of power for much of today's session, benefiting from sector upgrades from Sanford Bernstein and RBC Capital Markets for the SOX which led the charge to the upside. The Nasdaq ran to the upper weekly descending resistance line and Fibonacci resistance at its session high of 1922 before falling back to the 1900-1910 range. The weekly Nasdaq chart looks more bullish than that of the Dow in some respects, with clearer buy signals from more oversold levels on the oscillators. The run up from the lower channel support line was steeper and the price action on this week's one- day-old candle is more insistent, with price pushing today at the upper descending resistance line. On the other hand, the bullish stochastic divergence on the Dow is absent here, and the selling in the early summer was more violent on the Nasdaq than on the Dow. In any event, 1920-25 resistance is the bull flag resistance level to break, analogous to the 10300-10350 Dow level discussed above. Below 1890, next support is at the 1845 level. Below 1820, the weekly cycle buy signals should whipsaw. Daily Nasdaq Chart As on the Dow, the daily COMPQ chart is less bullish than that of the weekly. Today's failure at 1922 left a tall upper doji shadow, and the negative close near the opening lows left us with a bearish gravestone doji. A failure to regain the highs tomorrow will result in further weakness in the daily cycle oscillators, but bears need to see the 1890-1900 level taken out in order to damage the still-intact rising channel off the summer lows. Last week's sideways range continues to look like consolidation above 1900, but below 1890, there's little support to the 1870-75 level. Daily Nasdaq Price/Volatility ratio chart The Nasdaq volatility index (VXN) rose .43 today to close at 20.56, rising alongside price at various points throughout the session. Over the years, many analysts, myself included, have noted the inverse correlation between volatility and price. "When the VIX is high, it's time to buy- when it's low, it's time to go." The VXN is the Nasdaq's VIX, and we've been noting extremely low relative readings in recent months. The trouble is in knowing how low is "low", and for this purpose, I prefer to watch ratio charts between the Nasdaq's underlying price and its volatility index. The COMPQ:VXN chart above follows this relationship, and the oscillators follow the turns. The ratio fell today, losing 2.08- that level is insignificant, except that the oscillators are oversold and verging on a turn lower. A downleg in the ratio suggests that the Nasdaq's price will decline relative to the VXN. I'll be following this tomorrow in the Market Monitor, but another up day for the VXN / down day for the Nasdaq should kick off a new downleg for this ratio- a bearish outcome for the Naz. Weekly TNX Chart Bonds rose strongly today, ahead of the FOMC announcement scheduled for 2:15PM tomorrow. Ten year note yields (TNX) fell 6.9 bps to close at 4.058% in a 1.67% decline for the day. The move reversed all of Friday's gain in the TNX / decline in ten year bond and retested last week's TNX lows, the current lows for the move that commenced in June. A break below current levels sets up a retest of lower channel support and old confluence close below at 4%. Treasury Secretary John Snow spoke in front of the National Press Club today, reiterating his optimistic view of the economic recovery in the US. He cited the creation of 1.7M jobs in the past 12 months as evidence of better times to come. He added that the President remains committed to cutting the federal deficit in half by the end of a second term should he be reelected. The IMF's managing director Rodrigo Rato touched on these themes as well, saying that the US should seize the moment to begin reducing both its fiscal and balance of trades deficits. Addressing the Council of Foreign Relations in New York, Rato said, "This relatively benign global outlook provides an important window of opportunity for further progress in addressing global imbalances and reinforcing the basis for more balanced and sustainable global growth." In other news, the National Association of Home Builders announced that its housing index fell from 71 in August to 68 in September to July's levels. The Wall Street Journal reported news of a report due to be released by the Office of Federal Housing Enterprise Oversight that will allegedly reveal evidence of FNM's executives decisions to manipulate earnings. FNM closed lower by 1.59% at 75.98. Weekly chart of Crude oil Crude oil marched higher today on news of Russian YUKOS' suspension of 100,000 bpd worth of oil exports to China, closing higher by 70 cents or 1.54% at 46.30. The financial press also noted that Hurricane Ivan has disrupted an estimated 1.2M