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Daily Newsletter, Monday, 12/20/2004

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PremierInvestor.net Newsletter                   Monday 12-20-2004
                                                    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: Check your inverted yield curve.   
Watch List: Fashion Accessories to gambling and more  


===============================================================
MARKET WRAP  (view in courier font for table alignment)
===============================================================
      12-20-2004           High     Low     Volume   Adv/Dcl
DJIA    10661.60 + 11.68 10735.27 10652.07 1.78 bln 1383/1434
NASDAQ   2127.85 -  7.35  2154.48  2124.22 1.98 bln 1128/1952
S&P 100   567.80 +  0.43   572.14   567.31   Totals 2511/3386
S&P 500  1194.65 +  0.45  1203.64  1193.36
SOX       419.40 -  4.35   428.19   418.53
RUS 2000  638.05 -  4.03   645.17   636.95
DJ TRANS 3730.88 - 20.19  3762.15  3728.45
VIX        11.83 -  0.12    12.34    11.77
VXO (VIX-O)13.61 +  0.90    13.63    12.28
VXN        18.21 +  0.00    19.22    18.21
Total Volume 3,773M
Total UpVol  1,421M
Total DnVol  2,206M
Total Adv  2511
Total Dcl  3386
52wk Highs  304 
52wk Lows    29
TRIN       1.06
PUT/CALL   0.84 
===============================================================

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

Buoyed by oil prices failing more than a $1.00 a barrel, the DOW 
charged out of the gate this morning, gained about 85 points, hit 
its daily high of 10732 and reversed and unfortunately from there 
it was downhill for the rest of the day. The DOW closed at 10661 
for a measly +11.68 gain for the day. The SPX also hit its daily 
high early in the morning at 1203.64, fell for the balance of the 
day making a daily low at 1193.36 and also closed poorly at 
1194.66 for a daily gain of +0.46. Same story for the NASDAQ, it 
hit its daily high at 2154.48, made a daily low at 2124.22 and 
also closed poorly at 2127.85 for a daily loss of -7.35 points 

NASDAQ most actives were SIRI, MSFT, PARS, SYMC AND CSCO. NYSE 
most actives were PFE, LU, NWS, NT AND MRK. 

On the Big Board, 1.4 billion shares traded and 1,641 stocks rose 
and 1,677 fell. On the Nasdaq 2 billion shares changed hands with 
1,169 advancing and 2,001 declining. New highs/new lows on the 
NYSE were 242/11 and on the NASDAQ it was 144/17. 

According to the Stock Trader's Almanac the Santa Claus Rally is 
scheduled to begin on December 23rd and should continue through 
the last five trading days of the year and into the first two 
days of the New Year. Since 1969 the S&P has averaged 1.7% gains 
during this time but it is important to note that if this rally 
fails to materialize it has often been a harbinger of bear 
markets ahead. The saying is "If Santa Claus should fail to call 
- bears may come to Broad and Wall."

Retailers are gearing up for one of their best weeks of the year 
although recent data of retail sales doesn't look too good. Data 
from ShopperTrak of Chicago estimated that retail sales on 
Saturday were down 7% compared with the same Saturday last year. 
The research group took into account two additional shopping days 
between Thanksgiving and Christmas this year so the slowdown is 
"a little alarming" said Bill Martin, co-founder of the research 
group.  Many midprice retailers tried to spur sales with sharp 
price cuts and discounting was so steep at some major stores that 
experts aren't sure whether retailers can bring home the 4.5% 
sales gains the industry has projected for the 2004 season. 
Retailers are blaming the lack of a trendy holiday gimmick and 
high energy costs for the slowdown. Doesn't this sound like Krispy 
Kreme blaming its woes on the low carb craze?

However, there are some retailers that haven't been affected by 
high energy costs, retailers like Apple (AAPL). Apple's can't 
ship its portable music player, iPod, fast enough giving rise to 
Lehman Brothers raising its profit outlook and target price on 
AAPL. Lehmen expects AAPL will post first quarter revenue up $0.1 
billion. Interestingly AAPL closed at 62.72 down -2.27 for the 
day. 

In other news Exelon (EXC) has agreed to merge with Public 
Service Enterprise Group Inc. (PEG) for $12.81 billion in stock 
thus creating the largest power generator in the country. Under 
the merger agreement, which both boards unanimously agreed to, 
each PEG common share will be converted into 1.225 shares of EXC 
so PEG stockholder will ultimately own 32% of EXC's pro forma 
shares. EXC closed at 43.05 up +1.19 and PEG closed at 50.59 up 
+3.29. Obviously Wall Street likes this merger. 


The Securities and Exchange Commission (SEC), the National 
Association of Securities Dealers (NASD), the New York Stock 
Exchange (NYSE) and Edward D. Jones & Co. have tentatively agreed 
to a $75 million settlement due to the brokerage firm's practice 
of steering its investors to mutual funds from which they 
received compensation without disclosing the fact to the 
investor. Last year the SEC fined Morgan Stanley $50 million for 
conflicts of interest which included the same practice. 

