|
|
Enron Mail |
October 29, 2001
STOCKFIRST Newsletter Investment Strategies For The Smart Investor http://www.stockfirst.com USA - "United We Stand" ________________________________________________ One Minute Market Snapshot The Week in Review Monday - The major averages closed higher Monday as investors shrugged off the latest anthrax scare and bid up tech stocks and blue- chips alike. The Dow Jones Industrial Average gained 173 points, or 1.9%, to 9377. The Nasdaq was up 37 points, or 2.2%, to 1708, and the S&P 500 was up about 16 points, or 1.5%, to 1090. The Philadelphia Stock Exchange semiconductor index ended up 4.9%. Tuesday - The major averages closed lower Tuesday, but off their worst levels of the session, as the latest anthrax news compounded an already grim earnings outlook. The Dow Jones Industrial Average lost 37 points, or 0.4%, to 9340. The Nasdaq dropped 4 points, or 0.2%, to 1704, and the S&P 500 was off about 5 points, or 0.5%, to 1085. Telecommunications equipment maker Lucent (LU:NYSE) reported a third-quarter loss of $909 million, or 27 cents a share, wider than the consensus loss estimate of 23 cents a share. The company also took a restructuring charge totaling $8 billion. Wednesday - Blue-chips closed slightly higher Wednesday, and tech stocks climbed as strength in the semiconductor sector helped the Nasdaq move higher. The Dow Jones Industrial Average tacked on 5.54 points to 9345.62. The Nasdaq rose 27.10 points, or 1.6%, to 1731.54, and the S&P 500 was barely changed at 1085.20. The semiconductor stocks benefited from the chip equipment book-to- bill ratio, which came in slightly higher in September than the previous month. Intel (INTC:Nasdaq) and LSI Logic (LSI:NYSE) ended with gains, while the Philadelphia Stock Exchange Semiconductor Index finished up 4%. Chip stocks are off to the races again in what has become the customary reaction to practically any news in the sector whatsoever. Thursday - Stocks closed higher Thursday, after trading lower for much of the session, overcoming weak economic data, pessimistic profit reports and more anthrax news. The ride began when the Commerce Department reported its durable goods numbers for September, showing orders for big-ticket items tumbled to their lowest level in more than five years. The orders fell far more sharply than expected, fueled by a drop in aircraft orders since Sept. 11. On the housing front, September's existing home sales fell 11.7% in September to $4.89 billion, vs. a consensus estimate of $5.20 billion. Separately, the newly unemployed grew in ranks with the latest jobless claims number rising by 8,000 to 504,000 last week. The Dow Jones Industrial Average gained 117.28 points, or 1.3%, to 9462.90. The Nasdaq rose 43.90 points, or 2.5%, to 1775.44, and the S&P 500 was up 14.89 points, or 1.4%, to 1100.09. Friday - Blue-chips closed higher Friday as investors shrugged off a series of less-than-stellar earnings reports and lukewarm economic data, but tech stocks inched lower. The Dow Jones Industrial Average gained 82.27 points, or 0.9%, to 9545.17. The Nasdaq was down 6.49, or 0.4%, to 1768.98, and the S&P 500 was up 4.52 points, or 0.4%, to 1104.61. This morning, the University of Michigan released its final consumer sentiment report for October, with the index rising to 82.7 from 81.8 the previous month. Major Stock Market Indices & Trends _______________________________________________ Index: DJIA SP500 NASDAQ RUT Close on 10/26 9204.11 1073.48 1671.31 425.7 1 Week 9545.17 1104.61 1768.96 438.65 Before % Change 3.7 2.9 5.8 3.0 3 Months 10455.63 1202.93 2022.96 485.07 Before % Change -8.7 -8.2 -12.6 -9.6 1 Year 10380.12 1364.44 3272.18 479.76 Before % Change -8.0 -19.0 -45.9 -8.6 _______________________________________________ o DJIA (Dow Jones Industrial Average) - A widely used index that tracks 30 blue-chip companies traded primarily on the NYSE. o SP500 (S&P 500) - A popular index of 500 major companies: 400 industrial, 20 transportation, 40 utilities, and 40 financial. o NASDAQ (NASDAQ Composite)- An index tracking stocks traded by the National Association of Securities Dealers (NASD). o RUT (Russell 2000) - An index that tracks 2000 U.S. small-cap firms; a well-regarded measure of small-cap stock performance. ________________________________________________ Looking Forward With third-quarter earnings season slowing dramatically this week, economic data will be the focus, and encouraging signs will likely be hard to find. The gross domestic product data due out Wednesday is expected to show a 0.9% decline for the third quarter, according to consensus estimates. The October purchasing manager's index will be released Thursday and the employment report that comes out Friday should provide a more reliable look at how the economy is reacting to Sept. 11. These reports, the first major pieces of October data, should be less skewed by the immediate impact of the terrorist attacks, but they may not be pleasant. Economists are expecting activity in the manufacturing sector to decline for the 15th consecutive month in September. Consensus forecasts put the October PMI at 44.6 vs. 47.0 in September and 47.9 in August. Nonfarm payrolls are seen declining by 262,000 vs. 199,000 in September, while unemployment is expected to surge to 5.2% from 4.9%. For a technical look at the markets for the week, please go to the market forecast section on the www.buysellorhold.com/index.cfm homepage for