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Daily Newsletter, Monday, 10/04/2004

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PremierInvestor.net Newsletter                   Monday 10-04-2004
                                                    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: Flagpole Rally II 
Watch List: Telecom to Defense and more 


===============================================================
MARKET WRAP  (view in courier font for table alignment)
===============================================================
      10-04-2004           High     Low     Volume   Adv/Dcl
DJIA    10216.54 + 23.89 10270.37 10191.40 1.91 bln 1676/1142
NASDAQ   1952.40 + 10.20  1965.76  1950.17 1.83 bln 1846/1195
S&P 100   544.74 +  1.63   547.36   543.11   Totals 3522/2337
S&P 500  1135.17 +  3.67  1140.19  1131.50
SOX       405.01 +  3.10   413.13   401.91
RUS 2000  589.09 +  4.06   592.02   585.03
DJ TRANS 3318.62 + 19.82  3329.46  3299.25
VIX        13.41 +  0.66    13.45    12.99
VXO (VIX-O)13.11 +  0.56    13.23    12.60
VXN        19.61 +  0.70    19.66    18.90
Total Volume 3,745M
Total UpVol  2,528M
Total DnVol  1,160M
Total Adv  3522
Total Dcl  2337
52wk Highs  491 
52wk Lows    42
TRIN       0.63
PUT/CALL   0.86
===============================================================

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

Flagpole Rally II
Jonathan Levinson

It was a very quiet, almost cadaverous market for traders 
watching the cash markets during regular trading hours, as the 
real action occurred in the premarket.  After the initial gap up, 
there little tradeable action and a narrow range ensued.

Despite the lack of range, volume was strong with breadth 
positive, advancing volume more than doubling declining volume on 
the NYSE and almost doubling it on the Nasdaq.  The volatility 
indices were similarly divided, with the NDX volatility index 
(QQV) rising even as the NDX advanced, while the OEX volatility 
index (VXO) declined.


Daily Dow Chart



The daily candle print for the Dow combined with the strong NYSE 
volume would qualify as a gravestone doji, a classic reversal 
print.  However, there are two inconsistencies:  a gravestone 
doji should be red instead of green, meaning that the day would 
ideally have finished negative.  I've found this to be of only 
minor importance, as the key is that the Dow finished well within 
the bottom of its range, having been decisively rejected at the 
upper end.  More importantly, however, there wasn't the panicked 
"DOH! Geee" reversal that markets the obvious doji tops.  This 
pattern is based on the idea of the herd stampeding in one 
direction, and then stampeding equally urgently the other way.  
Today's endless, minute range that drifted lower wasn't the stuff 
of which classic reversals are made.  Of course, it could have 
been a controlled distribution top-  it's just not obviously so.  
The key will be whether we break today's low of 10191 on a 
closing basis tomorrow.  A strong break below the upper 
descending resistance line tomorrow will close the door on bulls.  
A weak, sideways decline or a bounce will set up more pain for 
bears.


Daily S&P 500 Chart


The same candlestick issue is evident here for the SPX, and bears 
will be looking for a close below 1131.5.  Note that the daily 
cycle oscillators are on early buy signals from a higher low for 
SPX.  Because of the higher price high, there's the potential for 
a steep bearish divergence if the upphase fails early, as in this 
week.  However, until it does, the SPX is still in an upphase, 
and the benefit of the doubt should go to bulls above the line at 
1131.


Daily Nasdaq Chart


The Nasdaq would have printed a gravestone doji/shooting star, 
closing 2 points above its low for the day.  It opened on its 
second consecutive breakaway gap up in as many sessions, with gap 
support at 1942 if today's low at 1950 fails.  Of the 3 indices, 
the Nasdaq is on the weakest daily cycle upphase, and a close 
below the 1940 level should be enough to stall the current bounce 
attempt.  Once again, it's bullish until it isn't, but bulls will 
want to keep their stops close to protect current profits.


Weekly TNX Chart


Treasury bonds kicked off the week on a soft note as ten year 
note yields (TNX) rose above 4.2% intraday before settling back 
below the line.  Buying in bonds reversed the gains as the TNX 
closed in light negative territory, still at the upper end of 
Friday's range.  Traders following the TNX closely should refer 
to this weekend's Futures Wrap, in which I reviewed the daily TNX 
chart.  The weekly chart posted above shows last week's bullish 
reversal in the TNX, rising on a bullish hammer from below the 4% 
line to engulf the previous two weeks' declines.  Bond 
bears/yield bulls will want to see the TNX clear the 22 and 50 
week EMAs overhead on the way to a retest of the 4.4% resistance 
level.  Note that this week's TNX candle is based solely on 
today's session.  For the day, the TNX declined 1.8 bps to 
4.173%, a .43% loss for the day.


