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Daily Newsletter, Thursday, 10/21/2004

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PremierInvestor.net Newsletter                 Thursday 10-21-2004
                                                    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:       Adrenaline Rush
Watch List:        Pasta to Semis and more!
Market Sentiment:  Friday Could Be Quiet

=================================================================
MARKET WRAP  (view in courier font for table alignment)
=================================================================
      10-21-2004           High     Low     Volume   Adv/Dcl
DJIA     9865.76 - 21.20  9903.15  9800.87 2.04 bln 2164/1050
NASDAQ   1953.62 + 20.70  1957.48  1933.00 2.02 bln 1863/2052
S&P 100   531.26 +  0.54   532.53   527.28   Totals 4027/3102
S&P 500  1106.49 +  2.83  1108.96  1098.47 
W5000   10851.86 + 55.06 10870.68 10775.31
SOX       408.98 + 15.60   411.21   393.36
RUS 2000  576.66 +  6.53   576.70   568.38
DJ TRANS 3431.69 + 45.00  3435.52  3381.86
VIX        14.54 -  0.31    15.19    14.28
VXO (VIX-O)14.99 -  0.11    15.97    14.86
VXN        20.36 -  0.29    20.92    20.21 
Total Volume 4,397M
Total UpVol  3,098M
Total DnVol  1,254M
Total Adv  4545
Total Dcl  2548
52wk Highs  233
52wk Lows   140
TRIN       1.10
NAZTRIN    0.60
PUT/CALL   0.83
=================================================================

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

Adrenaline Rush
by Jim Brown

Nearly 400 companies reported earnings on Thursday and 
the results were all over the board. Good news was mixed
with bad news and delivered so quickly investors were
left dizzy and confused. Strong market moves were made
in both directions and outlooks changed faster than 
traffic lights during rush hour. Welcome to the busiest
day in the October earnings schedule.

Wilshire-5000 Chart

 
Dow Chart

 
Nasdaq Chart

 

What a day! I hardly know where to start with mixed
economics and even more violently mixed earnings. The
Jobless Claims fell -25,000 to pre hurricane levels
but analysts suggested it might be too early to get
excited. The Columbus Day holiday may have impacted
number collection and the low number may be in error.
Seems to me there is some qualification on every number
we get recently. The headline number was 329,000 for
the week and heading for levels that translate to job
gains on a consistent basis. 

The Chicago Fed National Activity Index fell -0.01 for
September and back into negative territory after posting
a high of 0.83 back in March. The decline has been very
erratic with a spike from -0.08 in June to +.55 in July
only to completely retrace that spike in August. Only
37 of the 85 indicators that make up the CFNAI rose
during the month. Employment moved to -.09 from -.02
in August and was the biggest contributor to the decline
in the headline number. High oil prices were also a
factor in the decline. 

The Conference Board Leading Indicators fell for the 
fourth consecutive month with a -0.1% headline number.
The Coincident Index also fell -0.2% for the month. 
These numbers may seem insignificant but the key is
the trend and it is clearly down. Declining shipments
and narrower yield spreads were two major reasons for
the decline along with the pressure from energy prices.
This is the only the third time since Jan-2002 that the
index has declined more than three months in a row. The
outlook is negative for future releases based on the
internal trends. The index typically predicts economic
trends for the next six months. 

Not all economics were negative with the Monthly Mass
Layoffs falling slightly to 708 events impacting only
68,792 workers. This was only 51 workers less than the
August report but both months were significantly below
the recent trends. For instance July had 253,939 layoffs
and when compared to Aug/Sept there is a significant
improvement. Temporary services accounted for 10% of the
Sept number and hit the highest level since 2001. This
could be a negative sign that the fringe workers are
being trimmed in advance of cutting into the long term
workers. 

The best news came from the Philly Fed, which exploded
to 28.5 compared to estimates for 19.3 and the September
number at 13.4. This was clearly a blowout and renewed
faith in manufacturing in general despite being only a
regional index. Shipments surged to 28.2 from 22.4 and
New orders remained strong at 24.6. On the negative
side back orders fell into negative territory at -5.4
from last months already weak +3.1. Employment also 
fell strongly to 14.1 from 21.5. The six-month outlook
dropped significantly from 44.9 to 27.6. The report
was bullish on the surface definitely showed some
cracks in the foundation. These are not insurmountable
and as long new orders remain firm the minor weaknesses
will be ignored. 

