PremierInvestor.net Newsletter Wednesday 11-24-2004 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: Turkey Run Watch List: Software to Telecom to Insurance and more =============================================================== MARKET WRAP (view in courier font for table alignment) =============================================================== 11-24-2004 High Low Volume Adv/Dcl DJIA 10520.31 + 27.71 10527.40 10482.26 1.43 bln 2033/ 775 NASDAQ 2102.54 + 18.26 2103.80 2090.20 1.62 bln 1869/1139 S&P 100 562.70 + 1.41 563.55 561.22 Totals 3902/1914 S&P 500 1181.76 + 4.82 1182.46 1176.94 SOX 433.65 + 3.94 435.59 430.75 RUS 2000 629.50 + 4.97 630.29 624.41 DJ TRANS 3647.59 + 26.51 3651.41 3621.04 VIX 12.70 + 0.05 12.89 12.56 VXO (VIX-O)12.97 - 0.11 13.48 12.82 VXN 17.88 - 0.55 18.28 17.73 Total Volume 3,055M Total UpVol 2,060M Total DnVol 940M Total Adv 3902 Total Dcl 1914 52wk Highs 575 52wk Lows 26 TRIN 1.03 PUT/CALL 0.61 =============================================================== =========== Market Wrap =========== Turkey Run Jonathan Levinson The markets opened and traded as scheduled, but hearts and minds appeared more acutely focused on the promise of turkey and trimmings. Light volume and slight ranges dominated the indices ahead of the (almost) long weekend. Other than the absence of volume, it was a solidly positive day, as advancing volume more than doubled declining volume on the NYSE and almost did so on the Nasdaq. There were 396 new NYSE highs for 3 new lows, 210:18 on the Nasdaq. In light of these internals, it's surprising that the indices didn't advance further. Daily Dow Chart The Dow added 27.71 points to close at 10520.31, above this week's high but below resistance on the way to last week's high. This week has seen the first steps of an overdue daily cycle downphase, but without confirming followthrough. Support is where indicated at 10425-30, 10360 and 10240-50. A close below the 10425 level should be enough to get the daily cycles pointed more unambiguously south, but given the close near the highs today and the certain light, retail-dominated volume expected on Friday, bears will most likely have to wait for next week to see it. Daily S&P 500 Chart The SPX gained 4.82 to close at 1181.76. The cycle picture matches that on the Dow, and bearish traders need a closing break of 1168 to be confirmed with a break of 1160 support. Daily Nasdaq Chart The Nasdaq was relatively stronger than its peers, gaining .87% or 18.2 points to close at 2102.5. The rally highs are spitting distance away, and Friday could see a light volume, high anxiety retest. The daily cycle oscillators are trying to put together an upside whipsaw on today's gains. The trouble with light volume moves is that they're more susceptible to reversal when volume returns. While price is the only arbiter for traders, light volume price breakouts are the most likely to reverse, and for that reason we need to be careful in the event that the bulls pick up on Friday where they left off today. Weekly TNX Chart The Mortgage Bankers Association reported that its Mortgage Index, which measures weekly application for home mortgages in the US, declined 5.7% during the week ending November 19, engulfing the previous week's 4.3% gain. This index can be very volatile from week to week, and the 5.7% drop would be uninteresting except that it occurred alongside a decline in interest rates, with the rate for a 30-year fixed mortgage down from 5.7% to 5.64% during the same period. The Refi Index, which measures refinancing activity, declined 8.3%, while the Purchase Index lost 3.5%, posting its third consecutive week of declines. Ten year note yields ($TNX) declined last week as well, with what appears to be a neutral pennant printing during the past 3 weeks in the early stages of the recently-commenced upphase. If this oscillator upphase is for real, the pennant should break to the upside, targeting next weekly resistance in the 4.4%-4.5% area. The pennant of the past few weeks has reflected itself as a downphase in the shorter (ie daily) timeframes, which I've been following nightly in the Futures Wraps. That downphase has so far been corrective, and so long as the current consolidation does not violate 4.0% support, TNX bulls/bond bears should have a shot at the year highs above 4.8% on a break above 4.5%. For the day, TNX finished higher by 1.1 bps at 4.195%. Weekly chart of Crude oil The Energy Department reported that crude oil inventories rose in the week ending November 19th by 100,000 barrels to 292.4M, their 9th consecutive weekly rise. Distillate supplies rose 1M barrels to 115.6M, while gasoline stocks rose 1.8M barrels to 202.7M barrels. Later this morning, the American Petroleum Institute reported its own inventory figures, announcing that distillate inventories rose 1.8M barrels to 117.6M, crude oil inventories declined by 1.2M barrels to 293.2M, and gasoline rose 2.9M to 204.1M barrels. The Energy Department's and the API's figures are often at odds, as occurred with this week's crude oil data, and the disagreement as to whether crude stocks rose or fell is not particularly noteworthy. Crude oil traded both sides of unchanged, bouncing from a low of 47.775 per barrel to print an afternoon high at 49.65 and closing higher by 1.02% at 49.45. The higher range so far this week sets up last week's doji hammer as a potential reversal candle. However, in light of the ongoing weekly cycle downphase (launching as it did from a bearish stochastic divergence), oil bulls will need to be vigilant for a lower bounce