Weekly chart of Philadelphia Housing Index ($XAL)


Homebuilders got clocked on the weakness in bonds and continued 
lower even after bonds returned to positive territory, declining 
3.2% to close at 397.59 in a notable divergence from the broader 
market.  The weakest components of the index included BZH, MDC 
and PHM, all of which lost more than 4% for the day.  TIN and BCC 
were the lone advancers among the 21 stocks that comprise the 
index.


Weekly chart of Crude oil


Oil was among the topics discussed at this weekend's G7 meeting, 
with the Group of Seven calling for an expansion in supply from 
oil producers.  Representatives of the G7 countries, Britain, 
Canada, France, Germany, Italy, Japan and the United States, 
stated that current high oil prices pose a risk to global 
economic growth.  Both higher production and an increase in 
efficiency from consumer nations were cited in the G7's 
communiqué.  OPEC's smallest producers, Qatar, said however that 
OPEC has done all it can to relieve rising prices, but added that 
it will continue to do so.  OPEC's top producer, Saudi Arabia, 
announced that it was increasing production from 9.5 mbpd to 11 
mbpd in response to prices above 50 per barrel.

Reuters reported that Nigerian rebels withdrew their threat to 
target oil operations in the delta region and signed a peace 
agreement on Friday.  Oil companies were considering returning 
workers to Nigeria's delta today as it appeared that the deal 
would stick.  Nigeria produces approximately 2.3 mbpd.

David Malpass of Bears Stearns was out this morning with bullish 
comments for the US economy, projecting growth in Q3 above 4% and 
a possible "blowout" in Q4 to the 6% level.  He cited rate hikes 
as being bullish for the economy, based on their evidencing the 
Fed's lack of concern for deflation and the degree to which 
current rates are currently low.  He believes that global 
economic expansion is offsetting the drag caused by the oil 
rally, and cited certain expiring tax provisions that allow the 
expensing of capital equipment purchased prior to year-end.  He 
expects a spike in spending from businesses seeking to exploit 
these provisions.

In much the same vein, Fed Governor Bernanke was talking down the 
impact of oil prices today: "It's the difference between rising 
prices and high prices. The economy can accommodate prices at the 
current level."  Nevertheless, he added that he hopes that oil 
prices will fall gradually.

Philly Fed President Santomero weighed in as well in a speech to 
the National Association of Business Economics (NABE), stating 
that he expects to see growth in the 3.5%-4% range through 2005 
supported by a steady rise in consumer and business investment 
spending.  In his opinion, growth at this level would be optimal, 
sufficient to stimulate gains in employment without causing a 
spike in price inflation.  He believes that at its current 1.75%, 
the overnight lending rate is "below neutral."  As he put it, "I 
don't think we are yet at neutral.  We will have to evaluate how 
the economy evolves from here to try to figure out how to 
proceed, but my suggestion to you is that we still have a way to 
go."

Governor Bies addressed the NABE in the afternoon, reiterating 
the view that the US economy is coming out of its recent "soft 
spot" and her opinion that growth would accelerate in the current 
quarter.  She added that she sees very weak inflation: "The core 
PCE has been one-tenth of one percent for the past three months 
and that is a good signal that we are down from where we were," 
she said.  Note that the "core" PCE strips out the so-called 
"volatile" food and energy components.

The IMF's managing director Rodrigo de Rato and World Bank 
president James Wolfenson reported a general lack of consensus on 
critical issues from this year's World Bank-IMF annual meeting.  
Strongest progress was made on the issue of debt-relief for the 
world's poorest nations, though a specific plan was not agreed 
upon.  Rato spoke up in favor of better surveillance to provide 
early warning of potential financial crises. 

More exciting were comments from Li Ruogu, assistant governor of 
the People's Bank of China, who delivered what was characterized 
as a rebuke to Congress, suggesting that it is not China's 
currency, but rather the low US savings rate behind current 
global imbalances.  Mr. Li suggested that US foreign direct 
investments in China generate profits not for China, but for the 
US, and concluded that changing the exchange rate would 
effectively "destroy the goose that can give you golden eggs".  
He said that China remains committed to supply-and-demand based 
exchange rates, but would not state a timeframe, stating that in 
China's 8000 year history, a decade isn't a long time.  He added 
that the US has done nothing in 20 years despite its commitment 
to reduce arms sales to Taiwan.