their technical outlook. What follows is a capsule summary of some of the more important Wall Street, economic, and political events that are likely to impact stock markets this week. For a list of upcoming earnings reports we recommend you go to www.zacks.com/earnings/. Calendar Highlights for the Week of 10/29/01 - 11/2/01 Monday October 29 - * Treasury Budget for Sep. Tuesday October 30 - * Consumer Confidence for Oct. Wednesday October 31 - * GDP-Adv. for Q3 * Chain Deflator-Adv. for Q3 * Chicago PMI for Oct. Thursday November 1 - * Auto Sales for Oct. * Truck Sales for Oct. * Personal Income for Sep. * PCE for Sep. * Initial Claims for 10/27 * Construction Spending for Sep. * NAPM Index for Oct. Friday November 2 - * Average Workweek for Oct. * Nonfarm Payrolls for Oct. * Unemployment Rate for Oct. * Hourly Earnings for Oct. * Factory Orders for Sep. Recognizing that you are very busy, our hope is to provide you with a useful, easy to read column that you can enjoy and digest in just a minute or two - hence the name One Minute Market Snapshot. Your comments and suggestions are greatly appreciated. Please send all comments to Snapshot@stockfirst.com. ________________________________________________ BuySellorHold Turning Data into Knowledge The Internet's First Intelligent Decision Support System for the Financial Industry FREE 30 DAY TRIAL OFFER The software that will revolutionize online trading! BuySellorHold (BSH) is the leading Application Service Provider (ASP) of intelligent, Internet-based decision support tools for the Financial Industry. Simply put, they are a technology company that turns data into knowledge. They are the only technology company that provides dynamic data interpretation based on key technical and fundamental analysis indicators. Being the "data to knowledge experts," their products simplify complex data analysis providing a simple, unbiased and direct interpretation presented as a specific course of action or ranking. This auto-interpretation of data helps their customers quickly analyze any financial instrument, identify opportunities, and/or support his or her own decisions. At a more advanced level, customers will be able to access the BSH database to refine or expand their own analysis and support tools to include hedging analysis and risk management. Please visit www.stockfirst.com/bsh30dayoffer.htm to learn more about BuySellorHold and take advantage of our FREE 30 DAY TRIAL OFFER. ________________________________________________ The Smart Investor "An educated investor is a smart investor" Can You Spell CANSLIM? (part 2) The cup or cup-with-handle formation is a chart pattern that identifies stocks preparing for a breakout to new highs or the start of a new uptrend. This pattern in history has shown to be the most popular in preceding a big move up in a stock's price. This was popularized by William O'Neil (Founder of Investor's Business Daily Newspaper) and his CANSLIM method of stock picking outlined in his book, "How to Make Money in Stocks". The CANSLIM approach to investing combines technical and fundamental analysis to identify promising stocks in leading industries. According to the system, only those stocks meeting a set of quantifiable criteria are candidates for purchase. In addition, a stock must exhibit one of three or four different chart patterns that summarize less quantifiable aspects of the system. The C-A-N-S-L-I-M characteristics are often present prior to a stock making a significant rise in price, and making huge profits for the shareholders! O'Neil explains how he conducted an intensive study of 500 of the biggest winners in the stock market from 1953 to 1990. A model of each of these companies was built and studied. Again and again, it was noticed that almost all of the biggest stock market winners had very similar characteristics just before they began their big moves. This week will look at the last four components of CANSLIM; S, L, I, and M. S = Supply/Demand: Small Cap + Volume Supply and demand dictates the price of almost everything in your life. The law of supply and demand is more important than all the analyst opinions on Wall Street. The price of a stock with 400 million shares is hard to budge up because of the large supply of stock available. Yet, if a company has only 2 or 3 million shares outstanding, a reasonable amount of buying can push the price up rapidly because of the small available supply. If you are choosing between two stocks to buy, one with 60 million shares outstanding and one with 10 million shares, with all other factors equal, the smaller one will usually be the bigger mover. Stocks that have a large percentage owned by top management are generally better prospects. Again referencing O'Neil's 38 year study, more than 95% of the companies had less than 25 million shares outstanding when they had their greatest period of earnings improvement and stock price performance. Foolish stock splits can hurt a stock's performance. Watch out for companies that split their stock 2 or 3 times in just a year or two. The splitting creates a larger supply and may make a company's stock performance more lethargic, like many "big cap" companies. Large holders who thinking of selling are often inclined to sell their 100,000 share positions before a 3-for-1 split would have them looking to sell 300,000. Smart short sellers (an infinitesimal group) pick on stocks beginning to falter after enormous price runups and