That brings us to earnings and this was a monster day
with nearly +400 companies reporting. Five Dow components
reported with CAT the standout with the best results and
the biggest share price loss. CAT earnings more than
doubled on strong demand for its products but concerns
about high costs knocked -$3.35 of the share price. The
basic worry was that continued high oil prices would 
pressure sales and growth in other countries. Steel 
prices have doubled and for CAT that is a major expense.
Estimates for 2005 saw revenue up +10% compared to +30%
gains in 2004.    

Dow component Merck reported earnings that fell to 60
cents compared to 82 cents for the same period last
year. The Q3 earnings contained a 25 cents charge for
the VIOXX recall. However, MRK guided analysts to a
higher number for Q4 but many analysts were expecting
the charge in the current quarter and not on the Q3
earnings so the real continued earnings should not
appear until 2005. Merck said it already had over 300
personal injury lawsuits in progress from the VIOXX
claims. MRK was flat for the day at $31.28.

AIG fell another -1.15 on news a grand jury was looking
at products that might have been used to make earnings
look better. The probe centers on a contract with CELL
claiming the company fraudulently concealed losses on
the policy. AIG announced earnings that matched analyst
estimates and that was the good news. A JPM analyst
said he expected Spitzer to extract more than $2 billion
in penalties from the current insurance scandal. 

Pfizer reported earnings of $3.34 billion for the quarter
compared to $2.22 billion for Q3-2003. They beat the
street slightly but warned that there would be increased
generic competition next year for $5 billion of their
products. Considering they will have more than $50B in
total revenue next year the minor amount they may lose
on generics should more than be made up on Celebrex.
The stock appears to have found support at $28.50 and
the VIOXX news is slowing.

UPS missed estimates by two cents but used the politically
correct hurricane excuse and escaped investor wrath. The
company said business was strong and 2005 earnings should
grow +13% to +17%. They said the holiday shipping season
was shaping up to be a strong season. 

After the bell Microsoft beat estimates by +2 cents and
said Q4 could be weaker than expected but raised estimates
for all of 2005. The company said it was seeing more 
business decisions on software purchases being postponed
by companies from Q4 and into 2005. Unearned income fell
unexpectedly and suggests Linux is cutting into their
subscription revenue base. MSFT fell -14 cents at the 
close and about -70 cents in after hours before the call
produced some minor buying. MSFT has that monster $32B
dividend that will be paid next month and $9 billion of
that is expected to be received by retail investors. The
rest will be collected by funds and insiders like Bill 
Gates. The $9 billion is expected to provide a retail
bounce for the holiday season and some analysts suggest
it could add 25-30 points to the GDP. I assume that was
before the nearly $100 billion haircut in the insurance
industry.  

AMZN dropped -3.46 in after hours after missing estimates
by a penny and giving disappointing guidance. The +17
cent earnings were significantly over the +4 cents from
Q3-2003 but the bar is pretty high for the online firm.
AMZN did say they were well positioned to go into the
DVD rental space. The problem came from revenue growth
that was less than analysts had hoped. Competition is
growing and growth is slowing as the business matures.
I bought my first online book from Barnes and Nobel last
week because Amazon did not have it. In the past Amazon
always had everything and this could be a symptom of the
future of their retail model. Skinny the inventory and
ignore the slow sellers. With their reputation built as
the worlds greatest marketplace it will be interesting
to see how this plays out. I might also note I bought
12 other books from Amazon last week so the defection 
to BN.com for the one they did not have was only a minor    
detail. 

The big news after the bell was Google, which brought 
back the Internet volatility of yesteryear. When GOOG
announced earnings of only 45 cents when analysts were
expecting 56 cents the crowd went wild. The stock dropped
from $149 to $140 as traders dumped the stock but then
rallied back to $162 after they disclosed in the call
that there was in fact some hidden charges in the number.
The clean number was reported to be 70 cents and a beat.
The volatility was huge and analysts could not say enough
good things about the stock. However, nobody seemed to 
want to buy it at the current range. GOOG was touted as
having a better growth rate than YHOO, EBAY and AMZN and
while that may be true based on today's numbers the field
is about to become very crowded. The Google model is not
yet fully understood and once understood it will be widely
copied. Microsoft is expected to make an announcement soon
and Yahoo and Amazon already have products in place and
growing. GOOG has a whopping 250 million shares coming 
eight times the current shares available for trading. 

