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Daily Newsletter, Wednesday, 01/05/2005

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PremierInvestor.net Newsletter               Wednesday 01-05-2005
                                                   section 1 of 2
Copyright (c) 2005, 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: Are the Wheels coming off?
Watch List:  Semis, Tech and more


===============================================================
MARKET WRAP  (view in courier font for table alignment)
===============================================================
      01-05-2005           High     Low     Volume   Adv/Dcl
DJIA    10597.83 - 32.95 10684.43 10597.75 2.12 bln  708/2138
NASDAQ   2091.24 - 16.62  2116.75  2091.24 2.37 bln  877/2193
S&P 100   565.21 -  1.56   569.75   565.20   Totals 1585/4331
S&P 500  1183.74 -  4.31  1192.75  1183.72
SOX       404.25 -  6.11   412.86   402.59
RUS 2000  617.48 - 11.06   628.66   617.48
DJ TRANS 3653.29 - 25.04  3679.45  3649.72 
VIX        14.09 +  0.01    14.09    13.26
VXO (VIX-O)13.97 -  0.16    14.37    13.49
VXN        20.18 +  0.12    20.19    19.52
Total Volume 4,492M
Total UpVol  1,184M
Total DnVol  3,261M
Total Adv  1585
Total Dcl  4331
52wk Highs   70 
52wk Lows    29
TRIN       1.15
PUT/CALL   0.95
===============================================================

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

Are the Wheels coming off?

Jane Fox

This morning stocks opened bearishly near yesterday's lows but 
appeared to grab a bid and started to rise. All the bulls gave a 
sigh of relief, "the selling was over for now." Unfortunately 
that sigh turned into a gasp of disbelief when yesterday's lows 
were breached. But alas, there was another sigh of relief when it 
was realized that the breach was hardly anything to worry about 
and stocks were headed back up again. Then those lows were 
breached again and this time there was no responding sigh of 
relief from the bulls because there was no heading back up again. 
Stocks closed at their daily lows. Not looking good so far. You 
know the saying "If Santa Claus should fail to call - the bears 
will come to Broad and Wall." Well here they are and the bulls 
may fall!

The DOW closed at 10597 for a -32.95 point loss. The DOW has lost 
1.7%, or 185.18 points, in the last three days and has now 
declined for six straight sessions -- the longest losing streak 
since July 2002. The Standard & Poor's 500-stock index fell 4.32 
to 1183.73 and the Nasdaq Composite Index slid 16.62 to 2091.24. 
On the Big Board, 1.7 billion shares traded, 930 stocks rose and 
2,411 fell. On the Nasdaq Stock Market, 2.4 billion shares 
changed hands, 910 issues advanced and 2,250 declined. 

It is still early in the month so this may be a little premature 
but heck who knows when I will get another chance to let you in 
on these little gems. One is called the Stock Market's Almanac 
Incredible January Barometer devised by Yale Hirsch in 1972. It 
states that however the S&P goes in January the rest of the year 
follows suit and has a 90.7% accuracy rate. Since 1950 this 
barometer has failed only five times. Now that's incredible. 

The other gem I would like to share with you is that if the DOW's 
December lows are breached in the first quarter of the New Year 
then you will have a bearish year. Of the 26 years (since 1952) 
when the DOW breached its December lows in the first quarter of 
the New Year, 13 times the DOW closed lower. Now I don't think 
this is such a great record but then of those 13 years if you 
have a negative First Five Days in January also 12 of those 13 
years have closed lower. Now that is a record I think is great. 

Larry Williams took this on step further and says if the November 
lows are breached in the first quarter there is an 80% chance 
that we will have a bearish year. Something to put in your hat 
and remember come March 31st. 

The economic reports started this morning at 7:00EST with the 
MBA's release of its refinancing Index and although many market 
watchers ignore this early-morning release, this morning's 
merited attention.  A 10.6 % decrease in mortgage applications 
was tagged as the largest decrease in more than a year, and that 
occurred despite a drop in mortgage rates.  Refinancing activity 
dropped 5.7 %.  Addition information reveals that this year may 
be the first since the recession when the number of house 
purchases does not set a new record.  Housing prices have been 
rising throughout the year, with that rise in cost being cited as 
a reason for the slowing of demand in the housing market.  