splits, realizing that the potential number of shares for sale (particularly by funds) has dramatically been increased. L = Leader or Laggard? Which is your stock? People often buy stocks they're comfortable and familiar with, like an old pair of shoes. Usually these are lagging slowpokes rather than leaping leaders. It is really important to look at how your stock is performing in relation to the overall market. The 500 best performing stocks from 1953 to 1990 averaged a relative price strength of 87 (scale of 1-99) just before they began their major advances in price. Avoid laggard stocks and look for genuine leaders. I = Institutional Sponsorship = Institutional Sponsorship It takes big demand to move a stock significantly higher in price. Institutional buyers are the most powerful source. You don't need a large number of institutional owners, but should have at least a few. No institutional sponsorship in a stock is a bad sign because odds are that many institutional investors looked at the stock and passed it over. The things we are looking for with C-A-N-S-L-I-M are really signs that the bigger money (mutual funds, banks, insurance companies, pension funds, etc.) is coming into the stock. See that there is a better-than-average performance record by at least a few of the institutional owners. Another good thing about some institutional sponsorship is that it provides buying support for the stock. Beware of stocks that become "over owned". By the time performance is so obvious that almost all institutions own it, it is probably too late. Pay attention to whether the number of institutional owners is increasing or decreasing. M = Market Direction = Market Direction You can be right on everything else, but if you are wrong about the direction of the broad market you are still likely to lose money. The best way to analyze the overall market is to follow and understand every day what the general averages are doing. They are difficult to recognize, but meaningful changes in the behavior of the market averages at important turning points is the best indicator of the condition of the whole market. What signs should you look for to detect a market top? On one of the days in the uptrend, the total volume for the market will increase over the preceding day's high volume, but the Dow's closing average will show stalling action, or substantially less upward movement, than on prior days. The spread between the daily high and low of the market index will likely be a bit larger than on the earlier days. Normal market liquidation near the market peak will only occur on one or two days, which are part of the uptrend. The market comes under distribution while it is advancing! This is one of the reasons so few people know how to recognize distribution (selling). Immediately following the first selling near the top, a vacuum exists where volume may subside and the market averages will sell off for four days or so. The second, and probably the last early chance to recognize a top reversal is when the market attempts it's first rally, which it will always do after a number of days down from it's highest point. If this first attempt to bounce back follows through on the third, fourth, or fifth rally day either on decreased volume from the day before, or if the market average recovers less than half of the initial drop from it's former peak to the low, the comeback is feeble and sputtering when it should be getting strong. Frequently the first attempt at a rally during the beginning of a downtrend will fail abruptly. Possibly after a one-day resurgence, the second day will open up strong, only to sell off toward the end of the day and suddenly close down After an advance in stocks for a couple of years, the majority of the original price leaders will top, and you can be fairly sure the overall market is going to get into trouble. It is very important to pay attention to the way the leading stocks are acting. ----------------------------------------------------------------- RECOMMENDED LINKS * Zacks - www.freeforum.com/cgi-bin/micro.cgi?offer=ZACKS-001& &code=BSH- * Self Starters - www.freeforum.com/cgi-bin/micro.cgi?offer=DEANGE-00 1&&code=BSH- * Red Herring - www.freeforum.com/cgi-bin/micro.cgi?offer=REDHER-002 &&code=BSH- * Selling Power - www.b2bfreenet.com/cgi-bin/micro.cgi?offer=SLLNGP-00 1&&code=BSH- * Stock Market Institute of Learning - www.b2bfreenet.com/scripts/b2boffer.php?OFFER=WADE CO-007&&code=BSH * The Bowser Report - www.freeforum.com/scripts/fofoffer.php?OFFER=THEBO W-003&&code=BSH- * Concord Trading - www.b2bfreenet.com/scripts/b2boffer.php?OFFER=LHME DI-026&&code=BSH- * Barkey Financial - www.b2bfreenet.com/scripts/b2boffer.php?offer=PTPASS- 004&&code=BSH- * Investment Club of America - http://www.b2bfreenet.com/scripts/b2boffer.php?OFFER=P SSTAD-001&&code=BSH- ------------------------------------------------------------------ IMPORTANT DISCLAIMER The information contained in the documents in this website should not be construed as an offer to sell, or a solicitation to buy, any securities referred to herein. The information is considered reliable, but not guaranteed as to accuracy or completeness. STOCKFIRST specifically disclaims any liability in connection with the documents and/or information contained within this website. --- You are currently subscribed to stockfirst as: alewis@ect.enron.com To unsubscribe send a blank email to leave-stockfirst-37848R@mail.stockadvisor.ws
|