bpd's worth of production in the Gulf of Mexico. However, the YUKOS story received the most attention, as the suspension of rail deliveries to China constitutes the first supply disruptions arising from its ongoing financial woes. The company has been warning of such risks in the wake of bank account seizures pursuant to the Russian government's efforts to recover more than 7B in taxes from the company. Analyst David Thurtell noted that "The YUKOS volume isn't much in the scheme of things but in today's market, which is as tight as a drum, it's crucial." The move broke last week's high, closing above the 46 level and confirming the doji reversals from the lower rising channel on the past 3 tests over the past month. While the bearish stochastic divergence continues, it will whipsaw to the upside on a return to the prior highs. 45.50-.75 is now support, and above the session high of 46.475 there's resistance at 46.75-47, following which the year highs will come into view above 48. It was a quiet newsday, with no major economic reports released. In corporate news, CL was out with an earnings warning this AM, saying that Q3 and Q4 earnings will be light. The company cited higher marketing costs that exceeded better-than-expected growth in unit volume and market share. While consensus estimates were for earnings of .67 per share for Q3 and .68 for Q4, the company expects earnings from .57-.59. CL got smoked for 11.23% to close at 48.23, -6.10, and the warning from the consumer products company helped keep the Dow and SPX in the red for the duration of the session. PMCS also warned in the morning, reducing its Q3 revenue expectations from 86M to 71M-73M. The company cited reduced demand for DSL equipment from Asian ISPs in Q2 2004. Consensus estimates were for earnings of 89.2M. PMCS, like the Nasdaq, managed to rise on the news, adding 39 cents or 4.12% to close at 9.86 for the session. After the bell, ADBE announced earnings for Q3 of 42 cents per share, beating estimates by 3 cents on sales of 403.7M. ADBE was up 3.86% at 50 as of this writing. RHAT announced Q2 net income of 11.8M or 6 cents per share, beating estimates by 5 cents. RHAT was higher by 1.51% at 15.46 as of this writing. For tomorrow, all eyes will be on the Fed's 2:15 rate announcement and it accompanying bias statement. The bond market is poised for a breakout using last week's price high/yield low as the reference. Strength in bonds today suggests that the Fed will emphasize the "disinflationary" risks facing the economy, which in the recent past has see declines in the dollar and rallies in all other asset classes. As the intermarket relationships have been cloudier than usual, however, it's safer to follow the individual charts you're trading than to guess at an intermarket reaction to moves in the dollar. The daily cycle in the Dow has rolled decisively to the downside, while the Nasdaq continues its bullish trending move. Today's bearish gravestone doji suggests possible trouble tomorrow for Nasdaq bulls, but it will take a move below 1890-1900 to get the ball rolling. The bullish cycle picture would have a corrective daily cycle downphase bottom at a higher low before resuming a renewed charge against descending bull flag resistance on the weekly charts. Nasdaq bulls today were hoping to dispense with the downside altogether and get to the good part, which they nearly accomplished. With the pending announcement at 2:15PM, there's the possibility that the market will try to bore us for the first part of the session and then make up for lost time in the final 2 hours. ================================================================== 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 --------------------------------- National Semiconductor - NSM - close: 15.74 change: +0.71 WHAT TO WATCH: The SOX semiconductor index was the strongest sector on Monday with a 2.9 percent gain. NSM out performed its peers with a 4.7 percent rally to breakout to new five-week highs and above its simple 50-dma. NSM has filled the gap from mid- August and looks ready to breakout over the $16.00 level. We would watch for the breakout or a possible dip back toward $15.00 and consider a bounce. --- Overseas Shipping - OSG - close: 49.54 change: +1.48 WHAT TO WATCH: Oil stocks were strong today and OSG, an oil tanker company, joined the rush higher with a 3 percent rally. Shares of OSG have been trading sideways between $48 and $50 for the last several days but the stock looks ready to breakout over round-number resistance at $50.00. The P&F chart shows a triple- top breakout buy signal and a bullish target to $66. --- Apple Computer - AAPL - close: 37.71 change: +0.57 WHAT TO WATCH: AAPL just keeps on climbing. The stock is up strongly the last three