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[sharechat] Fw: Schaeffer's Opening View for December 18, 2002

From: " Hans van der Voorn" <>
Date: Thu, 19 Dec 2002 10:27:45 +1300

Title: HTML Email
For those if you who are interested in such things, this is sample free email from the site I mentioned yesterday.
----- Original Message -----
Sent: Thursday, December 19, 2002 3:30 AM
Subject: Schaeffer's Opening View for December 18, 2002

Schaeffer's Opening View
For Wednesday, December 18, 2002

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End of Announcement

Wednesday's Opening View

It looks like some "not so bad" economic news was unable to overcome the loss of appetite caused by McDonald's (MCD: sentiment, chart, options) bitter earnings outlook. Retailer Target (TGT: sentiment, chart, options) warned of softer than expected December sales. That news weighed heavily on the S&P Retail Index (RLX 273.06), which was one of the largest percentage losers yesterday with a decline of 2.44 percent.

As far as the economic data goes, U.S. housing starts rose 2.4 percent in November to a seasonally adjusted annual rate of 1.697 million following a revised 8.4-percent decline in October to an annual rate of 1.657 million. October housing starts were initially reported as an 11.4-percent drop to an annual rate of 1.603 million. On the downside, the November report showed that building permits (an indicator of future building activity) fell by 2.7 percent to a 1.725 million annual rate following a 2.3-percent rise in October. A decline in building permits could suggest the housing market is poised to weaken, but one figure doesn't make a trend. This is worth keeping an eye on going forward.

The Consumer Price Index rose 0.1 percent in November the smallest rise in four months. October's rate was booked at a plus 0.3 percent. The core index, which excludes food and energy, rose by 0.2 percent matching October's 0.2-percent rise. The Street had expected both the overall and core CPI to rise by 0.2 percent. Energy prices declined by 0.2 percent while food prices jumped by 0.3 percent. That energy component may change a little going forward. As a result of the CPI numbers, Real Average Weekly Earnings rose by 0.2 percent in November.

Finally, U.S. industrial output edged up in November, as a surge in automobile production led to the first monthly increase since July. Industrial production rose 0.1 percent in November after falling 0.6 percent in October. Capacity use rose 0.1 percent in November to a level of 75.6 percent from October's revised 75.5 percent. October capacity use had previously been reported at 75.4 percent.

After the market close, Micron Technology (MU: sentiment, chart, options) reported a first-quarter loss of $315.9 million, or 52 cents a share, on revenue of $685.1 million. Analysts had expected a loss of 23 cents per share on revenue of $809.4 million. Disappointing on both fronts, MU gave up another 1.25 points (9.4 percent) beyond yesterday's regular close of 13.28. The report will no doubt pressure some of the issues in the PHLX Semiconductor Index (SOX 320.63, minus 1.54 percent) today.

Equity option activity on the CBOE yesterday had 251,826 put contracts trade compared to 504,142 call contracts. The resulting 0.500 put/call ratio has moved the 21-day moving average back down to 0.593 as it persists in consolidating in the 0.59 area. The 21-day moving average has held in this range for the past eight sessions. The CBOE Market Volatility Index (VIX 30.16) added 0.60 percent and the Nasdaq-100 Trust Volatility Index (QQV 41.80) fell by 2.06 percent. The VIX is once again flirting with the 30 level (it traded as low as 29.59 yesterday). With the index now failing at both its 10-day and 20-day moving averages, you should be aware of potential support at the 30 level. This area caught and reversed the index back in August. Failure to hold support here would bode well for the near-term performance of the market.

As for today, if the Dow Jones Industrial Average (INDU 8535.4) seems a little light, it's because Wal-Mart Stores (WMT: sentiment, chart, options) goes ex-dividend before the open. The company pays a quarterly dividend of 0.075 cents per share, which is equivalent to 0.514 Dow points. Economic data is a little light today, with the MBA Refinancing Index (last minus 8.6 percent) and the October trade deficit (seen at $36.0 billion, last $38.03 billion) both coming out. The anticipated decline in the trade deficit is more likely a function of the West Coast dock workers' strike than a function of diminished demand. There are several earnings reports scheduled for today (see below). Oracle (ORCL: sentiment, chart, options) reports after the close.

In futures trading, the March 2003 contracts on the SPX (902.99, minus 0.81 percent), INDU (8535.40, minus 1.07 percent) and the NDX (1040.01, minus 0.23 percent) have been consolidating below their respective fair value numbers. The ND contract is looking the weakest. It looks like a negative open to today's session. At this point in time, session lows and highs are: SP/H3 (895.60/903.50), DJ/H3 (8462.00/8528.00), and ND/H3 (1030.50/1047.00).

Overseas markets are in worse shape today than they were yesterday. Currently, none of the 15 that we track are positive and the cumulative average return is a minus 0.923 percent. The Nikkei failed to follow through on the prior session's gains and has hit another multi-year low. The Nikkei is currently losing the parity race with the INDU. You have to wonder when we'll be talking about the break of another millenium level on the index! German business sentiment fell for a seventh consecutive month in December. The December Ifo survey came in at 87.1 in-line with expectations and lower than November's 87.3. The current conditions component fell to 76.8 from 79.0, but the expectations component came in at 97.9 versus 95.8. This is the first rise in expectations since May.

