PremierInvestor.net Newsletter Monday 11-01-2004 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: Low Range, High Anxiety Watch List: Plenty of Breakouts to watch =============================================================== MARKET WRAP (view in courier font for table alignment) =============================================================== 11-01-2004 High Low Volume Adv/Dcl DJIA 10054.39 + 26.92 10076.59 10010.15 1.72 bln 1633/1164 NASDAQ 1979.87 + 4.88 1983.91 1969.32 1.53 bln 1574/1492 S&P 100 540.50 - 0.15 542.24 539.21 Totals 3207/2656 S&P 500 1130.51 + 0.31 1133.43 1127.53 SOX 413.71 + 1.46 415.00 409.39 RUS 2000 587.00 + 3.21 587.42 581.11 DJ TRANS 3504.07 + 6.65 3521.82 3485.70 VIX 16.27 - 0.00 16.76 16.18 VXO (VIX-O)16.31 - 0.26 17.07 16.27 VXN 22.61 + 0.71 22.85 22.43 Total Volume 3,256M Total UpVol 1,843M Total DnVol 1,347M Total Adv 3207 Total Dcl 2656 52wk Highs 284 52wk Lows 57 TRIN 0.86 PUT/CALL 0.92 =============================================================== =========== Market Wrap =========== Low Range, High Anxiety Jonathan Levinson It was a relatively quiet day, punctuated by small number of sharp, narrow range moves. Volume was light overall, not surprising as we approach the elect with its attendant direct and indirect uncertainties. Option volatility increased despite the tight range for the day, perhaps caused by option purchases by market participants seeking to hedge open positions. One year daily Dow Chart I've squeezed one year's worth of daily candles into a single chart to provide some perspective on today's action, or lack thereof. The Dow rose 26.92 points to close at 10054, just above The Number but below 10080 confluence and trendline resistance. The daily cycle upphase currently in progress is so far delivering excellent price traction, and while the market feels to me like it wants to correct, the small wedge/flag atop last week's sharp rally should act as a continuation pattern with the upphase. A close above 10080 will suggest that the breakout is in progress, targeting 10130 and 10175-200 next. Daily SPX Chart The SPX rose less than a point to close at 1130.51, one of those rare days when every fraction counts. The daily cycle upphase has been very strong since last week as well, but the climb has outpaced the oscillators, leaving a potential bearish divergence here if the price reverses back below the 1115 support level on a closing basis. Until then, this is merely a potential divergence, and only a daily cycle signal will change it. Above 1136, 1142-44 looms large on the way to a possible test of the year highs. Daily Nasdaq Chart The Nasdaq is the closest to a test of this year's declining resistance line, looking for a close above the 1985 level (today's close was 1979.9) to target 1995-2000, 2025 and 2060. The pattern of stochastic highs suggests that the 1980-2000 level will be a key battle between bulls and bears, and conveniently we have major market moving news due tomorrow. Below 1950, next support is at 1920 and 1900. Weekly TNX Chart Bonds were weak today, gapping slightly and spending the day above the bulk of last week's range. On this weekly chart (see tonight's Futures Wrap for a discussion of the daily chart), the most recent weekly candle is based solely on today's data. Despite the strong move higher in the ten year note yield (TNX), which added 1.51% in a 6.1 basis point move to close at 4.09%, the downtrend off the springtime highs has yet to be violated. A move above the 4.14% level will be the first sign of trouble for bond bulls/TNX bears, followed by EMA resistance in the 4.2% area. A break below the 3.85%-.88% level would suggest that the current decline is in fact a bear wedge breakout targeting the low 3.0% level below 3.59% support. Weekly Crude Oil Chart Last week's pullback was being lightly retraced this morning, with December crude futures reaching a high of 52.475 as the financial press discussed production concerns amid reports of wildcat strikes in Nigeria. The spin abruptly reversed course as crude oil took a plunge, with reporters attributing the fall in prices to the workers not formally having agreed to strike and Iraqi production reaching its highest level since the first attacks on that country. Reuters attributed the action to speculation of a Kerry win, citing analysts who expect a more interventionist petroleum policy, a less aggressive expansion of the Strategic Petroleum Reserves and a more conventional diplomatic policy in the Middle East under Kerry. Whatever the reason, oil was