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Email Version, Section 1, Tuesday 01-11-2005
PremierInvestor.net Newsletter Tuesday 01-11-2005
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
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In section one:
Market Wrap: Intel Beats, UPS Warns
Watch List: A Mixed Bag
Market Sentiment: Not Looking Good
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MARKET WRAP (view in courier font for table alignment)
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01-11-2005 High Low Volume Adv/Dcl
DJIA 10556.22 - 64.80 10619.77 10531.54 1.88 bln 1168/2050
NASDAQ 2079.62 - 17.40 2090.62 2072.62 2.25 bln 947/2151
S&P 100 564.68 - 3.59 568.27 563.49 Totals 3115/4201
S&P 500 1182.99 - 7.26 1190.25 1180.43
SOX 396.19 - 10.10 406.09 393.73
RUS 2000 611.53 - 6.21 617.74 609.91
DJ TRANS 3644.26 - 19.00 3662.90 3639.50
VIX 13.19 - 0.04 13.68 13.05
VXO (VIX-O)13.03 - 0.14 13.92 12.90
VXN 19.67 + 0.06 20.30 19.55
Total Volume 4,413M
Total UpVol 1,004M
Total DnVol 3,368M
Total Adv 2457
Total Dcl 4787
52wk Highs 126
52wk Lows 64
TRIN 1.72
NAZTRIN 1.34
PUT/CALL 0.82
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Market Wrap
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Intel Beats, UPS Warns
by Jim Brown
Tech holders are breathing a little better tonight after
Intel beat street estimates slightly. However, the broader
market may focus on dropping package volume at UPS as real
evidence the economy is slowing. It is still too early to
form any opinions about this earnings cycle from the mix
of warnings and guidance but that info is coming soon.
Dow Charts
Nasdaq Chart
SOX Chart
The cautiously awaited Intel earnings beat the street by
two cents with the highest ever quarterly revenue at $9.6B.
Intel projected a slight rise in CapEx spending for Q1 to
around $5.1B. Inventory levels had dropped slightly to
$2.6B from $3.2B last quarter. They projected slightly
lower grow margins around 55% in Q1 as they continue to
markdown inventory. Their 2005 margin estimate remains
58% and Intel expects the inventory problem to be reduced
over the next several quarters. CEO, Craig Barrett, said
they ended the quarter with robust demand across all
geographies. Records were set in sales of Microprocessors,
Chipsets, Motherboards and WiFi units.
There were mixed feelings about the $600 million drop in
inventory. Many analysts were hoping for more. This is
inventory that in many cases is already 6-12 months old
and is becoming more obsolete as each day passes. If Intel
could not dump more of it during the Q4 consumer feeding
frenzy then they may have to mark down selling prices even
more in 2005 or even take a charge to blow it out and get
rid of the problem.
Intel said the new 64bit Xeon processors had surpassed
one million units in the first two quarters of shipments.
Intel also announced it was hiring the HP Itanium design
team and HP announced it was going to spend $3 billion to
drive the development and sales of its Itanium based server
systems. Itanium processors now power 83 of the top 500
of the worlds fastest supercomputers with Intel branded
processors in 64% of the top 500.
The positive Intel earnings came only a day after AMD
warned that earnings would be below expectations. The
company said that weaker sales of flash memory would
cause earnings to be down significantly from the Q3
level of $68.4 million. They claimed that processor
sales had continued higher and would be over Q3 levels.
AMD did not give a new earnings estimate and analysts
had expected a +19 cent profit.
On the downside tonight UPS warned after the bell that
slower than expected package volume and higher costs
would cause it to miss estimates by a dime for Q4. The
prior estimate was 85 cents. They said late December
shipments dropped significantly more than they previously
expected and were only about half the prior rate for
the quarter. UPS said that international shipments grew
at a double digit rate compared to a +2.5% growth for
domestic shipments. The market did not react strongly
to the warning with UPS only losing about -$2 in after
hours to $81. They maintained their positive outlook
for all of 2005 expecting earnings to increase +13% to
+17%. All of 2004 UPS grew earnings by +19%.