The U.S. Dollar Index (DX/Y 103.63) shed 53 cents yesterday as the U.S. dollar could only post a gain versus the Mexican peso. The White House finally came out to emphasize its continued policy on a strong U.S. dollar. Market participants had lost sight of that fact due to the appointment of the new Treasury Secretary, John Snow. Certain members of the trading audience felt that the stance might fade during the cabinet transition. The statement was enough to bring the index back from the brink of a new yearly low of 103.50 set earlier in the session. Early trading today has the U.S. dollar gaining ground versus all but the pound and real:

Currency/ Last/ Change
Euro/ 1.0241/ -0.0035
British pound/ 1.5983/ 0.0006
Japanese yen/ 121.4182/ -0.0016
Brazilian real/ 3.5319/ 0.0040
Mexican peso/ 10.2596/ -0.0003
Canadian dollar/ 1.5506/ -0.0006
Swiss Franc/ 1.4308/ -0.0014

The February future contract on gold (GC/G3 338.00) settled higher by 40 cents per ounce on the regular trading session yesterday. The contract moved as high as 343.50 during the session, but those gains faded on the White House's re-affirmation of its strong dollar policy. Early trading today has the contract off by $1.40 to $336.60. London spot was at 336.80/337.30.

The March future contract on the 30-year bond (US/H3 109'06) could only manage a gain of 2/32 yesterday despite the malaise in equities. The contract is barely clinging to its 10-week moving average, which (as we mentioned yesterday) has bearishly crossed below the 20-week moving average. You have to figure that those fingernails are getting a little frayed by now. The yield on the two-year note stood at 1.869 percent and the 10-year note was sporting a 4.126 percent yield. The 2-30-year yield spread widened to 315 basis points. Early trading in London this morning has the group generally reclaiming some of yesterday's losses. Early weakness in equities, as well the heightened potential for war, are lending some bid:

2-year note was at 100-11/32 up 3/32 to yield 1.81 percent
5-year note was at 99-28/32 up 7/32 to yield 3.02 percent
10-year note was at 99-11/32 up 9/32 to yield 4.08 percent
30-year bond was at 105-10/32 unchanged to yield 5.02 percent
The yield curve, as measured by the 2-30-year yield spread, has risen to 321 basis points.

The January contract on sweet crude oil (CL/F3 29.94) slipped by 16 cents yesterday ahead of the weekly inventory data from the American Petroleum Institute (API). With no additional news to warrant a trading directive, traders thought it wise to consolidate recent gains.

After the market closed last night, the API reported a 3.2 million-barrel decline in domestic crude inventories to a total of 283.9 million barrels. Supplies are nearly 28 million barrels below the year-ago level. Most analysts had predicted the decline, so there was no surprise here. The data hit the Street on Venezuela's 16th day of a general strike. Opposition leaders, calling for new elections and the resignation of President Hugo Chavez, refuse to end the strike that has severely incapacitated the Venezuelan oil industry. Recent reports place Venezuela's oil output at just 400,000 barrels per day compared to the usual amount of nearly three million barrels per day. The U.S. imports about 13 to 14 percent of its crude oil from Venezuela. Needless to say, the longer this stalemate continues the greater the impact will be on an already anemic U.S. inventory.

U.S. gasoline inventories actually rose by 119,000 barrels in the latest week. Total supplies of 205.5 million barrels, however, are nearly five million barrels below the year-ago level. Analysts had expected a sharp decline here, ranging from one to four million barrels. The API also reported a 462,000-barrel decline in distillate stocks, which includes fuel oil and heating oil. Early trading today has the contract slipping by 30 cents.

Today's Economic Calendar:
7:00 a.m. MBA Refinancing Index (last minus 8.6 percent).
8:30 a.m.: October Trade Deficit (seen at $36.0 billion, last $38.03 billion).
TBA: ABC/Money Consumer Confidence (last minus 22).
TBA: Richmond Fed President Broaddus speaks at Chamber of Commerce luncheon in North Carolina.

Unusual Put and Call Activity:

For an explanation of how to use this information, check out "Option Volume Explodes ... Now What?"

Click here for a description of Fair Value.

Earnings expected today with current estimates:
ATI Technologies (ATYT) 3Q .08
Actuant Corp. (ATU) 1Q .60
Apollo Group (APOL) 1Q .22
Ashworth Inc. (ASHW) 4Q .04
Bear Stearns (BSC) 4Q 1.23
Bed Bath & Beyond (BBBY) 3Q .23
Biomet Inc. (BMET) 2Q .26 came in at 0.27
CarMax (KMX) 3Q .17 came in at 0.18 OP
Electro Scientific (ESIO) 2Q .02
FedEx Corp. (FDX) 2Q .79 came in at 0.81
FuelCell Energy (FCEL) 4Q (.40)
General Mills (GIS) 2Q .74 came in at 0.77 OP
Global Payments (GPN) 2Q .35
Heico Corp. (HEI) 4Q .14
Herman Miller Inc. (MLHR) 2Q .13
Merix Corp. (MERX) 2Q (.17)
NDCHealth Corp. (NDC) 2Q .36
Oracle Corp. (ORCL) 2Q .08
Palm Inc. (PALM) 2Q (.17)
Quiksilver (ZQK) 4Q .43
Resources Corp. (RECN) 2Q .13
Riverstone Networks (RSTN) 3Q (.16)
Steelcase Inc. (SCS) 3Q (.08)
Supervalu Inc. (SVU) 3Q .43
Tibco Software (TIBX) 4Q .01
URS Corp. (URS) 4Q .64
Univ of Phoenix (UOPX) 1Q .13
W-D 40 Co. (WDFC) 1Q .33
Winnebago (WGO) 1Q .68
Worthington Industries (WOR) 2Q .25

- Al Schwartz (


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