back below the 50 level for the first time in a month, lending some credence to the bearish divergence in the 10-week stochastic that has been steadfastly holding its ground. Wildcat strikes, kidnappings and fighting in the Middle East, and news of the sabotage of a pipeline in northern Iraq were ignored. There's support at 49, with stronger confluence at 45-46. Obviously, the election results will have their own impact on this chart, always assuming that the more than 10% price drop in the recent days approaching the election were merely technically driven. For the day, crude oil for December delivery closed at 50.20 on the Nymex, a 3% decline. Following Friday's news of the 70+ year low in the personal savings rate, the Bureau of Economic Analysis announced US September consumer spending and personal income before the bell. Personal income rose 0.2% for the month, while consumer spending rose 0.6%. Expectations were a .3% increase and a .6% increase, respectively. The Personal Consumption Expenditure Index (PCE), an index that the Fed prefers over the CPI, is now up an annualized 2% over the past year, with the core PCE up an annualized 1.5%. There was little reaction to this data upon its release, with bonds drifting slowly lower while equities declined slightly and then rose. The news was notable in that personal spending continued to advance faster than personal income, as appears from the attached chart from the BEA's report: BEA chart of Real Disposable Income and Real consumer spending This month's income figure included an increase of 20B in transfer receipts representing net insurance settlements for hurricane damage. Wages and salaries increased by another 20B, but according to the report were "partly offset" by a reduction in rental income due to uninsured losses resulting from the hurricanes. At 10AM, the Institute for Supply Management reported that the US manufacturing sector expanded for its 18th consecutive month in October, holding over the 50% baseline but declining to 56.8% from an unrevised 58.5% in September. Expectations were for 58.5%, and equities dipped immediately on the news. Also at 10AM, the Commerce Department reported a US Construction Spending for September. The number was flat for the month, missing expectations for a .5% increase. The August reading was revised to a .9% gain from the .8% increase previously reported. The September reading broke a 7 month trend of increases in construction spending. At 3PM, the Treasury Department announced that it intends to borrow another $100B in the last quarter of 2004 to fund the budget deficit, to be followed by an additional 147B in the first quarter of 2005. The markets greeted this news with a yawn, with the US Dollar Index holding steady as well. Earning season is finally slowing down, and it was a relatively quiet day for corporate news. DCLK was up strongly on news that it has retained Lazard Freres to advise the company on increasing shareholder value, including potential stock buybacks, dividends, the sale of all or part of the company and such. DCLK rose a whopping 11.95% to close at 7.12. TYC reported fiscal Q4 earnings of 22 cents or 454M, which, excluding non-recurring items amounted to 45 cents per share, beating estimates by 2 cents. Q4 2003 had seen a loss of 297M or 15 cents per share. Led by strong growth in its healthcare, electronics and engineered products divisions, revenues rose 13% to 10.44B, meeting expectations. TYC expects to earn 40-42 cents in the next quarter, below current analyst estimates of 44 cents. TYC rose 1.77% to close at 31.70. A Wall Street Journal story made the rounds this morning, suggesting that internal emails and other documents reveal a an effort on the part of MRK to bury the facts showing elevated heart risks associated with Vioxx. The article cited an email dated March 9, 2000 acknowledging such risk. In the afternoon, it was announced that Standard & Poor's had placed MRK's triple-A credit rating on review for a potential downgrade due the risks of additional litigation against the company. The stock got shanked for 9.68% to close at 28.28. Petrochemical and coal mining company CVX was downgraded by Robert W. Baird from "outperform" to "neutral" following last week's Q3 results, citing an expected negative impact from lingering interruptions in the wake of this years hurricanes, as well their anticipation of a "consolidation" in oil prices. CVX closed lower by .21% at 52.95. After the bell, chipmaker NSM lowered its fiscal Q2 targets, with the company