Next on the docket of economic reports was the 10:00EST Institute 
for Supply Management's (ISM) December's index of non- 
manufacturing companies. The number rose to 63.1 from 61.3 in 
November, the fastest pace in five months. Readings above 50 
means growth. The average of 62.5 for 2004 is the highest since 
the survey began in 1997. According to the survey of purchasing 
executives in industries including retail trade, banking and 
insurance, orders accelerated and more companies said they were 
adding to inventories. Economists were cited as saying the post-
Christmas surge in sales suggests consumers have the incomes and 
confidence to keep driving economic growth. 

Then at 10:30EST we got the Energy Department's weekly report of 
Crude Oil/Gasoline/Distillate inventories that showed heating oil 
and diesel inventories rose by two million barrels to 121.1 
million barrels. The build was higher than expected and moves 
distillates (heating oil and diesel) within their historic 
inventory range for this time of year. Crude oil inventories fell 
by 3.3 million barrels whereas analysts were expecting a 1.2 
million barrel decline. Gasoline inventories rose by 2.0 million 
versus analyst's forecast of a 1.0 million.

In December, U.S. car and light-truck sales rose 8% from a year 
earlier, for a seasonally adjusted annual sales pace of 18.4 
million vehicles, a record for the month. Although industry 
analysts agreed that the numbers were due largely to the heavily 
advertised end-of-the-year sales promotions, some think stock-
market wealth and improvements in personal income and consumer 
confidence will sustain demand and that 2005 sales will match 
last year's strong performance of about 17 million light vehicles 
sold.

The Airline index (XAL) was down -3.41 today amid announcements 
from Delta Air Lines (DAL) that they were slashing fares for 
domestic travel by as much as 50% and dropping restrictions such 
as Saturday night stays to win back customers from low-fare 
competitors. The whole index took a hit because of concerns that 
revenue may fall if all carriers adopt Delta's stance. One 
analyst said airlines may lose as much as $3 billion a year and 
cut forecasts on Delta, AMR Corp., Northwest Airlines Corp. and 
AirTran Holdings Inc. The hardest hit was the holding company for 
American airlines (AMR) falling 13%. Delta and Northwest Airlines 
(NWAC) were close behind, nose-diving 12% and 11%, respectively.

On to the charts.

SPX Daily Chart

 

This is not a healthy looking chart. The fact that since November 
15th SPX has continued to climb in the face of a falling MACD had 
to resolve itself at some point. I think that point has finally 
come. Why do I think that? First of all SPX has broken out of the 
regression channel when most would have thought (liked) SPX to 
have bounced back to the top of the channel. Next, for two days 
running now SPX has closed below its 20 EMA.  The last time the 
SPX closed below its 20 EMA was October 26th. Then you have the 
MACD probing the 0 line albeit not under it yet. The last time 
the MACD was under the 0 line was October 28th. 

DOW Daily chart.

 

The DOW has not been as strong as SPX during our little bull 
rally and it did close below the 20 EMA back on December 8th but 
it has not closed two days running under this MA since back in 
late October when the bull rally was just getting started.  

I have marked the December lows in red and the November lows in 
magenta. If you have a charting platform you may want to put 
these trendlines on your DOW chart as a reminder of the December 
low indicator (or November low if you decide to use that one 
instead) I mentioned earlier.  

COMPX Daily Chart.

 

This chart is very similar to the SPX chart but does not have the 
clear regression channel. However, it does have the very clear 
MACD divergence and two days running of closes under the 20 EMA 
something that not has happened since October 26th. 

RUT daily Chart.


 


The one thing that bothers me the most about the decline we have 
seen since the beginning of the year is that it is lead by the 
RUT, one of our strongest markets and it looks like the wheels 
are about to come off this steam roller. It has the negative MACD 
divergence just like the other markets and the closes under the 
20 EMA but look at where the MACD ended up today. The fast MACD 
line has hit a level today that it has not seen since last 
August. Yikes!

Now the market never goes straight up or straight down so 
tomorrow "should" bring a little relief to the bulls but 
unfortunately it may just be temporary. We have had some major 
damage done here and the bulls will need to call in some heavy 
hitters to fix the damage. Heavy hitters like the RUT and the 
Compq. 

Same-store sales figures began appearing after the close with 
AEOS and SBUX being among the stores reporting this afternoon.  
AEOS raised guidance and SBUX reported same store sales up 8%. 
Tomorrow morning sees other stores reporting, including ANN, ANF, 
DDS, FD, KSS, PIR and WMT, among others.  