sessions and up six out of the last seven weeks. Shares have almost doubled from their late December lows near $19.25. We suspect AAPL can make it to the $40 level before its next serious bout of profit taking. Watch for a dip back to $36.00-36.25 and consider buying a bounce. The bullish triangle breakout on its P&F chart is a very successful pattern to play but its bullish price target was achieved before the pattern was formed. --- Tiffany & Co - TIF - close: 31.43 change: -0.21 WHAT TO WATCH: Is TIF getting ready to roll over again? TIF has been trading lower for months with a dramatic trend of peaks and valleys creating a nice pattern of lower highs and lower lows. The most recent oversold rebound is beginning to fade under its simple 50-dma. The oscillators look bearish and its MACD is nearing a new "sell" signal. We would watch for a drop under $30.00 as a potential entry point. ----------------------------------- RADAR SCREEN - more stocks to watch ----------------------------------- SNDK $27.20 +0.90 - SNDK rallied 3.4 percent to breakout over the $27 mark and confirm its breakout over the simple 200-dma. AIRT $19.01 +3.91 - We can't find any news behind AIRT's 25 percent gain today. The stock only has 1 million shares in its float and 2.8 million shares traded today. The most recent data doesn't show a lot of short interest. SNE $34.45 -0.22 - Noticing that SNE is seeing some follow through on the recent failed rally near $36. The MACD has just painted a new "sell" signal. ================================================================= 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 09-20-2004 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 ================================================================= In section two: Stop Loss Adjustments: IMN, ETM, DPH, SMRT, PSSI, PCLN Stock Splits Announcements: None 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 Adjustments ================================================================== IMN - tech stock short - IMN continues to consolidate but the action on the intraday chart and the momentum oscillators certainly seem to point to a breakdown soon. ETM - non-tech short - ETM continues to sink and has now broken the $35.00 level. Shares dropped 2.8 percent on Monday. We are going to lower our stop from $37.01 to $36.01. Readers can prepare to exit as ETM nears our target at $32.00. DPH - non-tech short - DEPH is back under the $9.00 level again. Traders may want to reconsider new entries on a drop below 8.90 or 8.80. SMRT - non-tech short - Be careful here. SMRT dipped toward its exponential 200-dma before bouncing on Monday. PSSI - non-tech short - ENTRY ALERT - We have been triggered in PSSI. Our entry point to open shorts was $10.44 and PSSI dropped 2.74 percent on Monday breaking support at its exponential 200-dma. PCLN - high risk/reward short - PCLN looks increasingly weak. The stock dropped 2.5 percent breaking support at $20.00 and hitting new four-week lows. ================================================================== Stock Splits ================================================================== None ================== 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 ECA Encana Corp 44.08 +1.16 DVN Devon Energy 71.09 +1.09 CNQ Canadian Natural Res. 36.20 +0.73 PCAR Paccar Inc 66.23 +1.28 OMC Omnicom Group 70.93 +0.74 TLM Talisman Energy 24.54 +0.56 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- RMBS Rambus Inc 16.98 +1.48 SIRF Sirf Tech Holdings 13.47 +1.31 MEDX Medarex Inc 7.84 +1.01 SMSC Standard Microsystems 17.69 +1.16 AIRT Airt T Inc 19.03 +3.93 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- DNA Genentech Inc 53.91 +1.91 SLM SLM Corp 43.61 +1.36 XLNX Xilinx Inc 29.65 +1.11 CCJ Cameco Corp 73.41 +2.54 NVLS Novellus Systems 27.04 +1.16 HRS Harris Corp 53.61 +1.91 PDS Precision Drilling 54.86 +1.95 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- C Citigroup 45.40 -1.55 PG Procter & Gamble Co 54.38 -1.88 MO Altria Group 47.08 -1.40 UN Unilever 58.16 -2.78 CL Colgate-Palmolive 48.23 -6.10 SSP E.W.Scripps Co 49.08 -1.08 RAI Reynolds American 69.89 -2.49 ACV Alberto-Culver 44.87 -1.43 IFF Intl Flavors & Fragrances 37.33 -1.37 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ------------------------------------------- LEN Lennar Corp 45.95 -1.61 DNB Dun & Bradstreet 56.28 -1.97 UHAL Amerco 31.00 -1.23 AVD American Vanguard Corp 32.32 -2.23 LM Legg Mason 80.63 -1.38 IST Ispat Intl 27.30 -1.05 SKYF Sky Financial Group 25.06 -0.26 RYL Ryland Group 89.72 -2.01 ================================================================= 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) 2004 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
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