high, particularly in the 51-52 resistance zone. At 8:30AM, the Labor Department released the initial claims data for the week ending November 20th, with 323,000 new claims for state unemployment benefits reported. This figure was down from the previous week's 335K reading, and was lower than consensus estimates for 335K as well. Continuing jobless claims declined 29,000 to 2.76M, the lowest level since May 2001. The 4-week moving average of initial claims also posted an encouraging drop of 6,750 to 332K, which is the lowest level since November 2000. The report indicated that 337K new jobs were added in October. Also released at 8:30 was the Durable Orders report. The Commerce Department reported that orders for durable goods fell 0.4% in October, missing analyst expectations for a 0.5% rise. The data would have been even worse if not for strong military demand, as non-defense durable goods fell 1.5%, posting the sixth consecutive decline in 7 months. By comparison, orders for military aircraft launched by 35.2% in October. Ex-transport, durable orders were down 0.7%. This bleak picture was somewhat mitigated by upward revisions to September's durable orders number from .2% to .9%. At 9:45AM, the University of Michigan announced that consumer sentiment as measured by the Umich sentiment index fell to 92.8 in late November from its previous 95.5 reading released earlier this month. The number fell short of analyst expectations for 96, but remained above the October level of 91.7. At 10AM, the Conference Board's Help Wanted Index, which tracks newspaper help-wanted ads in the US, rose to 37 in October from its September level of 36. Also at 10AM, the Commerce Department reported a rise in New Home Sales of .2% to 1.226M units in October, the third highest level on record. The data exceed analyst expectations by 26,000 units. The report further revealed an increase of 1% in the number of homes offered, which equates to 4.1 months' supply. The median price of a new home rose from $203,300 in September to $221,800 in October. In corporate news, GE announced its agreement to purchase ION, manufacturer of water purification devices, for a price of $44 per share comprised of 1.1B in cash and the assumption of ION's debt. The $44/share purchase price represents a 48% premium on ION's previous closing price. ION closed higher by 45.51% at 43.29 while GE lost .42% to close at 35.66. Insurer and financial manager AIG announced its agreement to pay 126M in fines to settle ongoing federal investigations relating to its dealings with Brightpoint and PNC Financial Services Grp. The 126M figure is comprised of 46M to be paid to the SEC, and 80M to the US Department of Justice. AIG is not out of the woods, however, as a Wall Street Journal article reported that federal prosecutors are investigating allegations as to whether chairman Maurice Greenberg attempted to manipulate AIG's share price in 2001. The alleged scheme would have sought to achieve a higher price for the stock in order to save money on its 23B deal to acquire American General. AIG closed lower by 3 cents at 64.17. Overall it was a quiet day, with the treasury market closing early for the holiday. The US Dollar got crushed to new lows for its multiyear decline, as commodities and foreign currencies rallied to new multiyear highs. In the case of the CRB, it was nearly a 25 year high above 291.5. In this environment, it's surprising that the degree of dollar selling hasn't corresponded with more weakness in treasury bonds, as the ten year yield has continued to mark time in the low 4% area. As I've discussed at length in the Futures Wraps this year, the decline in the dollar has often coincided with rallies in everything else denominated in those dollars. Aggressive investors have sought protection from the depreciating dollar in commodities, real estate, metals, and equities. Until we see pronounced selling anywhere but in the dollar, there's little reason to expect these intermarket trends to reverse. While the past month's rally in the indices looks toppy and ready for a correction, traders will want to see at least a few days' worth of weakness before assuming that the trend is changing. Recall that over the past month, we've seen 3 days' worth of weakness, and only one occasion during which there were 2 consecutive days' worth of lower lows and lower highs. If the markets feel toppy to you (as they do to me), ask yourself whether you believe that the USD Index is a buy at these levels- equities look almost as overbought on a daily chart as the USD Index looks oversold. So far, the trend has maintained the dollar in opposition to dollar-denominated equities and while no trend is bulletproof, it's best to follow it as long as it lasts. With the promise of a light volume session when trading resumes on Friday, traders are best to be mindful of the propensity of low volume markets to frustrate, obfuscate and whipsaw. Have a safe and happy Thanksgiving. ================================================================= 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 --------------------------------- Synopsys Inc - SNPS - close: 18.37 change: +0.62 WHAT TO WATCH: The rebound continues in software maker SNPS. Shares began to trend higher a few weeks ago and the stock just today broke out over minor resistance at $18.00. SNPS is now challenging technical resistance at its 100-dma. This looks like an entry point for a run toward $20.00. The P&F chart has reversed into a new buy signal with a long-term $25 target. Yet traders need to be