One stock that continues to shock investors is TASR which
has finally run out of energy. Problems are now appearing
almost daily including SEC investigations, suits by their
competitors and now an earnings warning from Taser itself.
Taser said it is expecting delays in orders from law
enforcement agencies as those agencies test and evaluate
products from their competitors. It was also announced that
the top insiders sold $105.8 million in stock recently and
there were some questionable financial arrangements to
insiders. It was disclosed that the company paid $205K
in 2004 to lease airplanes from the family that runs the
company and entered a 15 year lease to use another plane
that is owned by Thomas Smith, the president. In one
week in November three family members sold $54 million
in stock only days after it was announced the federal
government had approved Taser for use on airlines. While
all of this dirt being spread by detractors is not illegal
activities it does pose questions about the long term
prospects if insiders are dumping the stock. With positive
news breaking out all over in Q4 the insiders sold stock
worth more than 10% of the market cap of the company
receiving the equivalent of twice the companies annual
sales in proceeds. Those recent buyers who believed the
spin were rewarded with a drop from $33 to $14 over the
last two weeks of trading. Competitors to Taser claiming
to have better products are Stinger Systems (STIY) and
Law Enforcement Associates (LENF). LENF claims their
guns shoot twice as far and use 1/16th the power making
them less dangerous. They have also been around much
longer than Taser in the law enforcement community.
TASR Chart
Economically today was a non-event with Chain Store Sales
falling -0.6% but that should be no surprise given the post
holiday letdown. The December Richmond Fed Manufacturing
Survey rose to zero from a -3 in November. There was no
real change in components with shipments and new orders
flat. The backlog of orders also returned to nearly flat
at -4. The bottom line was no change and no excitement as
the year came to a close. Capacity utilization decreased
and the only positive was a continued rise in optimism by
manufacturers for the next six months. The Richmond district
has been lagging the rest of the company in its recovery.
The next day for material economic reports is Friday when
we get PPI, Industrial Production, Consumer Sentiment and
Business Inventories.
Oil prices continue to creep higher and closed just shy
of $46 today on fears of increasing Iraqi attacks, work
stoppages in Nigeria, well problems in the North Sea and
the coming OPEC meeting on Jan-30th. $46 has been a new
resistance level since Dec-1st but the pressure is building.
Traders fear OPEC will ratchet down production again at
the coming meeting to offset the potential drop in demand
as cold weather ends. During the spring there is less
demand for heating oil and the summer gasoline demand has
not yet increased. Rumors are that OPEC has decided to
support a $45 price now instead of $40. Once addicted to
an increasing supply of dollars it is tough to break the
habit if you control half the worlds supply of a limited
commodity. They have found that the sticker shock has
passed and we have become more or less immune to the
current $42 bottom.
PeopleSoft employees got the bad news today. Oracle said
today they would be announcing the first round of layoffs
at PSFT as a result of the Oracle takeover. This should
come as no shock as rumor has it employees are already
leaving in droves on their own accord. The layoff
announcement is scheduled for Friday.
The SOX was the index of the day with a drop below 400 on
the AMD news and in fear that Intel could stumble after the
close. The index held 396 all afternoon despite selling in
several chip stocks. After Intel's earnings report the chip
sector saw a muted bounce but nothing earth shaking. The
analysts community had been making positive comments about
expectations for Intel for the last week so much of the
good news may have been priced into the market. That news
was shaken yesterday with the AMD announcement but support
at 22.40 on Intel continued to hold.
I was going to title this part tonight as "Danger Will
Robinson" after the Dow, Nasdaq and S&P all closed at a
new low for the year. After hearing the various spins on
the Intel earnings as well as Andy Bryant bubbling over
with excitement it is possible the market losses are
almost over. Those three key indexes are still well above
my critical levels I mentioned on Sunday and are still
technically bullish despite closing at the lows for the
year.
