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.
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