The only economic report out today was the Leading Indicators 
index (LEI), a report of 10 different economic indicators 
compiled by a private research group, the Conference Board.  Of 
the 10 indicators, six increased in November: stock prices, real 
money supply, average weekly initial claims for unemployment 
insurance, index of consumer expectations, manufacturers’ new 
orders for non-defense capital goods, and manufacturers’ new 
orders for consumer goods and materials. The four negative 
indicators were: vendor performance, average weekly manufacturing 
hours, building permits, and interest rate spread. The overall 
LEI had fallen for the last five straight months showing that the 
economy's momentum was running out of steam and giving rise to 
worries of inflation but today the conference board announced 
that overall LEI increased to 0.2% after a revised 0.4% decline 
the month before. Economists had expected to see a gain of 0.1% 
for the month. 

Although this report looks good lifting up the hood we find some 
problems. The report's performance this year hasn't corresponded 
particularly well with actual economic performance and a survey 
of top economists finds that they are not placing tremendous 
emphasis on the report this year. 

On to the charts. 

DOW Daily

 

Although the DOW looked weak intraday when you look at it on the 
daily chart you see a pretty healthy looking chart with the 
exception of the MACD divergence. This market could drop all the 
way back to the triple bottom at about 10400 before you see a 
hint of a trend change. I think the bulls are still doing OK. 

DOW Weekly

 

Looking at the DOW on a weekly chart you start to see that it may 
be hitting a resistance that could be quite difficult to get 
through. 

SPX daily

 

Once again although the intraday chart of the SPX was anything 
but bullish the daily chart tells the real story and this is a 
bullish chart if you ever saw one. However, things need to cool 
off a bit and the MACD may be telling us that that is exactly 
what the SPX may be doing. 

NASDAQ daily

 

The NAZ has a similar chart to the SPX but with some differences 
that are worth noting. First of all the MACD is more bearish in 
that the slow line is starting to curve up in the SPX but not in 
the NAZ; the NAZ is at the bottom of it channel and much more of 
a move downwards could mean the trend changes and the bearish 
double top is confirmed; then we have the double top on the NAZ 
whereas it is a higher high on the SPX. 

Tomorrow, Morgan Stanley (MWD) and Bear Stearns (BSC) are the 
only two S&P 500 components with earnings before the bell while 
General Mills (GIS) is expected to report quarterly results 
during market hours.  There will be no economic data out until 
final Q3 GDP readings hit the wires on Wednesday at 8:30 ET.

One last note - in a New York Federal Reserve 1996 study on what 
indicators were the most reliable predictors of a recession, only 
one of six indicators measured that was significantly reliable 
was an inverted yield curve. They later did a private study with 
over 20 factors and still the only dependable indicator was the 
inverted yield curve. So what is an inverted yield curve? Well 
normally, short term rates are lower than long term rates because 
investors want to be compensated for the risk of the longer 
holding period. But sometimes short terms rates rise above long 
term rates, giving rise to what is known as an inverted yield 
curve. What this 1996 (and subsequent studies) have found is that 
when the yield curve is inverted or negative for 90 days, you 
typically get a recession in about 12 months. The last time we 
had a inverted yield curve was August 2000 and according to John 
Maudlin of Frontlinethoughts.com a recession after a 90 day 
inverted yield curve is more than typical. He states, in the US, 
every time we have had a period of negative yield curves, we have 
had a recession within a year. Should we start to worry? Not yet.

The US yield curve is slowly flattening but is not inverted and 
is not signaling a recession but Mr. Maudlin has spotted a 
worrisome inverted yield curve in England. I won't go into the 
dept that Mr. Maudlin did but suffice it to say he has found 
enough similarities between the two economies for us to take note 
and watch to see if this may be our canary in the mine for a 
recession heading our way. In any advent I would start watching 
the yield curve and if it inverts start to take action for a 
possible recession. You can watch the yield curve on 
stockcharts.com, which has a tres cool dynamic yield curve. 

Remember plan your trade and trade your plan. 

Jane Fox
 

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

Fossil Inc - FOSL - close: 23.63 change: -1.34

WHAT TO WATCH: FOSL has produced another high-volume breakdown, 
which is becoming more and more common for the stock.  The recent 
breakdown two weeks ago broke support at $26 and its 200-dma.  
Just when the MACD looked ready to produce a new buy signal FOSL 
loses another 5.3 percent and breaks down under the $24 level.  
Today's move could be a bearish entry point.  We would target 
support at $22.00 as our initial exit but it wouldn't surprise us 
to see it hit $20.00. The P&F chart is very bearish with a $15 
target. 




---

Boyd Gaming - BYD - close: 38.99 change: +1.68

WHAT TO WATCH: BYD is another relative strength winner today.  
Shares added 4.5 percent on volume about twice the average.  The 
move is a breakout over two-month old resistance at the $38.00 
level.  Short-term technicals are positive and its MACD is 
nearing a new buy signal.  We know the stock looks a little 
overbought following its post-earnings explosion back in October-
November but shares have essentially churned sideways the last 
several weeks digesting those gains.  The P&F chart points to 
$48.