The Dow closed just above its 50-day average at 10556
with the S&P closing drop putting it about -2 points under
its 50-day at 1185. The Nasdaq is well under the 50 at
2106 and tested support at 2075 today for the second time
this year. For tomorrow that 2075 level would be my key.
As long as we stay over that level the market could attract
buyers. The SOX should rally back over 400 at the open and
it MUST hold that level from now on to avoid a tech meltdown.
S&P-500 Chart
We have already sold off more than I initially expected
but as I stated above the charts are still bullish with
only a normal correction at this point. Until the Dow
moves under 10425 and the Nasdaq 2000 that bullish bias
will remain. Obviously that is a lot lower than our current
levels and it would require some serious pain to make that
trip. With the Intel news tonight and the potential for
further retirement cash to flow into the market I would
look for SPX 1175 to be the more critical line on the
charts. Nasdaq 2075 for techs and S&P 1175 for the broader
market. I would not be a dip buyer under 1175. I would wait
for the market to come back to us at that level if you are
determined to be long.
We are reaching a critical turning point in the markets.
There needs to be some attempt to rally very soon or the
market sentiment will begin to change rapidly. Bulls are
beginning to get nervous and bears are getting bolder. It
is time for the 2005 bull market to assert itself and make
a stand or it is going to be a long year for investors.
Jim Brown
Editor
"One reason it is so hard to save money is that our
neighbors are always buying something we can't afford"
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WATCH LIST
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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
---------------------------------
Autodesk - ADSK - close: 32.39 change: -1.85
WHAT TO WATCH: ADSK was a huge winner in 2004 and is now seeing
some profit taking in January. The breakdown under the 50-dma
looks like a short opportunity but ADSK still has some minor
support near the $32 level. If shares break the $32 level we
might watch for a drop towards the 100-dma near $28. ADSK found
support at the 100-dma back in August.
---
VeriSign - VRSN - close: 30.44 change: -0.39
WHAT TO WATCH: VRSN broke support at the $30.00 level on Monday
but managed a sharp intraday bounce. That bounce failed today at
the 50-dma and the stock still looks poised for more weakness,
especially considering how extended the stock is from its pre-
October levels. Look for the breakdown under $30 and target the
100-dma near $25.50-26.00.
---
Quicksilver Resources - KWK - close: 37.40 change: +1.58
WHAT TO WATCH: The relative strength in KWK this week is
encouraging. Bulls can take note of the consistent trend of
higher lows. We also see the above average volume with today's
4.4 percent gain. Watch for a breakout over $38.00 as a
potential entry point to go long.
-----------------------------------
RADAR SCREEN - more stocks to watch
-----------------------------------
HUM $31.18 +0.53 - We mentioned HUM as a potential bullish play
if shares could break the $31 level. The stock did that today in
the face of a market pull back.
CVS $47.11 +1.10 - The slow, long-term trend higher in CVS looks
like a potential investment or a covered-call candidate. Use the
$44 level as support.
JDSU $2.76 -0.14 - JDSU just lost another 4.8 percent but managed
a decent rebound from the $2.61 level intraday. This is a one-
year low. Watch to see if traders buy the dip or let it sink
under the $2.50 level.
SIRI $6.10 -0.52 - The oversold bounce in SIRI is failing and
shares are testing the $6.00 mark again. A drop under $6.00 and
traders could target a fall toward $5.00 and its 100-dma.
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Market Sentiment
===============================
Not Looking Good
- J. Brown
January has already been a tough month for stocks. Unfortunately
the first day of fourth quarter earnings season did not go well
and it does not bode well for the rest of the month either. The
market ended the session in widespread decline with internals
heading south once again. Declining stocks outnumbered advancers
by 2-to-1 on the NYSE and 21-to-9 on the NASDAQ. Down volume
swallowed up volume 7-to-2 on the NYSE and 17-to-5 on the NASDAQ.