With GOOG adding to the share price each day whether
on valid assumptions or not the market cap continues
to grow. Eventually this stock will be included in the
various major indexes and at the current nearly $50 
billion market cap will mean index funds will need to
buy large quantities when that happens. This could be
months away and after the last lockup release on Feb-15th
of 176 million shares. Currently there are slightly more
than 30 million shares in circulation and another 40 mil
will be released on Nov-16th a little more than three
weeks from now. Additional releases of 25M each will 
occur on Dec-15th and Jan-15th. 

The bad news came from numerous chip stock earnings. 
There were several today including BRCM, HLIT, IDTI, 
KLAC, MCHP, TQNT and XLNX to name a few. Led by BRCM
several warned about Q4 and the amount of orders being
pushed into 2005. BRCM warned that sales could drop
as much as -18% in Q4 on delayed customer orders. They
blamed excessive chip inventories still held by their
customers due to weak Q3 demand. They said weaker sales
of networking and satellite equipment had rippled back
to them through the supply chain. 

XLNX warned that revenue would be down for the quarter
based on increasing inventory levels at customers. The
average inventory level at quarter end was 156 days, up
from 131 days in the prior quarter. KLAC also said they
saw a decline in Q3 and another decline is expected for
Q4. They said sales to foundries had slowed significantly.
TQNT warned that they would have a bigger loss than they
previously expected for Q4, sales were slowing and their
book to bill had dropped to only 0.81. MCHP warned that
despite record sales in Q3 their expectations for Q4 
had fallen. IDTI repeated the claims that Q4 would also
be a challenge as customers wade through excess inventory.
Sounds like they have the excuse committed to memory.

That pretty well makes it unanimous that chip inventory
has not improved and is not expected to improve for Q4.
Based on dozens of company forecasts this situation is
expected to pass by Q1-2005. The warnings tonight were
nothing new and exactly like the warnings we have seen
from chip companies for the last two months. Despite
those warnings the SOX rose to a three week high today
and the SMH did not lose any ground in after hours 
trading. The bad news appears to be fully priced in and
traders are buying chips six months ahead of when they
believe the next demand bounce will occur. Those buying
today are looking at the April earnings as an exit point
if the current tech scenario completes as expected. 

SOX chart

 

Today was the largest earnings schedule for the Q3 cycle
with nearly 400 companies reporting. As of yesterday's
close 223 S&P companies had reported with an average
increase in revenue of +9.2% and an average earnings
increase of +10.8%. Analysts expect the final total to
show earnings growth of +14.8% but as you can see by the
current total there is a big gap. The breakdown of the
results so far is shown in the following table and it
is still not that bad. 

2004-Q4 Comparisons

   

Partial list of companies reporting after the close:

KO  earnings est +0.47, actual = +0.50 
ACF earnings est +0.39, actual = +0.43 
ACS earnings est +0.71, actual = +0.72
CLS earnings est +0.08, actual = +0.11 
ELX earnings est +0.10, actual = +0.11 
GNW earnings est +0.54, actual = +0.55
MCK earnings est +0.24, actual = +0.29
RHI earnings est +0.21, actual = +0.24
SFA earnings est +0.36, actual = +0.36 
AMZN earnings est +0.18, actual = +0.17
BRCM earnings est +0.34, actual = +0.36
CAMD earnings est +0.09, actual = +0.10 
CPKI earnings est +0.25, actual = +0.27 
EPNY earnings est -0.07, actual = -0.06 
FDRY earnings est +0.12, actual = +0.11
GILD earnings est +0.21, actual = +0.25 
GOOG earnings est +0.56, actual = +0.70 
HLIT earnings est -0.03, actual = -0.03 
NSIT earnings est +0.29, actual = +0.30 
IDTI earnings est +0.07, actual = +0.09 
KLAC earnings est +0.57, actual = +0.58 
MENT earnings est +0.07, actual = +0.05
MCRL earnings est +0.07, actual = +0.08
MCHP earnings est +0.29, actual = +0.29 
MSFT earnings est +0.30, actual = +0.32
OSTK earnings est -0.20, actual = -0.16
PSFT earnings est +0.14, actual = +0.17
PLCM earnings est +0.19, actual = +0.19 
RSAS earnings est +0.14, actual = +0.15 
SIAL earnings est +0.81, actual = +0.81 
TQNT earnings est -0.04, actual = -0.03 
WEBX earnings est +0.24, actual = +0.26
XLNX earnings est +0.24, actual = +0.24
YELL earnings est +1.34, actual = +1.38