---

Omnicare Inc - OCR - close: 33.84 change: +0.68

WHAT TO WATCH: OCR out performed the broader market indices today 
with a two percent rally on above average volume.  Bulls will 
note the current trend of higher lows as shares continue to push 
against resistance at $34.00, which coincides with the bottom of 
its July gap down.  We would consider new bullish positions on a 
move over $34.05 but more conservative traders should probably 
wait for a breakout over $35.00 and/or its simple 200-dma near 
$35.50.  The P&F chart looks pretty bullish with a bounce from 
support and a new target at $49.00.




---

T C F Financial - TCB - close: 31.46 change: +0.53

WHAT TO WATCH: The four-month pattern in TCB is looking more and 
more like a neutral pennant formation with higher lows and lower 
highs.  Usually when shares narrow into the point of the pennant 
we can begin to expect a breakout one way or the other.  While 
pennants are typically neutral patterns the P&F chart is bullish 
with a $44 target.  Readers could watch for a move over $31.75 or 
$32.25 as a potential bullish entry point. Be patient.  TCB is 
not a very fast moving stock.



 

=================================================================
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 12-20-2004
                                                    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:  QLGC, MNST      

Active Trader (Non-tech Stocks)
  Closed Bullish Plays: UHS

Stock Splits
  Announcements:        CRDN
  
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
==================================================================

QLGC - tech stock long -
  Heads up!  QLGC has broken technical support at its
  simple 21-dma.  Plus the SOX index does not look very
  strong.  This could be a clue that QLGC and the sector
  are about to turn lower.  
 
 
MNST - tech stock long -
  Uh-oh!  Readers may need to re-evaluate their risk-reward
  profile on MNST.  Shares hit $33.90 this morning but quickly
  faded back toward minor support at $32.00.  Our target was
  a move into the $34-36 range but MNST didn't quite make it
  and today's action looks like a failed rally, which could be
  translated as a possible bearish entry point.   We do expect the
  $30.00 level to hold up as support.  Nimble traders may want to 
  consider exiting under $32.00 and looking for a new entry on a 
  bounce from $30.

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

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

  Closed Bullish Plays
  --------------------

Universal Health - UHS - cls: 45.35 chg: -0.96 stop: 45.50     

Looks like the late afternoon bounce on Friday was nothing but a 
speed bump on the way down.  UHS has broken support at the $46.00 
level with Monday's 2 percent decline.  The stock has now 
completely erased its mid-December gains.  One could argue that the 
exponential 200-dma near today's low might be support but we're not 
counting on it besides our stop loss was $45.50.

Picked on December 12 at $48.51 
Gain since picked:       - 3.16
Earnings Date          10/21/04 (confirmed)
Average Daily Volume:       500 thousand




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

CRDN announces a 3-for-2 stock split

 Monday morning before the market's opening bell Ceradyne, Inc. 
(NASDAQ:CRDN) announced that its Board of Directors had approved a 
3-for-2 stock split of its common shares.

The split will take the form of a 50 percent stock dividend 
payable on January 18th, 2005 to shareholders on record as of 
January 10th.  Fractional shares resulting from the split will be 
paid in cash.


About the company:
Ceradyne develops, manufactures and markets advanced technical 
ceramic products and components for defense, industrial, 
automotive/diesel and commercial applications. (source: company 
website)


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

TM      Toyota Motor Corp          77.65     +0.54
COP     ConocoPhillips             88.00     +1.01
XOM     ExxonMobil                 51.06     +1.26
UN      Unilever N.V.              65.35     +0.90
DOW     Dow Chemical               50.05     +0.54
OXY     Occidental Petroleum       58.68     +1.78

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

CATG    Cambridge Antibody Tech    14.37     +1.99
TWMC    Trans World Entertainment  12.77     +1.15
CRZO    Carrizo Oil & Gas          11.57     +1.07
ATCO    American Technology         8.54     +1.05
SNDS    The Sands Regent           15.62     +1.03
FRD     Friedman Industries        10.82     +1.76

---------------------------------------
Breakout to Upside (Stocks over $20)
---------------------------------------
  
MON     Monsanto Co                52.49     +1.05
FS      Four Seasons Hotel         82.51     +3.76
BYD     Boyd Gaming Corp           38.99     +1.68
FHR     Fairmont Hotels            32.74     +1.18
MTH     Meritage Homes            112.13     +3.93
ZGEN    Zymogenetics               24.48     +1.35
CMC     Commercial Metals          47.42     +4.32

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

PFE     Pfizer Inc                 24.29     -1.46
SYMC    Symantec Corp              24.04     -1.33
CTAS    Cintas Corp                43.63     -1.11
JNY     Jones Apparel Group        35.33     -1.53
R       Ryder Systems              48.97     -5.53
COT     Cott Corp                  24.41     -2.69
FOSL    Fossil Inc                 23.63     -1.34
SYNA    Synaptics                  30.47     -2.30
ROG     Rogers Corp                44.22     -1.06

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

STZ     Constellation Brands       45.93     -1.89
CME     Chicago Mercantile Exchg  217.78     -2.78
MCRS    Micros System Inc          73.29     -1.83


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








DISCLAIMER

Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

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