now expecting sales to decline almost 20% to 445M- 450M from its previous forecasted drop of 8%-10%. NSM was down 8.03% to 15.35 afterhours as of this writing. MXIM was also getting sold afterhours, down 2.51% to 43.10 after meeting analyst expectations of 42 cents per share. Sales were light, however, coming in at 435M for the quarter vs. expectations of 454M. The company also announced an increase in its quarterly dividend from 8 cents per share to 10 cents. For tomorrow, we have a light menu of economic reports, with the ICSC-UBS Store Sales report and the retail Redbook, followed at 10AM by the Challenger Job report. That, and the elections. I believe that today's lighter volume, higher option-volatility, narrow range action was the prelude to tomorrow's news. I won't bother adding my voice to the deafening chorus of guesses as to what will, will not or might happen. From a trader's perspective, we can either try for an educated guess, or wait for the market to tell us by moving through or failing to move through key levels. While the temptation is obviously to attempt to anticipate a move with a prior (directional) position, that's the higher risk alternative. With the Nasdaq near the top of an impressive rally off the August lows while the Dow and SPX continue to retrace last month's losses, there's something for everyone. While I am personally expecting some kind of selling on the Nasdaq, at least on a corrective basis, that opinion will change if bulls can break the declining resistance lines on the way to a test of the June highs. The only certainty is that the market will be making a strong move in either direction following the light volume, high anxiety action we had today. If you find yourself worrying about the outcome of the election, at least as far as your open directional positions go, consider either hedging them or lightening up. Alternatively, a straddle properly applied can help you capture the move without committing more than necessary to either direction. ================================================================== 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 --------------------------------- Masco Corp - MAS - close: 35.41 change: +1.15 WHAT TO WATCH: Investors were in a buying mood the day before MAS reports earnings. The stock added 3.3 percent on above average volume to breakout over resistance at $35.00 hitting new all-time highs. Technicals are positive and its MACD is in a buy signal. The P&F chart is very bullish with a $60 price target. Wall Street is looking for MAS to report earnings of 62 cents a share tomorrow morning. Watch for a reaction to the news. --- Unocal Corp - UCL - close: 42.32 change: +0.57 WHAT TO WATCH: Oil and oil service stocks have been consolidating some of their late summer gains. Yet while both the OIX and OSX indices traded lower today shares of UCL continued Friday's bounce on above average volume. The RSI and stochastic indicators are reversing upward again and its MACD indicator is nearing a new buy signal. Readers may want to consider bullish positions on a move over $42.75-43.00. --- Martin Marietta - MLM - close: 47.75 change: +2.22 WHAT TO WATCH: MLM added 4.8 percent on strong volume after reporting earnings that bested analysts' estimates by 7 cents. The breakout has pushed MLM to new six-month highs and a new P&F buy signal. Considering the double-bottom near $41 and the consolidation over the past couple of months MLM could be poised to move higher. Its MACD is in a buy signal and the P&F chart points to $58. We see current resistance in the $51 region. --- Novastar Financial - NFI - close: 44.25 change: +0.97 WHAT TO WATCH: This could be a bullish entry point in NFI. Several days ago the stock put in a quick double-bottom at the $40 level. Now shares have broken out over resistance at $44.00 and its simple 200-dma. NFI has also broken its six-week trend of lower highs. Plus, its MACD is in a new buy signal. Aggressive traders may want to consider long positions now. Conservative traders can watch for a move over $45. We would target $50. ----------------------------------- RADAR SCREEN - more stocks to watch ----------------------------------- RSH $30.87 +0.94 - RSH added more than 3 percent on Monday with volume way above average. Today's breakout pushes through resistance at $30.00 and its simple 200-dma. PWR $6.94 +0.22 - PWR has rallied another 3.2 percent to breakout over resistance t $6.75 following Friday's move over the simple 200-dma. STZ $40.04 +0.81 - STZ looks poised for a breakout