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Daily Newsletter, Wednesday, 12/29/2004

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PremierInvestor.net Newsletter               Wednesday 12-29-2004
                                                   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: Looking Back
Watch List:  Medical Equipment to Life Insurance and more


===============================================================
MARKET WRAP  (view in courier font for table alignment)
===============================================================
      12-29-2004           High     Low     Volume   Adv/Dcl
DJIA    10829.19 - 25.35 10853.72 10795.57 1.14 bln 1533/1277
NASDAQ   2177.00 -  0.19  2182.33  2170.99 1.49 bln 1415/1621
S&P 100   576.53 -  0.63   577.16   575.31   Totals 2948/2898
S&P 500  1213.45 -  0.09  1213.95  1210.95
SOX       430.53 +  3.78   432.29   425.62
RUS 2000  653.34 -  1.23   654.57   651.95
DJ TRANS 3810.29 -  1.33  3814.88  3801.21
VIX        11.62 -  0.38    11.79    11.61
VXO (VIX-O)12.47 +  0.16    12.84    12.46
VXN        17.72 -  0.07    19.31    17.69
Total Volume 2,634M
Total UpVol  1,457M
Total DnVol  1,117M
Total Adv  2948
Total Dcl  2898
52wk Highs  374 
52wk Lows    25
TRIN       0.69
PUT/CALL   0.93
===============================================================

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

Looking Back
Linda Piazza

The year's end presents a time appropriate for looking back, for
taking stock of the year's developments and projecting those for
the next year.  Consider looking back further than the beginning
of 2004, however.  Consider looking all the way back to the
beginning of the millennium when ominous signs began appearing on
at least one monthly chart.  This year's end brings some indices
up to test resistance established then.  

Annotated Monthly Chart for the Dow:

 

Annotated Daily Chart for the Dow:

 

Buying breakouts above the neckline looks dangerous with the Dow
so far above its monthly 50-sma.  Expected resistance at 11,000
lies just ahead of the breakout, adding to the danger.  Let
volume help you determine whether to go long on such a breakout,
as volume should explode on such an important breakout.  

Those considering selling rollovers beneath the red trendlines,
perhaps to be confirmed by a drop beneath the blue trendline,
should protect profits near 10,600-10,635 if that level is
reached and then again at 10,400-10,416. A bounce might be
expected from one of those levels.

Rather than a nice directional move, however, these chart
conditions may be pointing to dreaded choppy trading conditions
ahead, at least for this index.  Massive forces seem pitted
against each other. Resistance should be presumed at a major
congestion zone from which the Dow fell to its bear-market low. 
A speculative fitted retracement bracket, seen above on the daily
chart, and inverse H&S hint at the possibility of much more
upside, although neither has been confirmed as valid formations. 
Bears might be emboldened and bulls cheered by separate chart
developments, with both nervously eyeing developments that oppose
their views.  Unfortunately, that can lead to choppy trading
conditions.

Choppy trading conditions certainly prevailed Wednesday.  The
morning saw many divergences develop, both in indicators and
equity index behaviors.  Individual stocks varied widely in their
performances.  

Early in the day, the RLX popped above a descending trendline off
the November high and the SOX made initial moves toward its
eventual challenge of its 200-sma.  The TRAN, often a leading
index for the S&P's and Dow, showed no particular strength early
in the day, however, and neither did some other former leaders
such as the BIX, GSO and GHA.  

A component of the Dow as well as other indices, Boeing (BA),
fell on news that China is not going to approve aircraft
purchases for 2005 since it has all the aircraft needed. 
Lockheed Martin (LMT) received similar bad news from the
Pentagon, with purchases of LMT's F/A-22 fighter being scaled
back.  Nike (NKE) will take a hit from the tsunami. TXN posted
strong gains after positive comments by CSFB.  PFE and General
Motors gained.  And so it went.

Other divergences developed as the morning passed, including
mixed breadth indicators.  As Jane Fox noted on the Futures
Monitor on OptionInvestor, the actions of TRIN, the volatility
indices and the advdec line did not always corroborate each other
in the usual manner, as should happen if traders are to have
confidence in picking a likely direction.  Also, advancers pulled
ahead on the NYSE, but decliners did on the Nasdaq.  By the end
of the day, many indices had produced doji, indicative of
indecision.