The obvious question is where do we go from here. The
overall earnings are not that bad although expectations
from techs for the next quarter are falling. The SOX
is telling us the bad news is priced in despite the
pummeling the Dow has taken over the last several 
sessions. 

However, was it really that bad? The Dow is only composed
of 30 stocks and there have been some monumental blowups
over the last several weeks. Drugs and insurance aside
the weakness we have seen has been due mostly to the 
huge impact of individual stocks on the Dow. Using the
broader indexes of the Wilshire-5000 and the Russell the
markets are not in that bad of shape. The Wilshire is
comfortably holding the high ground above 10800 support
and only -300 points from a new high for the year. The
Russell is also holding the high ground over 560 support
and only 25 points from the breakout 600 level. This is
not bad news despite what the Dow appears to be showing.

The Dow has tested 9800 for two consecutive days and 
saw nearly a +100 point rebound on both days. Neither
stuck due to individual stock issues. Today it was CAT
and its -3.35 drop taking nearly -30 points off the Dow
along with the continued AIG weakness. They were the
only two Dow components losing more than $1 for the day.
Dow 9800 is the conversational low of the year from
August with the actual low 9783 but close enough for
most. This 9800 retest is exactly where an October
bottom should occur if it is in the cards. A break of
the 9800 level would change all the rules but I will
wait to cover that if it happens. Bulls really want to
see the Dow rebound from this level and tomorrow would
be nice. There are no economic reports to confuse the
issue. 

The Nasdaq has actually been rising since the Oct-15th
lows at 1900. The close today at 1952 is just one good
day away from a potential breakout over 1975. It appears
the October low was already made and the bad news bulls
are back. This will of course be tested again tomorrow
after the multiple chip warnings tonight. 

The futures are well off their lows and nearly positive
as I type this and they appear to be indicating another
bounce at the open. With the election only seven trading
days away and October almost over there is a rising bid
beginning to appear. Unfortunately every bounce is sold
so there is still major resistance to be overcome. Any
fund portfolio shuffling for their October year end should
be over and if anything they should have cash to spend. 
TrimTabs reported tonight that fund flows for the week
were positive to the tune of +$1.5B on top of +$1.4B
last week. The tide may be turning and hopefully the
worst is behind us. 

For Friday I think traders will be watching oil and chips
and nothing else. Oil closed at $54.50 again and is higher
overnight. Like the chip warnings I think investors have 
decided to ignore oil and consider it a "transitory event"
using the Greenspan terminology. That sets up Friday as 
a possibly bullish day assuming chips don't suddenly 
implode. Watch the Wilshire, Russell and SOX for the 
real market direction. 

Enter Passively, Exit Aggressively. 

Jim Brown
Editor


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

American Italian Pasta - PLB - close: 27.64 change: +0.69

WHAT TO WATCH: PLB is trying to put in a bottom.  The stock has 
been withering for months but we're starting to see signs of a 
bottom between $25-26.  PLB has actually be stuck in a trading 
range between $25 and $28 for the last three months.  If PLB can 
breakout over the $28 level and its simple 100-dma it could be a 
bullish entry point.  Watch for earnings on November 10th.  We 
would target $30-31.  FYI: the P&F chart is currently bearish
making this a more aggressive play.