It was a quiet day for economic data, with August Factory Orders 
as the lone report for the day.  The Commerce Department reported 
that new orders at US factories declined 0.1% after rising a 
revised 1.7% in July.  Economists were expecting a rise of 0.1% 
in August.  The data revealed the bulk of the weakness to be in 
civilian aircraft orders, which declined 42.9% following July's 
103.5% increase.  Excluding transportation, Factory Orders rose 
1.3%, and y-o-y grown remains strong at +12.5%.  The market 
cheered the data immediately following its release at 10AM.


In corporate news, VTSS reduced Q4 estimates from 0-1 cent per 
share to -2 cents per share, citing weakness in the storage 
market.   VTSS closed lower by 5.92% at 2.70.

WAG announced that same-store sales rose 6.3% in September, with 
total sales rising 13.2% from September 2003.  NUS, a direct 
seller of personal care and nutrition products, reduced its 
forecast for Q3 earnings to 27-28 cents per share, compared with 
the First Call consensus of 34 cents.  The company cited weaker 
than expected revenue in China and Japan, and higher than 
expected expenses in these territories.  NUS declined 32.32% to 
close at 16.46.

Merrill Lynch was bearish on tech this morning, citing earnings 
revisions that were -14% in September compared with +5% in 
August.  This decline was more than double its standard 
deviation, and spurred Merrill's Steven Milunovich to project 
negative revisions to continue in 2005.  He expects technology 
stocks to underperform in such an environment.

SEBL was up more than 14.04% on news of an extension to its 
strategic alliance with MSFT whereby SEBL will optimize its 
Siebel Business Analytics for use with a number of MSFT's 
products.  The stock closed up 1.15 at 9.34.

The Disk Drive Index (DDX) rose 3.23% on gains from HTCH, which 
guided higher to 15-20 cents per share for fiscal Q4, up from its 
July guidance of breakeven to 10 cents per share, citing strong 
shipments.  HTCH closed higher by 16.28% at 4.57.  MXO was 
another big winner, adding 6.17% to close at 5.68.  WDC got a 
boost, rising 2.74% to close at 9.37 on news of a new 2.5" hard 
drive that is currently shipping briskly in a market that is 
expect to grow from 53M units in 2004 to 77M in 2007 according to 
Gartner Group. 

Tomorrow is scheduled to be another light news day, with ISM 
services for September at 10AM, est. +.1%.  The key issue for 
traders will be whether the indices can hold onto their gains 
following the dismal drift lower from this morning's strong open.  
While the daily cycles are pointed north, the higher price highs 
leave these cycles vulnerable to a divergent reversal, 
particularly on the Nasdaq. 


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

Bellsouth Corp - BLS - close: 28.27 change: +0.61 

WHAT TO WATCH: Bullish traders may want to give BLS a second 
look.  The stock has been rising on strong volume the last three 
sessions.  Today's 2.2 percent rally is a breakout over 
resistance at the $28 level.  Its oscillators are positive and 
its MACD just produced a new buy signal.  The P&F chart is 
bullish and points to a $40 target.  This looks like an entry 
point for a run toward $30-31.




---

Total Systems - TSS - close: 26.00 change: +0.52

WHAT TO WATCH: The 2 percent rally in TSS and its breakout over 
$26.00 is noteworthy for two reasons.  First it's a breakout from 
its three-week trading range between $25.00 and 25.50.  Secondly, 
it's a breakout over resistance at the bottom of its January gap 
down.  TSS is now free to try and "fill the gap".  Consider this 
an entry point for a possible run towards $28.00-28.50.




---

United Defense Industries - UDI - close: 40.81 change: +1.06

WHAT TO WATCH: Defense stocks have been strong and UDI has been 
consolidating under resistance at the $40 mark for the last three 
weeks.  That was until today.  UDI has broken out to new all-time 
highs on above average volume. Its short-term oscillators are 
bullish.  This could be an entry point for a run towards $44-45.





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

PRU $48.37 +0.62 - PRU is very close to breaking out over 
resistance at $49 to hit new all-time highs.

VRTS $19.62 +1.10 - We've had our eye on VRTS for weeks as we 
look for a breakout over resistance at $20.00.  The stock might 
be able to do it this time with rising volume on the current 
rally.

SID $16.10 +0.51 - SID just broke through resistance at $16.00.  
Consider a run towards $18.

AVO $40.97 +1.58 - AVO just broke out over resistance at $40.00.  
Look for the stock to challenge its highs near $42.50 and 
potentially more.