Dow-component Alcoa (AA) started the procession with an earnings
miss and biotech giant Genentech (DNA) followed up with an
earnings miss of its own. To make matters worse semiconductor
maker AMD issued a fourth quarter earnings warning that sent its
stock for a 26 percent loss and pushed the SOX to a 2.4 percent
decline. After the closing bell AMD's larger rival Intel (INTC)
surprised the street with a better than expected earnings report
but it remains to be seen if Intel can jump start a rally amidst
all of this negativity. Case in point - after Intel's report
came out package courier UPS issued a fourth quarter earnings
warning.
Investors already had cautious expectations for earnings growth
going forward but if the lead-off companies are going to turn in
disappointing results what can we expect during the rest of
earnings season. Granted the real flood of earnings news doesn't
hit until next week but we now have a reason to be spooked.
Meanwhile oil continues to be an issue as crude prices creep
higher amid supply concerns again and the upcoming Iraqi
elections, which is bound to bring about even more violence in
that part of the world.
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Market Averages
DJIA ($INDU)
52-week High: 10868
52-week Low : 9708
Current : 10556
Moving Averages:
(Simple)
10-dma: 10677
50-dma: 10556
200-dma: 10276
S&P 500 ($SPX)
52-week High: 1217
52-week Low : 1060
Current : 1183
Moving Averages:
(Simple)
10-dma: 1200
50-dma: 1182
200-dma: 1131
Nasdaq-100 ($NDX)
52-week High: 1635
52-week Low : 1301
Current : 1553
Moving Averages:
(Simple)
10-dma: 1584
50-dma: 1578
200-dma: 1465
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CBOE Market Volatility Index (VIX) = 13.19 -0.04
CBOE Mkt Volatility old VIX (VXO) = 13.03 -0.14
Nasdaq Volatility Index (VXN) = 19.67 +0.06
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Put/Call Ratio Call Volume Put Volume
Total 0.86 866,571 741,247
Equity Only 0.65 710,453 464,212
OEX 0.95 28,807 27,597
QQQQ 1.29 59,201 76,830
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Bullish Percent Data
Current Change Status
NYSE 73.7 - 0.3 Bear Correction
NASDAQ-100 74.0 - 1 Bull Confirmed
Dow Indust. 73.3 + 0 Bull Confirmed
S&P 500 74.8 - 0.2 Bull Confirmed
S&P 100 76.0 + 1 Bull Confirmed
Bullish percent measures the number of stocks in an index
currently trading on a buy signal on their point and figure
chart. Readings above 70 are considered overbought, and readings
below 30 are considered oversold.
Bull Confirmed - Aggressively long
Bull Alert - Cautiously long
Bull Correction - Pause or pullback in upward trend
Bear Alert - Take defensive action if long
Bear Confirmed - High risk if long, good conditions for shorting
Bear Correction - Pause or rebound in downtrend
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5-dma: 1.42
10-dma: 1.21
21-dma: 1.05
55-dma: 1.01
Extreme readings above 1.5 are bullish, and readings below .85
are bearish. These signals don't occur often and tend be early,
but when they do, they can signal significant market turning
points.
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Market Internals
-NYSE- -NASDAQ-
Advancers 947 922
Decliners 1862 2108
New Highs 47 44
New Lows 21 41
Up Volume 444M 493M
Down Vol. 1420M 1745M
Total Vol. 1880M 2256M
M = millions
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Commitments Of Traders Report: 01/04/05
Weekly COT report discloses positions held by small specs
and commercial traders of index futures contracts at the
Chicago Mercantile Exchange and Chicago Board of Trade. COT data
can be found at www.cftc.gov.
Small specs are the general trading public with commercials being
financial institutions. Commercials are historically on the
correct side of future trend changes while small specs tend
to be wrong.