aware that SNPS is due to report earnings on December 1st. We usually avoid holding over an earnings announcement. --- China Mobile Ltd - CHL - close: 16.43 change: +0.64 WHAT TO WATCH: CHL turned in a strong 4 percent rally on volume that was almost four times the average. Today's gain pushed CHL up and through resistance at the $16.00 mark. More importantly shares burst through technical resistance at the 200-week moving average. This looks like a bullish entry point for a run toward its yearly highs near $18.00. The bullish P&F chart points to a $21.00 target. --- Marsh Mclennan - MMC - close: 28.70 change: +0.64 WHAT TO WATCH: There are a lot of opinions out there surrounding the insurance sector, especially beleaguered stocks like MMC who were under investigation by NY Attorney General Elliot Spitzer. Whether you think the stock is a dog and needs to be dumped or a value play at current levels it is worth noting that the four- week consolidation seems to be breaking out to the upside. A move over resistance at $30.00 could be a bullish entry point. The P&F chart has reversed from a sell signal to a buy signal with a $42 target. --- Taro Pharmaceuticals - TARO - close: 29.40 change: +0.89 WHAT TO WATCH: After three months of consolidating above the $20.00 level TARO began to recover in late October. Now shares are challenging the top of the gap down at $30.00. Watch for a breakout over $30.00 as a bullish entry point. Our short-term target would be $35 and its exponential 200-dma. ----------------------------------- RADAR SCREEN - more stocks to watch ----------------------------------- SWIR $19.45 +0.25 - SWIR is creeping closer and closer to a breakout over resistance at $20.00. FMX $46.20 +0.80 - FMX turned in a nice bounce from the $45 level and its simple 200-dma. This could be a bullish candidate over $46.50. IDSY $18.99 +2.41 - This has been a volatile stock but shares are breaking out to new highs. ARA $37.20 +1.85 - ARA is also suggesting that its consolidation phase may be over. Watch for some follow through. AFG $31.92 +0.03 - This continues to look like a bullish entry point in this insurance stock. BCII $22.96 -1.14 - Looking for a bearish candidate? BCII has been consolidating its early 2004 gains for the last six months. Watch for a breakdown under its simple 200-dma near $22.00. ========================================================== 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 Wednesday 11-24-2004 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: SEBL, ASKJ, CHK, RIG, PCU, ZEUS 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 ================================================================== SEBL - tech stock long - The rally in the NASDAQ and software stocks helped lift SEBL to a 2.7 percent gain. The stock looks poised to run higher on Friday. ASKJ - tech stock short - Uh-oh! The market's strength was not so kind to the technology bears. ASKJ is trying to breakout and broke through $25.00 level on Wednesday. This is a big clue for the bears that it may be time to exit. If we don't see any weakness on Friday we will exit to minimize any losses. CHK - non-tech long - CHK continues to rally and looks very bullish with today's breakout over the $18.00 level. We are raising our stop loss from $16.00 to $16.49. RIG - non-tech long - Shares of RIG continue to look very strong, especially with Wednesday's 2.17 percent gain and move over the $40 level. We are raising our stop loss from $36.00 to $36.99. PCU - non-tech long - Heads up! We were prepared to close PCU but shares turned around on Wednesday. It could just be holiday volatility. We're watching for some follow through over the $48.00 level. ZEUS - non-tech long - We're going to give ZEUS one more day. If ZEUS doesn't bounce on Friday we're closing it. ================================================================== Stock Splits ================================================================== Announcements ------------- 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 CHL China Mobile Ltd 16.43 +0.64 TOT Total Sa (ADS) 108.81 +0.77 BP BP Plc 60.80 +0.53 CHA China Telecom 37.01 +1.10 LEH Lehman Brothers 84.52 +1.13 COF Capital One Financial 79.99 +0.52 --------------------------------------- Breakout to Upside (Stocks $5 to $20) --------------------------------------- DV Devry Inc 17.67 +2.77 AMSC American Superconductor 13.81 +1.58 HDTV Spatialight Inc 8.65 +1.12 MSB Mesabi Trust 12.75 +1.05 MERCS Mercer Intl Inc 10.90 +1.30 IDSY I.D.Systems 18.99 +2.41 --------------------------------------- Breakout to Upside (Stocks over $20) --------------------------------------- AAPL Apple Computer 64.05 +2.78 PDCO Patterson Companies 40.37 +1.39 TK Teekay Shipping 54.17 +2.90 ARA Aracruz Cellulose 37.20 +1.85 DCI Donaldson Co Inc 33.70 +1.80 TECD Tech Data Corp 45.25 +2.34 O Realty Income Corp 50.50 +1.05 ------------------------------------------- Breakout to Downside (Stocks over $20) ------------------------------------------- HRB H&R Block 47.40 -1.05 ESRX Express Scripts 69.65 -2.60 MIK Michaels Stores Inc 27.52 -2.68 OSIP OSI Pharmaceuticals 49.41 -2.97 CNCT Connetics 21.72 -4.63 ----------------------------------------- Recently Overbought With Bearish Signals (Stocks over $20) ----------------------------------------- PLMO Palmone Inc 35.46 -2.99 VLTR Volterra Semiconductor 21.00 -1.95 BCII Bone Care Intl Inc 22.96 -1.14 ================================================================= 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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