RDWR $22.96 +1.04 - RDWR just broke out over resistance at $22.50 
and its simple 200-dma. 

UTSI $18.30 +1.56 - UTSI has just broken through resistance at 
$17.00 and its simple 50-dma.  Look for shares to rally toward 
$20 and the bottom of its gap down near $20.85.


=================================================================
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 10-04-2004
                                                    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: MACR, SPN

Stock Splits
  Announcements: None       

Active Trader (Non-tech)
  New Bullish Plays: STN

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

MACR - tech stock long -
  MACR continues to show strength and added another 
  3.98 percent on Monday with above average volume and
  a bullish breakout over its simple 100-dma.
 
 
SPN - non-tech long -
  Uh-oh!  Heads up.  SPN gapped higher this morning and
  then traded lower most of the session.  This could be a 
  potential top forming.  We are suggesting readers take
  profits



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

None



=============
Active Trader
=============

New Bullish Play
----------------

Station Casinos - STN - close: 50.92 change: +1.90 stop: 48.49

Company Description:
Station Casinos, Inc. is the leading provider of gaming and 
entertainment to the residents of Las Vegas, Nevada. Station's 
properties are regional entertainment destinations and include 
various amenities, including numerous restaurants, entertainment 
venues, movie theaters, bowling and convention/banquet space, as 
well as traditional casino gaming offerings such as video poker, 
slot machines, table games, bingo and race and sports wagering. 
Station owns and operates Palace Station Hotel & Casino, Boulder 
Station Hotel & Casino, Santa Fe Station Hotel & Casino, Wildfire 
Casino and Wild Wild West Gambling Hall & Hotel in Las Vegas, 
Nevada, Texas Station Gambling Hall & Hotel and Fiesta Rancho 
Casino Hotel in North Las Vegas, Nevada, and Sunset Station Hotel 
& Casino and Fiesta Henderson Casino Hotel in Henderson, Nevada. 
(source: company press release)

Why We Like It:
STN has been consolidating its August to September gains in a 
three-week long trading range under resistance at $50.00.  Now 
shares are breaking out through the top of that range and round-
number, psychological resistance at the $50.00 mark on 2.5 times 
the average volume.  Earnings are expected on or near October 
19th so we could be seeing the beginnings of an earnings run up.  
We are going to use a TRIGGER to go long at $51.01 since STN 
failed at $50.94 back in June.  Our initial target is $55.00 and 
STN needs to get there quick since we do not plan to hold over 
its earnings report.

Annotated Chart:

 

Picked on October xx at $xx.xx <-- see TRIGGER
Gain since picked:      + 0.00
Earnings Date         10/19/04 (unconfirmed)
Average Daily Volume:      469 thousand




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

COP     ConocoPhillips             84.67     +0.60
MRK     Merck & Co                 34.23     +0.92
SBC     SBC Communications         26.90     +0.58
TGT     Target Corp                46.69     +1.24
BLS     BellSouth Corp             28.27     +0.61
GS      Goldman Sachs              94.87     +0.95

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

VRTS    Veritas Software           19.62     +1.10
SEBL    Siebel Systems              9.34     +1.15
UTSI    UStarcom Inc               18.30     +1.56
AMIS    Amis Holdings              15.17     +1.04
GME     Gamestop Corp              19.95     +1.03
AKS     AK Steel Holdings           9.70     +1.10

---------------------------------------
Breakout to Upside (Stocks over $20)
---------------------------------------
  
CCL     Carnival Corp              49.03     +1.19
WIT     Wipro Ltd                  20.86     +1.56
CI      Cigna Corp                 72.01     +1.41
NUE     Nucor Corp                 96.80     +3.78
SDS     Sungard Data Sys           27.00     +2.58
PH      Parker Hannifin Corp       61.12     +1.53
ACS     Affiliated Computer Svc    60.14     +3.20

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

ERTS    Electronic Arts            44.83     -1.61
PHM     Pulte Homes                56.33     -5.30
DHI     D.R.Horton Inc             30.91     -2.03
CTX     Centex Corp                49.04     -2.28
LEN     Lennar Corp                45.30     -2.30
TOL     Toll Brothers              43.84     -2.16
MDC     M.D.C.Holdings             70.01     -4.95
HOV     Hovnanian                  37.87     -2.74
CVD     Covance Inc                37.52     -2.42

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

KBH     KB Home                    80.89     -3.61
AU      Anglogold Ashanti          37.12     -1.18
TPL     Texas Pacific Land Trust   90.50     -7.50
 

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