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PremierInvestor.net Newsletter                   Monday 10-18-2004
                                                    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 
Watch List:  Bounces, Breakouts and Flags


===============================================================
MARKET WRAP  (view in courier font for table alignment)
===============================================================
      10-18-2004           High     Low     Volume   Adv/Dcl
DJIA     9956.32 + 22.94  9960.15  9861.63 1.68 bln 1495/1290
NASDAQ   1936.52 + 25.02  1936.52  1904.50 1.49 bln 1782/1207
S&P 100   535.18 +  3.38   535.48   529.94   Totals 3277/2497
S&P 500  1114.02 +  5.32  1114.46  1103.33
SOX       384.35 +  2.98   384.37   374.67
RUS 2000  572.03 +  2.61   573.19   565.97
DJ TRANS 3382.71 + 30.03  3384.27  3332.75
VIX        14.71 -  0.33    16.16    14.64
VXO (VIX-O)14.69 -  1.20    16.27    14.69
VXN        20.72 -  1.08    22.96    20.61
Total Volume 3,181M
Total UpVol  2,070M
Total DnVol  1,014M
Total Adv  3277
Total Dcl  2497
52wk Highs  192 
52wk Lows   103
TRIN       0.59
PUT/CALL   0.77 
===============================================================

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

Flagpole Rally
Jonathan Levinson

What started as a now-routine thrashing of the Dow and SPX, this 
time following bad news from MMM, whipsawed into a strong bullish 
reversal before noon.  Price ran vertically higher through 
multiple resistance lines, reversing a synchronous set of 
intraday downphases from what appeared to be a nearly perfect 
bearish intraday setup.

Merrill Lynch's Walter Murphy had been out this morning, 
forecasting that the Dow would blow the roof off this year in a 
terminal upside move to the 11000-11500 level.  Murphy expects 
the Dow to decline from there in 2005, and that the 4th quarter 
rally would mark the end of the rally from the 2002 lows.  He 
also noted that in every election year since 1932, the incumbent 
has lost the election where the Dow has lost 0.5% or more in 
October.

This seemed like the usual fluff, but the sudden upward launch in 
the indices lent it credence.  The bulls are still pretty far 
from being in control, however, as a quick look at the daily 
charts will reveal.  

Daily Dow Chart



The Dow posted a bullish doji hammer today, with the daily print 
coming close to a key outside reversal.  The Dow was below 
Friday's low when the burst of buying hit, with the Dow closing 
just north of 9950 resistance.  A daily cycle downphase still in 
effect, but with a potential bullish stochastic divergence.  If 
the bulls can close the Dow back above the rising trendline at 
10080, the resulting daily cycle upphase will launch from a 
higher stochastic high against the lower price low.  This is 
generally a setup for a powerful move, in this case to the 
upside, and would target the 100200  and 10250-60 confluences.


Daily S&P 500 Chart


The SPX printed a similar pattern, but bounced from a nominally 
higher low from Friday.  The bullish doji hammer broke Friday's 
high and targets 1122 trendline resistance next.   Because last 
week's selling wasn't as extreme as it was for the Dow, the SPX's 
potential bullish oscillator divergence isn't as sharp.  But it's 
still there, and bulls will be gunning for a close above 1128 
resistance to make good on it.

Daily Nasdaq Chart


The Nasdaq has been consistently stronger than its peers for the 
past two weeks, and today's candle underlines the point.  The 
bounce took place from above unbroken rising daily support, and 
blew past last week's closing highs.  The daily cycle downphase 
is the weakest of its peers.  Next resistance is at 1950, 
followed by 1980.  A close above 1950 should be enough to end the 
daily cycle downphase and print the first tentative daily cycle 
buy signals.


Weekly TNX Chart


FNM announced its intention to more aggressively court subprime 
borrowers, with CEO Franklin Raines announcing a 3 pronged 
strategy to encourage these mortgages.  This follows data in 
recent weeks showing a stall in mortgage activity as reported by 
the Mortgage Bankers Association, despite the recent declines in 
bond yields.  