---

Ryder Systems - R - close: 48.85 change: +0.53 

WHAT TO WATCH: Transports stocks are on a roll.  The Dow 
Transports index is hitting new five-year highs.  The entire 
sector is completely ignoring record high oil prices and higher 
fuel costs.  Meanwhile shares of Ryder are hitting new all-time 
highs.  This looks like a relative strength play but watch for a 
dip after earnings on Oct. 25th.




---


Lam Research - LRCX - close: 24.17 change: +0.87

WHAT TO WATCH: The SOX semiconductor index turned in a very 
bullish 3.9 percent rally on Thursday and this helped lift LRCX 
over its exponential 200-dma and round-number resistance at $24.  
If the SOX can power through the 410-412 region then LRCX might 
be able to breakout over its simple 200-dma near $24.33.  A 
breakout over the 200-dma could be used as a bullish entry point.  
A move over $25 would produce a new P&F buy signal.




---

Universal Health Services - UHS - close: 39.87 change: -1.02

WHAT TO WATCH: We've mentioned UHS before.  The stock has broken 
through the bottom of a multi-month trading range a few days ago 
but we didn't play it because of its earnings report.  Earnings 
came out tonight after the closing bell.  UHS missed Wall Street 
estimates by 5 cents.  We didn't see a lot of after hours trading 
but we expect UHS to trade lower tomorrow.  Given the breakdown 
from its eight-month trading range this could be a bearish entry 
point.  The P&F chart shows a quadruple-bottom breakdown sell 
signal with a $33 target.






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

VRTS $21.97 +1.43 - The 3 percent rally in the GSO software index 
helped support a 6 percent rally in VRTS.  Shares of the software 
company broke through resistance at $21.50 and its simple 100-
dma.  Earnings are expected on Oct. 26th.

EXM $36.92 +3.51 - Cargo ship operator EXM has seen a very 
volatile August through October trading period.  The stock 
appears to have found new support near $30 and looks ready to 
rebound again.  This would be an EXTREMELY high-risk play either 
direction.

PMCS $9.92 +0.92 - Here's another semiconductor stock that is 
trading higher despite a lackluster earnings report.  This is a 
breakout over the trend of lower highs and the simple 50-dma.

BEAS $8.00 +0.20 - We mentioned BEAS a few days ago when it was 
bouncing from the bottom of its rising channel near the $7.00 
level.  Shares have already hit the top of the channel.  Looks 
like a good place to do a little profit taking in the $8.00-8.20 
range.


===============================
Market Sentiment
===============================

Friday Could Be Quiet
- J. Brown

You wouldn't know it from looking at the major indices but the 
markets were generally positive today.  The Dow Industrials ended 
the session lower under weakness from drug stocks, insurance, and 
a negative reaction to Caterpillar's earnings.  The tech-heavy 
NASDAQ moved the opposite direction as investors bid up shares of 
EBAY for a 9 percent gain to $99.50.  EBAY reported earnings last 
night with a 77 percent jump in profits.  

After the bell Internet stocks continued to command the 
spotlight.  Shares of Google (GOOG) took traders on a wild ride 
as everyone struggled to discern whether or not the earnings miss 
was more or less important than the upside revenue surprise.  
GOOG closed at $149.38 in the regular session and initially 
dipped to $140 before soaring to $161 in the after-hours market.

GOOG may grab the headlines tonight and tomorrow but it will be 
lackluster earnings numbers and comments from the likes of 
Amazon.com (AMZN), Broadcom (BRCM) and Microsoft (MSFT) that are 
likely to lead the NASDAQ and most of the tech sector lower on 
Friday.  This will likely be a drag on the already weak Dow and 
S&P.  

Not helping matters today were comments from Federal Reserve 
governor Ben Bernanke who said that the days of cheap oil were 
likely behind us.  He did say that the U.S. economy would be able 
to manage but the initial reaction to his words were not 
positive.  

Whether you believe the market is going to head up or down it's 
worth noting that the Dow Transports have broken out to another 
new five-year high over the 3400 level.  I know some investors 
find this unbelievable given the high cost of fuel but it's 
happening anyway.  Plus, the RLX retail index just hit a new all-
time closing high.  The strength in retailers could have been 
boosted by a CNN article that said consumers were not going to 
let higher interest rates and higher gasoline prices impact their 
holiday spending.  The latest poll suggested that the average 
American consumer plans to spend about $702 in holiday shopping.  
That's a 4.5 percent increase over last year.