Annotated Daily Chart for the SPX:

 

Annotated Daily Chart for the Nasdaq:

 

Annotated Daily Chart for the Russell 2000:

 

Economic releases continued to be light on this week spanning two
holiday weekends, and that might have been part of the difficulty
with determining a market bias. Commentators mentioned that few
catalysts existed to drive markets one direction or another.  Yet
markets failed to react even when potential catalysts did appear. 
Two were pre-market moves in the currency markets and during-the-
market moves in crude and heating oil prices, but not even those
developments could produce anything but chop between resistance
and support. 

In economic releases, the usual Mortgage Bankers Association
information on mortgages and crude inventories numbers were
joined by the November Existing Home Sales.   The MBA reported
that mortgage applications fell a seasonally adjusted 1.7
percent, with a drop in refinancing activity appearing to be the
primary cause.  Refinancing applications fell 7.9 percent,
erasing all last week's gains and more.  Refi's have been
responsible for providing cash to consumers to spiff up homes and
increase consumer spending, so assume strong importance.  They
fell to 46.2 percent of all mortgage applications from last
week's 48.9 percent.  

The component of the MBA numbers that measures loan requests, the
purchase index, rose 2.7 percent but not enough to make up for
last week's loss.  Fixed 30-year mortgage rates rose three basis
points from the last week's number, to 5.72 percent from the
previous 5.69 percent.

Later in the morning, the National Association of Realtors
reported on the November sales of existing homes, with those
sales rising a seasonally adjusted record annualized rate of 6.94
million.  Home inventories rose, too, however, with inventories
at a 4.3-month supply.  The DJUSHB, the Dow Jones U.S. Home
Construction Index, bounced after the release of that number but
couldn't break out of its recent consolidation pattern.  After
touching 800 again, it fell back, joining other indices that
produced doji for the day.

Most attention focused on the crude inventories number to be
released near 10:30, however, with many expecting a dip in
inventories.  The Department of Energy's numbers proved
disappointing with crude oil supplies dropping 800,000 barrels
and distillates falling 800,000 barrels against expectations for
drops of 200,000 and 500,000 barrels, respectively.  These
results peg crude supplies at eight percent above year-ago levels
but distillate supplies thirteen percent below those year-ago
levels.  The American Petroleum Institute, the API, said
distillate inventories climbed, however.  Gasoline supplies rose
900,000 barrels, the DOE reported.  

Oil prices popped, with heating oil prices following shortly, but
both sank back again until an afternoon report of an explosion
near the Interior Ministry in central Riyadh sent them higher
into the Nymex close.  Equities showed little reaction, perhaps
because winter weather continues to be mild enough to head off
worries about tight heating-oil supplies.  Perhaps a chart-
related development reassured market-watchers that crude prices
might not rise far.

Annotated Daily Chart for Crude for February Delivery:

 

Volume should grow lighter as the week proceeds, making trading a
riskier endeavor than usual.  For those who want to trade, easy
benchmarks might be discovered by studying the five-minute
100/130-ema's.  For many indices, bounces from the five-minute
100/130-ema's have proven to be sound entries into new bullish
positions and bounces down from them have proven to be okay for
day-trading bearish positions.  The OEX was an exception today,
crisscrossing those averages all day, and anyone risking trading
in a light-volume environment might expect at least some such
whippy behavior until indices and indicators line up in some kind
of accord.  For the RLX, the two-minute averages have been needed
because it hasn't been retreating to the five-minute versions.  

Wednesday, many indices moved back below those averages, but many
stayed above, perhaps leading to the choppy trading behavior,
with some indices retaining bullish behavior and some not.  Some
indices, such as the Dow, infrequently stay below those averages
for more than a day, so that a continued bouncing back from them
might be leading into a more prolonged dip.  Perhaps watch
behavior relating to these averages on your preferred index,
using them as short-term bearish and bullish indicators. 
Experiment, as stronger indices such as the RLX have needed to be
watched on shorter-time intervals with respect to these averages,
but the five-minute interval works well for most.  If other
indices show the same lack of correlation seen today, perhaps
continue to expect choppy trading behavior in all indices and
trade only if you enjoy being frequently stopped out of
positions.