Later in the session, the National Association of Home Builders 
announced a bounce in builder confidence, wit its Housing Market 
Index (HMI) rising 5 points to 72, more than offsetting 
September's 4 point decline.  The Current Sales index rose 5 
points to 78, and Expected Sales rose 9 points to 84.

As can be seen in the weekly chart of the ten year note yield 
(TNX), rates have been in a downtrend since the June high but 
have recently found support at the 3.9%-4% level.  This attempt 
to put in a higher low for the yield is potentially bearish for 
bonds, provided that TNX doesn't break lower rising bear wedge 
support at 3.885%.  A weekly cycle upphase is trying to form, and 
yield bulls/bond bears should be in business on a break above the 
4.35% level.  For the day, the TNX closed unchanged at 4.053%.


Weekly chart of Crude oil


Crude oil declined from a record high of 55.5 this morning to a 
session low of 53.10 in the afternoon on the Nymex.  Aside from 
technical factors, analysts speculated that weakness in oil was 
attributable to the drag that the rally has been exerting across 
all asset classes.  The selling in base metals and the equity 
indices last week were cited in support of this hypothesis.  
Greenspan's comments last week underlined the obvious deleterious 
effects of high energy prices on the economy, and today's 
downward action in oil prices was attributed to the damage 
already wrought by the rally.  In theory, any rally in energy 
should eventually choke itself off, though I'd be very skeptical 
of any attempt to correlate daily market gyrations with macro-
fundamental factors such as that.  For the day, November crude 
close at 53.725, +.05.


In corporate news, MMM announced its Q3 results, earning 775M or 
97 cents per share compared with 663M or 83 cents in Q3 2003 but 
missing estimates of 98 cents.  The company expects to earn 
$3.68-$3.69 per share for 2004 and anticipates an increase in 
sales of 7% from 2003.  Profits rose, but the miss was the first 
in seven quarters, with the company attributing part of this 
quarter's strength to weakness in the US Dollar.  In particular, 
the company's chairman and CEO, James McNerney, said, "We are 
optimistic about the strength of our diverse business and 
technology portfolio, but remain cautious on the global economy." 
Given the diversified nature of MMM's business, the company's 
outlook and results were seen as a shot across the bow of the 
indices today, and both the stock and the Dow led the indices 
lower for most of the morning.  MMM closed lower by 2.41% at 76.10.

Air conditioner, bathroom and vehicle control system maker ASD 
missed estimates with Q3 earnings of 156M or 71 cents per share 
on sales  of 2.396B.  Net of one time revenues, however, earnings 
were 65 cents, missing consensus estimates of 67 cents.  The 
company narrowed its range for 2004 earnings, expecting earnings 
of per share from the previous projection of $2.17-$2.27 per 
share to $2.21-$2.25.  ASD lost 4.55% to close at 36.46.

Printer supplier LXK beat estimates, announcing Q3 earnings of 
156.1M or $1.17 per share, up from 79 cents in Q3 2003.  This 
amount was increased by a non-recurring tax benefit without which 
earnings were $1.02 per share, 4 cents higher than consensus 
estimates.  Revenue was 1.27B, 200M less than forecast. LXK lost 
.75% to close at 81.78.

Toymaker HAS characterized its 2003 earnings as "disappointing", 
earning 45 cents per share (up from 38 cents in Q3 2003) but on 
decreased revenue of 947.3M from 971.1M last year.  Estimates had 
been for 51 cents on revenue of 992M.  MAT beat by a penny with 
earnings of 61 cents but revenue missed forecasts for 1.76B, 
coming in at 1.67B.  Sales were lower by 9%, with Barbie sales 
falling 13% and Fisher-Price rising by 7%. HAS got smoked for 6.5%, 
closing lower at 17.26.