The big story on everyone's mind is the election.  Some market 
pundits feel that the stock market is likely to trade sideways 
for the next twelve days until after the November 2nd election.

Tomorrow's schedule is light.  There aren't any major economic 
reports due out and the Q3 earnings parade is relatively quiet 
after this week's deluge of numbers.


-----------------------------------------------------------------

Market Averages

DJIA ($INDU)

52-week High: 10753
52-week Low :  9497
Current     :  9865

Moving Averages:
(Simple)

 10-dma:  9965
 50-dma: 10114 
200-dma: 10275



S&P 500 ($SPX)

52-week High: 1163
52-week Low : 1018
Current     : 1106

Moving Averages:
(Simple)

 10-dma: 1118
 50-dma: 1109
200-dma: 1119



Nasdaq-100 ($NDX)

52-week High: 1559
52-week Low : 1301
Current     : 1474

Moving Averages:
(Simple)

 10-dma: 1442
 50-dma: 1404
200-dma: 1440



-----------------------------------------------------------------

CBOE Market Volatility Index (VIX) = 14.54 -0.31
CBOE Mkt Volatility old VIX  (VXO) = 14.99 -0.11
Nasdaq Volatility Index (VXN)      = 20.36 -0.29 


-----------------------------------------------------------------

          Put/Call Ratio  Call Volume   Put Volume

Total          0.95        856,237       810,611
Equity Only    0.87        728,489       633,400
OEX            1.39         15,123        21,170
QQQ            5.38         30,026       161,746


-----------------------------------------------------------------

Bullish Percent Data

           Current   Change   Status
NYSE          62.7    - 0.4   Bear Correction
NASDAQ-100    49.0    + 2     Bull Alert      
Dow Indust.   50.0    - 3     Bear Confirmed
S&P 500       60.0    - 1.4   Bear Correction
S&P 100       59.0    - 2     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: 0.93
10-dma: 1.19
21-dma: 1.07
55-dma: 1.12


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    1947      1824
Decliners     862      1105

New Highs     104        88
New Lows       49        50

Up Volume   1326M     1490M
Down Vol.    701M      485M

Total Vol.  2034M     2001M
M = millions


-----------------------------------------------------------------

Commitments Of Traders Report: 10/12/04

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 continue to hedge their bets on the large
S&P contracts as longs and shorts move closer to parity.  Small
traders didn't move much money either but remain net bullish.


Commercials   Long      Short      Net     % Of OI
09/21/04      404,746   425,560   (20,814)   (2.5%)
09/28/04      404,773   434,441   (29,668)   (3.5%)
10/05/04      421,217   435,736   (14,519)   (1.7%)
10/12/04      423,472   436,780   (13,308)   (1.5%)

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
09/21/04      134,943   108,036    26,907    11.1%
09/28/04      135,317   107,173    28,144    11.6%
10/05/04      137,210   114,489    22,721     9.0%
10/12/04      139,175   113,903    25,272     9.9%

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

Uh-oh!  This could spell trouble for stocks.  Commecials,
who are normally on the "right" side of the trade are upping
their short positions.  Meanwhile, small traders decreased
their short positions leaving them strongly net bullish.
This alone is a contrarian indicator for a market top.
Just remember that these readings were taken before the 
Wednesday-Thursday sell-off this past week.


Commercials   Long      Short      Net     % Of OI 
09/21/04      213,014   397,844   (184,830)  (30.2%)
09/28/04      226,020   420,714   (194,694)  (30.1%)
10/05/04      248,190   476,608   (228,418)  (31.5%)
10/12/04      258,457   517,805   (259,348)  (33.4%)

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
09/21/04      256,315     60,275   196,040    61.9%
09/28/04      262,501     68,255   194,246    58.7%
10/05/04      308,021     80,373   227,648    58.6%
10/12/04      309,720     62,502   247,218    66.4%

Most bearish reading of the year: (77,385)  - 09/02/03
Most bullish reading of the year: 449,310   - 06/10/03


NASDAQ-100

Commercial traders aren't changing their bets.  They remain
net bullish on the NDX.  Small trades have significantly 
reduced positions in both longs and shorts but remain 
strongly net bearish, which of course is bullish for the
NDX if you're a contrarian.


