PUBLISHED SAMPLE STOCK MARKET DIRECTION © Nov. 12, 2004
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Stock Market Newsletter - STOCK MARKET DIRECTION by Steve Zito has
Technical Indicator Analysis of the Dow and Nasdaq Composite Index
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STOCK MARKET DIRECTION by Steve Zito Newsletter for Friday, Nov. 12, 2004
Advanced Micro at 18.59 is 6.35% over uptrend, stochastics overbought at 99%/75%.
Readers bought AMD at 10.80 in September should raise Stop Loss orders to 16.50.
AMDAB 8.10 +0.80 Bid 8.60 Ask 8.70 volume 40 oi 14,179 Readers SOLD at 6.10 +408%
AMDAC 3.90 +1.09 Bid 3.80 Ask 4.00 volume 362 oi 26,475 Readers SOLD at 3.10 +77%
AMDAW 2.05 +0.75 Bid 2.05 Ask 2.10 volume 1,145 oi 38,501 Readers bought at 0.95.
Sun Microsystems SUNW recommended in March 8, 15 newsletters at 3.99
Advanced Micro Devices AMD recommended in Sept. 3 newsletter at 10.80
Pfizer added to Bush stocks to buy now, Viagra gets them up long term
Information in this newsletter based on prices from Thursday, Nov. 11, 2004
Dow Jones Industrial Average
---------------------------------------- 10,469.84 +84.36 (+0.81%)
Nasdaq Composite Index
----------------------------------------- 2,061.27 +26.71 (+1.31%)
Standard and Poors 500 Index
----------------------------------------- 1,173.48 +10.57 (+0.91%)
10-Year Treasury Note yield
--------------------------------------- 4.254% closed for Veterans Day
DOW JONES INDUSTRIAL AVERAGE analysis
The Dow closed 10,469.84 +84.36 at 1.28% above the Dow's 7-day moving average. Call
it a U.S. and financial world celebration of the death of 75-year old Yasser Arafat.
The Israeli Prime Minister did not even mention Arafat's death in parliamentary talk.
Bush did not say a word on passing of the Palestinian leader, at least not in public.
Tony Blair expressed regret, then called up Bush to decide how to divide up Palestine.
Settlers danced in the streets from sunrise to sunset in Israeli occupied West Bank.
Kind of like the jig Mr. Bush was stepping to November 3 when the Ohio voting closed.
In fact, the past 10 days, Bush has earned more "political capital" than over 4 years.
Bush in a speech earlier this week, said he "earned political capital...to spend it."
I checked US income tax codes, and CAPITAL is money that is invested to make returns.
Money that is EARNED is legally called income. Money SPENT is called expense or cost.
The rally Thursday was due to the death of Arafat, so it's a one-time event, unless
Arafat comes back from the grave. Crude oil dropped below $48 a barrel, but so what?
A couple of extremely cold days in the Northeast and everyone will be talking winter.
That's heating oil season, and no one has experienced the price shock on heating oil
that Americans have experienced in buying gasoline. Curiously the states in northern
US that voted blue (John Kerry) all have to oil heat homes in winter October to May.
States that voted red (G.W. Bush) are in the South and never see snow or blizzards.
There are some heartland states like Kansas and the Dakotas that have cold winters,
but those residents use wood to heat homes, when they are not out hunting for sport.
While urban kids in New York and L.A. play video games, heartland kids are hunting.
The stock market is one week away from stock options expiration, and that usually
has a change of direction. The current direction is up, so a change would be down.
That change occurs when large money pools close out expiring option positions and
buy new options for the following month. See volume (below) in Dow Jones Nov. puts,
for worthless DJX 99 and DJX 100 puts, which was quite identical at 4000 contracts.
Why would anyone buy back 4000 DJX puts which are worthless? To close out shorts.
Why would a money firm or hedge fund even sell 4000 DJX puts short? To make money
when the stock market rose after elections were over. Indecision held stocks down.
The volume in the December DJX puts was negligible, implying the public is bullish.
Why didn't the same firm(s) which bought back 4000 Nov 99 puts sell 4000 Dec puts?
Maybe the hedge fund community does not believe the Dow Jones will go any higher.
The Ivy League geniuses who are hired by Citigroup and Goldman to manage arbitrage
specializing in timing the market with options don't listen to Kudlow and Cramer who
are screaming bull market, and parading bullish guests who tout oil service as cheap,
gold as a long-term triple, and the US as an economic marvel. The US is anything but.
The U.S. has 5.5% unemployed, while Australia is reporting record employment levels.
The USA is corrupting (Halliburton and invasion of Iraq to control Iraqi oil wells)
that the US makes Enron execs and bankrupt telecom IPO's look like corporate angels.
What bullish momentum players on CNBC never tell the public is the higher prices go,
more likely the prices are to fall, not go higher. Throw a baseball up into the air,
and see if a baseball continues to outer space, or falls back to earth on your head.
Buy stocks when they are low, like AMD on Sept. 3 under 11, when nobody wanted AMD.
AMD is going up, not on momentum, but for a very good reason, competitive position.
Readers will notice that AMD rose sharply on Thursday, to rumors about Dell buying.
Every year, some analyst at Merrill or another brokerage starts this Dell-AMD rumor.
Supposedly, Dell's top exec said Dell is considering using AMD chips in Dell servers.
Continue to hold AMD and raise stop loss to 16.50. Hold AMD Jan 17.50 calls, up 116%.
Readers have made +1016% percent on AMD call options just since Sept. 3, +72% on AMD.