There was action among the miners today, with South African miner 
HMY announcing that it would be submitting an 8.1B stock-based 
takeover of GFI.  This would represent a 29% premium over the 
past 30-days' price of GFI.  The proposal, which is contingent on 
the proposed IAG-GFI merger being scuttled, would see the 
issuance of 1.275 new HMY shares for each GFI share.  GFI's 
largest shareholder, Norilsk Nickel (NILSY) supports the deal.  
GFI closed lower by 4.35% at 14.29, IAG closed lower by 8.93% at 
7.24, and HMY lost 8.44% to close at 11.50.

Homebuilder and mortgage banker NVR beat expectations, reporting 
Q3 earnings of 147.7M or $19.04 per share, rising from 109.4M or 
12.55 in Q3 2003 and beating estimates of $16.91.  Revenue was 
higher by 19%, new orders by 9%.  The company expects a 22%-24% 
increase in earnings for 2004. NVR closed higher by 2.27% at 
559.40.

After the bell, IBM announced earnings that beat estimates by 3 
cents at $1.17 per share and meeting estimates of 23.4B in 
revenues.  The EPS number excludes an 11 cent or 320M pension 
fund dispute.  IBM had closed higher by 1.26% and added another 
1.61% afterhours, trading 87.30 as of this writing. TXN was 
slightly lower afterhours at 21.05 after topping estimates of 27 
cents EPS with 32 cents.  TXN's profit represented an alltime 
high, doubling Q3 2003's result while revenue increased 28% over 
last year.  As was the case with MMM, the company noted 
challenges in the current environment but expressed confidence as 
to its measures, including tightening expenses and reducing 
production. 

JDAS also took off despite missing by a penny, adding 5.88% as of 
this writing to trade 11.70.  Q3 revenue for JDAS was down from 
11 cents per share in Q3 2003 to 6 cents, with earnings falling 
to 1.6M from 3.4M.  The company cited delays in software 
licenses.

With earnings season upon us, the markets should continue to 
deliver knee-jerk reactions in both directions.  What was a 
bearish market mover in MMM this morning was treated as bullish 
for TXN afterhours.  What appeared as a common thread was an 
acknowledgement of challenging conditions and a less optimistic 
outlook going forward.  Boosts from the foreign exchange 
differential, cost cutting or layoffs may increase short term 
profitability, but they grow increasingly difficult to repeat.  
As Henry Ford would have pointed out, companies cannot profit 
endlessly in an environment of wage deflation.  Cost-cutting 
increases competition between companies and is ultimately a 
double-edged sword.

For tomorrow, the key question will be whether today's big moves 
will hold.  The upside action in equities had an impulsive 
feel to it.  If bulls can hold within the flag atop today's 
flagpole rally, then the daily cycle downphases will convert to 
the upside, led by the Nasdaq.  However, a return to today's lows 
will do so minus most of the shorts who got blown out of their 
positions today, and will therefore have that much less support 
as prices fall.


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

Veritas Software - VRTS - close: 20.53 change: +0.93

WHAT TO WATCH: We've been keeping an eye on VRTS for weeks.  The 
breakout over resistance near the bottom of the July gap was 
significant.  The stock has traded mostly sideways since but is 
struggling with its simple 100-dma.  Given the Thursday-Friday 
decline last week VRTS appears to be building a bull-flag 
pattern.  If that's the case then traders may want to open 
bullish positions on a move over $21.00.  Be aware that earnings 
are expected on Oct. 26th.




---

RARE Hospitality Intl - RARE - close: 30.61 change: +1.61

WHAT TO WATCH: Does someone know something the rest of us 
doesn't?  RARE surged for a 5.5 percent rally to breakout over 
major resistance at $29.00-29.50 on above average volume.  These 
are new all-time highs for RARE.  The company is due to report 
earnings on Oct. 20th.  This is a new triple-top breakout buy 
signal on its P&F chart. 