S&P 500
Not much change in the large S&P futures contracts.
Professionals remain net bearish and small traders remain
net bullish.
Commercials Long Short Net % Of OI
12/07/04 450,072 498,057 (47,985) (5.0%)
12/14/04 502,471 540,494 (38,023) (3.6%)
12/21/04 455,238 502,538 (47,300) (4.9%)
01/04/05 456,255 505,042 (48,787) (5.0%)
Most bearish reading of the year: (111,956) - 3/06/02
Most bullish reading of the year: 23,977 - 12/09/03
Small Traders Long Short Net % of OI
12/07/04 187,707 135,776 51,931 16.0%
12/14/04 201,428 164,111 37,371 10.2%
12/21/04 157,015 106,205 50,810 19.2%
01/04/05 159,197 111,900 47,297 17.4%
Most bearish reading of the year: (1,657)- 5/27/03
Most bullish reading of the year: 114,510 - 3/26/02
E-MINI S&P 500
Commercial traders have increased their bearish bias
just as small traders have increased their bullish bias.
Commercials Long Short Net % Of OI
12/07/04 470,553 805,234 (334,681) (26.2%)
12/14/04 556,980 899,616 (342,636) (23.5%)
12/21/04 279,694 554,818 (275,124) (32.9%)
01/04/05 302,339 620,759 (318,420) (34.5%)
Most bearish reading of the year: (436,367) - 11/23/04
Most bullish reading of the year: 133,299 - 09/02/03
Small Traders Long Short Net % of OI
12/07/04 311,838 66,496 245,342 64.8%
12/14/04 398,915 137,598 261,317 48.7%
12/21/04 227,047 66,140 160,907 54.8%
01/04/05 279,274 71,151 208,123 59.4%
Most bearish reading of the year: (77,385) - 09/02/03
Most bullish reading of the year: 449,310 - 06/10/03
NASDAQ-100
Commercial traders have turned significantly more bearish
on the NDX just as the small traders has turned sharply
more bullish.
Commercials Long Short Net % of OI
12/07/04 57,621 34,313 23,308 25.4%
12/14/04 73,554 50,286 23,268 18.7%
12/21/04 30,614 45,158 (14,544) (19.1%)
01/04/05 27,226 44,600 (17,374) (24.1%)
Most bearish reading of the year: (21,858) - 08/26/03
Most bullish reading of the year: 26,058 - 11/30/04
Small Traders Long Short Net % of OI
12/07/04 15,489 49,064 (33,575) (52.0%)
12/14/04 26,781 58,159 (31,378) (36.9%)
12/21/04 20,840 9,109 11,731 39.1%
01/04/05 22,227 8,293 13,934 45.6%
Most bearish reading of the year: (34,877) - 11/30/04
Most bullish reading of the year: 19,088 - 01/21/02
DOW JONES INDUSTRIAL
Commercial traders are increasing their bearish bias on
the Dow Industrials but small traders have jumped ahead
in their bearish attitude for the index.
Commercials Long Short Net % of OI
12/07/04 25,523 27,351 (1,828) (3.4%)
12/14/04 36,960 38,566 (1,606) (2.1%)
12/21/04 24,850 31,920 (7,070) (12.4%)
01/04/05 24,704 32,916 (8,212) (14.2%)
Most bearish reading of the year: (8,322) - 1/16/01
Most bullish reading of the year: 15,135 - 10/16/01
Small Traders Long Short Net % of OI
12/07/04 5,274 9,507 (4,233) (28.6%)
12/14/04 13,445 19,089 (5,644) (17.3%)
12/21/04 5,637 6,961 (1,324) (10.5%)
01/04/05 5,166 7,596 (2,430) (19.0%)
Most bearish reading of the year: (12,106) - 3/09/04
Most bullish reading of the year: 8,523 - 8/26/03
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DISCLAIMER
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newsletter picks are not to be considered a recommendation
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