Commercials   Long      Short      Net     % of OI 
09/21/04       54,530     30,827    23,703   27.7%
09/28/04       55,045     32,319    22,726   26.0%
10/05/04       55,640     32,872    22,768   25.7%
10/12/04       52,572     32,775    19,797   23.2%

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
09/21/04        7,417    25,821   (18,404)  (55.3%)
09/28/04       10,078    22,917   (12,839)  (38.9%)
10/05/04       12,254    30,693   (18,439)  (42.9%)
10/12/04        8,756    24,400   (15,644)  (47.2%)

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 reduced both long and short positions
but remained net bullish.  In contrast small traders
significantly increased both their longs and their shorts on
the Dow Industrials but in essence remain rather neutral.


Commercials   Long      Short      Net     % of OI
09/21/04       30,816    27,200    3,616       6.2%
09/28/04       29,714    26,877    2,837       5.0%
10/05/04       27,498    25,772    1,726       3.2%
10/12/04       24,150    22,849    1,301       2.7%
 
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
09/21/04        4,467     6,748   (2,281)   (20.3%)
09/28/04        5,143     5,988   (  845)   ( 7.6%)
10/05/04        5,531     5,539   (    8)   ( 0.0%)
10/12/04        8,814     9,167   (  353)   ( 1.9%)

Most bearish reading of the year: (12,106) -  3/09/04
Most bullish reading of the year:   8,523  -  8/26/03


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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

*****************************************************************
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Copyright ) 2004  PremierInvestor.net. and
The Premier Investor Network.
Do not duplicate or redistribute in any form.







PremierInvestor.net Newsletter                 Thursday 10-21-2004
                                                    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: NVLS, SWIR, BC, LSCP

Stock Splits
  Announcements:       FINL, GDW, RYL, SYMC

Active Trader (Non-tech Stocks)
  Closed Bearish Plays: PSSI

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

NVLS - tech stock short -
  Be careful here.  The SOX is bouncing pretty strong and 
  challenging resistance.  If the SOX breaks out then NVLS
  is likely to breakout over its resistance near $25.75-26.00.
  We are not suggesting new positions here.

SWIR - tech stock short -
  Be careful here too.  SWIR is bouncing from the $15.00 level
  and is now trading back over the $16 mark. We would not 
  suggest new positions.


BC - non-tech long -
  So far so good.  BC is challenging resistance at $47 and looks
  ready to breakout.


LSCP - non-tech short -
  We would be cautious here.  LSCP is nearing the $20 mark again.
  If LSCP trades over $20.51 again we may decide to exit early.
 


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

FINL steps higher with a 2-for-1 stock split

Thursday afternoon with about an hour to go before the close The 
Finish Line, Inc. (NASDAQ:FINL) announced that its Board of 
Directors had approved a 2-for-1 stock split.

The split will be payable on November 17th, 2004 to shareholders 
on record as of November 5th.  

The Board also approved a cash dividend of 5 cents per share 
payable on December 15th, 2004.


About the company:
The Finish Line, Inc. is one of the nation's leading athletic 
specialty retailers offering the best selection of athletic 
footwear, apparel and accessories for men, women and kids. Finish 
Line is publicly traded on the NASDAQ National Market under the 
symbol FINL and currently operates 580 stores in 46 states and 
online.  (source: company press release) 

--

GDW declares a 2-for-1 stock split

This morning before the opening bell Golden West Financial Corp. 
(NYSE:GDW) reported Q3 earnings and announced that its Board of 
Directors had approved a 2-for-1 stock split. 

The split will take effect as a stock dividend payable on December 
10th, 2004 to shareholders on record as of November 15th.


About the company:
Headquartered in Oakland, California, Golden West is one of the 
nation's largest financial institutions with assets over $100 
billion as of September 30, 2004. The Company has one of the most 
extensive thrift branch systems in the country, with 276 savings 
branches in 10 states and lending operations in 38 states. (source: 
company press release)

--

RYL builds a 2-for-1 stock split

After the closing bell on Wednesday Ryland Group Inc. (NYSE:RYL) 
announced its Q3 earnings report.  With that report the company 
also announced that its Board of Directors had approved a 2-for-1 
stock split.