---

Union Pacific - UNP - close: 61.07 change: +0.58

WHAT TO WATCH: The Dow Transportation index is at five-year 
highs.  Part of the transports momentum is coming from strength 
in the railroads.  UNP has climbing steadily for 2 1/2 months.  
We like how UNP has dipped back to test support at broken 
resistance in the $60.00 level and its simple 200-dma.  The 
bounce today looks like a bullish entry point but earnings are 
expected on Oct. 21st and we don't want to hold over the event.  
Watch to see how investors react to UNP's Q3 results.




---

Noven Pharmaceuticals - NOVN - close: 23.07 change: +1.30

WHAT TO WATCH: After months of building a base between $18 and 
$22 it looks like NOVN is ready to start a new trend higher.  The 
stock broke out above resistance with a 6 percent gain on above 
average volume.  We don't see any specific news to account for 
the move but we do see that volume has been rising during last 
week's rally.  Earnings are due out on Nov. 9th.





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

STX $14.00 +0.77 - Today's 5.8 percent rally was backed by strong 
volume.  Watch for a move over $14.50 and its simple and 
exponential 200-dma's.

SHW $42.20 +0.58 - SHW is bouncing from the near the bottom of 
its long-term rising channel. This could be an entry point but 
watch for earnings.

R $48.53 +0.89 - Lots of relative strength here.

ISG $29.65 -1.05 - Uh-oh!  This looks like a significant 
breakdown.  ISG has broken below its trendline of higher lows.  


=================================================================
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 10-18-2004
                                                    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, SWIR, BG, MLNM   

Stock Splits
  Announcements:        


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 -
  Remember - We are going to exit MACR on Tuesday
  afternoon ahead of its Wednesday earnings report
  - unless MACR hits our target at $23.50 first, then
  we'll exit at $23.50.  With today's breakout over $23
  odds are in our favor.
 
 
SWIR - tech stock short -
  Entry point!  SWIR dropped through our TRIGGER 
  at $15.45 on Monday to open the play for us.  
  More conservative traders may want to look for a 
  move under today's low at $14.89 as a new entry.
 
 
BG - non-tech long -
  Wow!  BG surged 3.55 percent on Monday with huge
  volume backing the move higher.   
 
 
MLNM - high risk short -
  Watch out!  MLNM rallied back above the $12.00 mark.



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

AIG     American Intl Group        59.68     +1.83
JNJ     Johnson & Johnson          57.32     +0.74
IBM     Intl Business Machines     85.92     +1.07
TGT     Target Corp                47.75     +0.86
ALL     Allstate Corp              48.06     +0.67
MER     Merrill Lynch              52.22     +0.59

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

SEM     Select Medical Corp        17.40     +3.18
VTIV    Ventiv Health Inc          17.95     +1.10
ELOS    Syneron Medical Ltd        19.10     +1.45
ISON    Isonics Corp                5.48     +2.11

---------------------------------------
Breakout to Upside (Stocks over $20)
---------------------------------------
  
PGR     Progressive Corp           88.85     +2.41
AAPL    Apple Computer             47.75     +2.25
PH      Parker Hannifin            63.41     +1.08
MEDI    MedImmune                  28.13     +1.81
BG      Bunge Ltd                  43.45     +1.49
CHKP    Check Point Software       21.10     +3.18
ADS     Alliance Data              44.36     +1.11

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

MMM     3M Co                      76.10     -1.88
LMT     Lockheed Martin            52.72     -1.13
WY      Weyerhauser                61.55     -1.03
MMC     Marsh & Mclennan           25.57     -3.63
HIG     Hartford Fincl Services    54.35     -1.95
SRE     Sempra Energy              33.15     -3.19
ASD     American Standard Cos      36.46     -1.74
ISG     Intl Steel Group           29.65     -1.05
BGG     Briggs & Stratton          71.26     -7.34

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

PDS     Precision Drilling         57.30     -2.24
ETP     Energy Transfer Partners   49.30     -0.85

 


=================================================================
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 (c) 2004  PremierInvestor.net. and
The Premier Investor Network.
Do not duplicate or redistribute in any form.








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