Thursday's economic releases begin with the usual 8:30 release of 
jobless claims and also includes the 10:30 release of natural gas 
inventories and the 4:30 report on the money supply.  At 1:00 
EST, the Fed's Hoenig gives an outlook on the economic, speaking 
in Kansas City.

Until next time - keep your wheels on your wagon.

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
---------------------------------

Cree Inc - CREE - close: 33.84 change: -1.70

WHAT TO WATCH: CREE is another semiconductor stock following the 
weakness in the SOX index lower.  Unfortunately for CREE 
shareholders the stock under performed its peers with a 4.78 
percent decline on heavy volume.  Shares have broken their five-
month up trend and support at $35.00.  We would carefully watch 
the 100-dma as potential support since shares are short-term 
oversold but the next target could be the 200-ema near $30.00.




---

Storage Technology - STK - close: 32.57 change: +1.00

WHAT TO WATCH: When a technology stock like STK shows relative 
strength during a sharp three-day decline in the market we want 
to take notice.  Shares rallied more than three-percent on 
Wednesday with very heavy volume to breakout to new four-year 
highs.  Unfortunately, we can't find any news to account for the 
rally.  Bulls may want to consider going long on a bounce fro 
$32.00.  The P&F chart is bullish with a $54 target.  We would 
only target $35 for a quick turnaround.




---

Startek Inc - SRT - close: 25.25 change: -1.89

WHAT TO WATCH: SRT is a low volume stock (average 109K/day) that 
is suddenly breaking down to new yearly lows with very strong 
volume.  We can't see any news to account for the decline but SRT 
has been stuck in a long-term trend of lower highs for months.  
The drop under $26.00 looks like bad news and the next level of 
support could be the $22.00-21.75 region.






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


CHIR $34.80 +0.12 - No luck for CHIR.  Shares broke through the 
$35 level but couldn't hold it.

BEAS $8.42 -0.22 - Uh-oh!  This could be bad news for BEAS.  The 
stock has broken significant support at $8.50 and its 200-dma.

TOO $27.71 +3.48 - We are not suggesting that anyone chase 
today's 14 percent rally but the breakout to new highs on big 
volume is certainly bullish.  A pull back toward $26.00 might be 
worth noting.
 

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

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Copyright 2005  PremierInvestor.net. and
The Premier Investor Network.
Do not duplicate or redistribute in any form.

PremierInvestor.net Newsletter               Wednesday 01-05-2005
                                                   section 2 of 2
Copyright (c) 2005, 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:  VSEA

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

VSEA - tech stock short -
  Our new play in VSEA starts off nicely with a 4.5 percent decline
  on heavy volume.  


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

C       Citigroup                  48.46     +0.60
AIG     American Intl Group        67.35     +1.10
BA      Boeing Co                  50.81     +0.83
GIS     General Mills Inc          49.75     +1.00
NOC     Northrop Grumman           53.30     +0.80
NSC     Norfolk Southern           35.89     +0.65

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

CRM     Salesforce.com             17.95     +1.59
KERX    Keryx Biopharma            14.18     +2.95
UWN     Nevada Gold & Casinos      13.73     +1.32

---------------------------------------
Breakout to Upside (Stocks over $20)
---------------------------------------
  
WAG     Walgreen                   41.12     +1.03
CMX     Caremark Rx                40.75     +1.30
TOO     Too Inc                    27.71     +3.48
TONS    Novamerican Steel          63.89     +3.21
TARR    Tarragon                   22.00     +3.90

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

GDW     Golden West Financial      59.57     -1.21
MON     Monsanto Co                51.00     -1.51
WIT     Wipro Ltd                  21.76     -1.39
FRX     Forest Labs                41.70     -1.22
SPG     Simon Property             60.45     -2.80
PCAR    Paccar Inc                 73.77     -2.46
VNO     Vornado Realty Trust       71.76     -3.10
POT     Potash Corp                75.25     -3.58
PH      Parker Hannifin            71.81     -1.30

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

BG      Bunge Ltd                  53.94     -1.39
NCX     Nova Chemicals             43.15     -2.96
BMHC    Building Materials         34.67     -2.35
XPRSA   U.S.Xpress                 27.10     -1.41
PEG     Public Service             49.85     -0.67
RIN     Rinker Group Ltd           79.30     -1.35
CP      Canadian Pacific Ltd       32.70     -0.85


=================================================================
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) 2005  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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