The split will take the form of a stock dividend to be payable on 
November 30th, 2004 to shareholders on record as of November 15th.


About the company:
With headquarters in Southern California, Ryland is one of the 
nation's largest homebuilders and a leading mortgage-finance 
company. The Company currently operates in 27 markets across the 
country and has built more than 225,000 homes and financed more 
than 195,000 mortgages since its founding in 1967.
 (source: company press release)

--

SYMC programs a 2-for-1 stock split

 Wednesday afternoon after the closing bell Symantec Corp 
(NASDAQ:SYMC) announced with its earnings report that the 
company's Board of Directors had approved a 2-for-1 stock split.  

The split will take the form of a stock dividend.  This dividend 
will be payable on or about November 30th, 2004 to shareholders on 
record as of November 11th.  Post-split SYMC will have 
approximately 632 million shares outstanding.


About the company:
Symantec is the global leader in information security providing a 
broad range of software, appliances and services designed to help 
individuals, small and mid-sized businesses, and large enterprises 
secure and manage their IT infrastructure. Symantec's Norton brand 
of products is the worldwide leader in consumer security and 
problem-solving solutions. Headquartered in Cupertino, Calif., 
Symantec has operations in more than 35 countries.
(source: company press release)


==================================================================
Active Trader (AT) Non-Tech Stock section
=================================================================

============
Closed Plays
============

  Closed Bearish Plays
  --------------------

PSS World Medical - PSSI - cls:  9.13 chg: -0.17 stop: 10.11     

Per our previous suggestion we are closing PSSI at $9.15.  The 
stock is seeing some great follow through on Tuesday's failed 
rally near $9.81.  The stock has surpassed its early October low 
and looks ready to hit the $9.00 mark.  Shares could easily keep 
falling but we're going to exit here to "trade our plan".  If you 
choose to keep the play open and see how far PSSI falls we 
suggest a tighter stop than $10.11.

Picked on September 20 at $10.44
Gain since picked:        - 1.29
Earnings Date           07/27/04 (confirmed)
Average Daily Volume:        734 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
---------------------------------
 
Value Plays With Bullish Signals
---------------------------------
Ticker  Company Name               Close     Change

MER     Merrill Lynch              52.50     +0.59
SO      The Southern Co            31.58     +0.96
OXY     Occidental Petroleum       57.87     +0.70
APA     Apache Corp                53.16     +0.65
DVN     Devon Energy               75.25     +1.01
PGR     Progressive Corp           88.54     +1.12

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

ALA     Alcatel                    14.24     +1.44
TER     Teradyne Inc               16.09     +1.06
SY      Sybase Inc                 16.10     +1.92
WAB     Wabtec                     19.97     +1.37
ASCL    Ascential Software         14.89     +1.08
KTO     K2 Inc                     15.93     +1.64

---------------------------------------
Breakout to Upside (Stocks over $20)
---------------------------------------
  
EBAY    eBay Inc                   99.59     +8.23
SAP     SAP Ag (ADS)               42.54     +1.28
FDX     Fedex Corp                 89.45     +1.58
SYMC    Symantec                   60.19     +5.76
NKE     Nike Corp                  80.79     +1.14
KSS     Kohl's Corp                52.08     +1.13
CNI     Canadian Natl Railway      51.62     +1.48

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

LLY     Eli Lilly & Co             52.64     -2.46
AIG     American Intl Group        56.45     -1.15
CAT     Caterpillar                77.03     -3.76
D       Dominion Resources         64.00     -1.08
PCAR    PACCAR Inc                 65.98     -2.96
AGN     Allergan Inc               68.00     -1.37
S       Sears Roebuck              33.74     -3.18
TDS     Telephone Data Sys         75.85     -3.90
CMI     Cummins Inc                67.76     -4.98

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

CELG    Celgene Corp               58.22     -4.16
CVD     Covance Inc                38.08     -1.27


=================================================================
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=================================================================
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.







DISCLAIMER

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