Thursday's economic releases pick up speed a little, with the
usual 8:30 release of jobless claims, the 10:00 release of
November's Help Wanted Index and December's Chicago Purchasing
Manager, the 10:30 peek at Natural Gas Inventories and a 4:00
release of Money Supply. 


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

Biomet Inc - BMET - close: 43.34 change: -0.25

WHAT TO WATCH: Bears have already injured BMET when shares 
crashed a couple of weeks ago to break its long-term up trend and 
support at the 200-dma.  Bulls tried to defend it but it looks 
like BMET has been crippled and bears are now circling in for 
another bite.  The failed oversold bounce under $45 looks like a 
bearish entry point as does the new failed rally under $44 today.  
A drop under $43.00 would produce a new P&F sell signal.  Our 
first target would be round-number support at $40.00.




---

JupiterMedia - JUPM - close: 23.25 change: -0.24

WHAT TO WATCH: Aggressive traders only!  JUPM has surged higher 
in the last four days to break resistance at $22.00-22.50 to hit 
new all-time highs.  Volume was very big on Tuesday's rally, 
which occurred without any news to account for the move.  The P&F 
chart is bullish with a $31 target.  Traders bought the dip this 
morning to $22.20 so an entry point will be tough to pinpoint but 
JUPM looks poised for more gains.




---

Sun Life Financial - SLF - close: 33.42 change: +0.64

WHAT TO WATCH: This life insurance stock has been consolidating 
sideways in a $1.50 range for the last six weeks.  Shares surged 
1.95 percent on strong volume to challenge resistance at $33.50 
today.  A breakout would put SLF at new all-time highs and 
considering the bullish technical picture that breakout could be 
soon.  The MACD is nearing a new buy signal. 






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

TSN $18.01 +0.17 - The two-month old bounce in TSN has filled its 
August gap down and is now challenging resistance at $18.00 and 
its 200-dma.

CMGI $2.60 +0.43 - CMGI has been narrowing its consolidation for 
weeks so today's breakout does not come as a surprise.  What does 
surprise us is the 19.8 percent gain on big volume without any 
news.

EVC $8.35 -0.06 - EVC is nearing major resistance at the $8.50 
level. A breakout may be worth noting.

UTSI $22.01 +0.80 - We are watching for the breakout over $23.00 
and its 200-dma.
 

==========================================================
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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 12-29-2004
                                                   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:  ONXX, PDCO

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

ONXX - non-tech long -
  Momentum is beginning to wane in ONXX.  It may be time
  to pick an early exit.
 
 
PDCO - non-tech long -
  Shares hit another new all-time high today.


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

TOT     Total Sa                  110.00     +0.73
MFC     Manulife Financial         45.99     +1.17
COP     ConocoPhillips             87.31     +0.76
PBR     Petroleo Brasileiro        40.37     +0.77
SLF     Sun Life Financial         33.42     +0.64
SU      Suncor Energy              35.04     +0.63

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

XXIA    IXIA                       16.88     +2.11
CVNS    Covansys Corp              15.77     +1.64
IMGN    Immunogen Inc               9.10     +1.17
MAGS    Magal Security             12.55     +1.20
GRU     Gurunet Corp                8.70     +1.20

---------------------------------------
Breakout to Upside (Stocks over $20)
---------------------------------------
  
BDK     Black & Decker             89.19     +1.18
SNDA    Shanda Interactive         43.20     +3.35
REY     Reynolds & Reynolds        26.35     +1.39
WST     West Pharmaceuticals       25.02     +1.71
ILSE    Intralase                  21.15     +1.05
NGPS    Novatel Inc                48.45     +3.40
ANTP    Phazar Corp                45.00     +9.40

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

LMT     Lockheed Martin            55.25     -1.51
VLCCF   Knightsbridge Tankers      33.21     -1.53

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

HOT     Starwood Hotel & Resort    57.96     -1.50
AIT     Applied Industrial Tech    27.58     -2.12
GBX     Greenbrier Companies       34.81     -1.89


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