over resistance in the $40.00-40.10 region. YCC $28.50 +0.80 - YCC has been consolidating in a large pennant pattern of lower highs and higher lows. Currently YCC has broken out over all its major moving averages and looks ready to break the trend of lower highs. ================================================================= 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 11-01-2004 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: AFG Stock Splits Announcements: None Trading Ideas Value Plays With Bullish Signals Breakout to Upside (Stocks $5 to $20) Breakout to Upside (Stocks over $20) Breakout to Downside (Stocks over $20) Recently Overbought With Bearish Signals (Stocks over $20) ================================================================== Stop Loss Adjustments ================================================================== AFG - non-tech short - Ouch! AFG is not cooperating and this is turning into a painful loss for us (-8.7 percent so far). Over the weekend we suggested that conservative traders may want to exit if AFG breaks out over the $30.00 mark. AFG did just that today, out performing the IUX insurance index on big volume again. All of our indicators and analysis on AFG is now bullish but the stock is nearing major resistance at $31.00 - a level that has not cracked in years! We're going to stick it out for another 80 cents. ================================================================== 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 --------------------------------- Value Plays With Bullish Signals --------------------------------- Ticker Company Name Close Change SI Siemens Aktien 75.44 +0.70 UBS UBS Ag 73.06 +0.57 UN Unilever N.V. 58.85 +0.56 MWD Morgan Stanley 52.19 +1.10 CAT Caterpillar 81.84 +1.30 AT Alltel Corp 55.78 +0.85 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- MVL Marvel Enterprises 16.98 +1.58 CHUX O'Charley's Inc 17.30 +1.78 ABMD Abiomed Inc 12.83 +1.52 MALL PC Mall Inc 16.53 +1.10 ECST Ecost.com Inc 10.10 +1.17 TRGL Toreador Resources 12.40 +1.96 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- PSFT Peoplesoft Inc 22.93 +2.16 PH Parker Hannifin 72.56 +1.93 HUM Humana Inc 20.35 +1.20 KCI Kinetic Concepts 55.65 +5.82 MLM Martin Marietta 47.75 +2.22 CRM Salesforce.com 21.70 +1.38 MMP Magellan Midstreams 56.75 +1.35 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- MRK Merck & Co 28.28 -3.03 AVP Avon Products 38.00 -1.55 APOL Apollo Group 64.38 -1.62 EL Estee Lauder 41.65 -1.30 KWK Quicksilver Resources 30.42 -1.21 EAC Encore Acquisition 31.62 -1.03 GIVN Given Imaging Ltd 29.75 -2.49 ATRS Altiris Inc 25.49 -1.71 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ----------------------------------------- GDT Guidant 62.98 -3.64 DADE Dade Behring 52.47 -3.82 SRX SRA Intl Inc 52.25 -1.51 CETV Central European Media 33.70 -1.69 CAC Camden Ntl Corp 35.84 -1.01 ================================================================= To stop receiving this PremierInvestor.net Newsletter, send email to Contact Support ================================================================= DISCLAIMER ================================================================= This newsletter is a publication dedicated to the education of stock traders. The newsletter is an information service only. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. The newsletter picks are not to be considered a recommendation of any stock but an information resource to aid the investor in making an informed decision regarding trading in stocks. It is possible at this or some subsequent date, the editors and staff of PremierInvestor.net may own, buy or sell securities presented. All investors should consult a qualified professional before trading in any security. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. PremierInvestor.net staff makes every effort to provide timely information to its subscribers but cannot guarantee specific delivery times due to factors beyond our control. Please read our disclaimer at: http://www.optioninvestor.com/page/oin/aboutus/disclaimer.html ***************************************************************** ADVERTISING INFORMATION For more information on advertising in PremierInvestor.net Newsletter, or any Premier Investor Network newsletter please contact Contact Support. ***************************************************************** Copyright (c) 2004 PremierInvestor.net. and The Premier Investor Network. Do not duplicate or redistribute in any form.
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