Dow stochastics changed very little from 79%/81% on Wednesday to 80%/79% on Thursday.
If options expiration causes a change in direction Friday (before options expiration),
change should occur early on Friday and continue into Monday. Bet on some downside.
If you know how to play expiring options, the closest to the money DJX puts are best.
These are 13 stocks I recommended a day after George W. Bush was re-elected to office.
Bush stock sectors: defense contractors, oil (integrated), drugs, I.D. tech, tobacco.
LMT closed at 57.98 +0.47 (+0.82%). Star Wars, missiles, tanks, heroism.
RTN closed at 38.83 +0.33 (+0.86%). High tech keeps enemy in 14th century.
GE. closed at 35.80 +0.48 (+1.36%). Bush to spend $9 billion on Star Wars.
XOM closed at 49.66 -0.01 (-0.02%). Most profitable company in history.
BP. closed at 58.92 -0.20 (-0.34%). High dividend and excessive profits.
MRK closed at 26.15 -0.26 (-0.98%). Where else can you get a 5.8% yield?
PFE closed at 27.15 -0.32 (-1.16%). Viagra pulls Pfizer up in long term.
WYE closed at 40.40 -0.17 (-0.42%). Cash flow king of the pharmaceuticals.
IBM closed at 94.79 +1.18 (+1.26%). Top data provider, Beijing Olympics.
ACN closed at 24.30 +0.10 (+0.41%). World's leader in outsourcing advice.
BA. closed at 54.30 +0.90 (+1.69%). Helicopters provider to the US Army.
MO. closed at 54.55 +0.54 (+1.00%). Has top share, 61 million US smokers.
IDNX closed at 7.35 -0.23 (-3.03%). Face and retinal scan entrants to USA.
NVDA closed 18.07 +0.35 (+1.98%) at 5.61% above an uptrend that is 3 months old.
Nvidia is a prime supplier of video game chipsets to Microsoft, which released a
new hit video sequel to Halo, that's Halo 2, to crowds lined for hours to pay $50.
NVDA stochastics fell to 48%/71%, allowing NVDA Jan. 20 calls to remain a value.
Buy UVAAD at 0.50, last 0.85 +0.10 Bid 0.80 Ask 0.90 vol 231 open 4,851 low 0.70.
Use any Friday to Monday options related selloff to buy calls on high beta chips.
AMD closed 18.59 +1.30 (+7.52%) opened at 17.80 with its high 18.63, low 17.55.
Advanced Micro is 6.35% over uptrend, stochastics are very overbought at 99%/75%.
Readers who bought at 10.80 in September should raise Stop Loss orders to 16.50.
AMDAB 8.10 +0.80 Bid 8.60 Ask 8.70 volume 40 open 14,179 Readers SOLD this at 6.10.
AMDAC 3.90 +1.09 Bid 3.80 Ask 4.00 volume 362 open 26,475 Readers SOLD all at 3.10.
AMDAW 2.05 +0.75 Bid 2.05 Ask 2.10 volume 1,145 open 38,501 Readers bought at 0.95.
Readers bought Jan 10 calls at 1.20 (i.e. 10 contracts), sold them at 6.10, to buy
3 times as many Jan 15 calls at 1.75, then sold at 3.10, bought 30 Jan 17.5 at 0.95.
Assuming $1200 to buy 10 Jan 10 calls, the current value is $6,150 plus $7,300 cash.
If you read my recommendations in Sept. for AMD and you were not making these gains,
you should have emailed me to submit questions for answers to appear in newsletters.
There is no wager in any casino which will pay you 11-to-1 with 80% chance to win.
DJX 104.70 +0.85 (+0.82%) open 103.88, Thursday's range low 103.88 to high 104.87.
Nov 99 put DJVWU last 0.05 unch. No Bid, Ask 0.05 volume 4,010 open interest 10,852
Nov100 put DJVWV last 0.05 unch. No Bid, Ask 0.05 volume 4,000 open interest 18,012
Dec 94 put DJVXP last 0.10 unch Bid 0.05 Ask 0.20 volume 0 open interest 9,885
OIL SERVICE looks pathetically weak for a bull market, which Cramer said this is.
Oil Service OSX at 116.28 -0.51 (-0.44%) open 116.57 range low 115.80 high 117.17.
OSX has double top at annual high 125, now 0.24% above trend, stochastics 70%/53%.
OSX Dec 90 put OSXXR last 0.10 unch. Bid 0.05 Ask 0.20 volume 0 open interest 1,205
Oct. 21, contract low 0.10 was the Bid price recommended for readers to buy OSXXR.
OSX Dec 95 put OSXXS last 0.30 unch. Bid 0.10 Ask 0.25 volume 0 open interest 5,236
Sell 1/2 OSXXR at 0.30, and sell 1/2 OSXXS at 0.70 to recover initial OSX put cost.
Gold Silver XAU 106.00 +0.53 (+0.50%) open 105.41 range low 105.23 to high 106.34.
The XAU looked weak at 107, fell to 0.76% over uptrend, stochastics fading 66%/68%.
XAU Jan 100 put XAVMT last 3.10 unch. Bid 2.70 Ask 3.00 volume 0 open interest 408
XAU Mar 100 put XAVOT last 4.80 unch. Bid 4.30 Ask 4.60 volume 0 open interest 438
NASDAQ COMPOSITE INDEX analysis
The Nasdaq Composite closed 2,061.27 +26.71 at 1.44% above its 7-day moving average.
Nasdaq stochastics rose from 75%/80% on Wednesday to overbought 100%/88% on Thursday.
Nasdaq is the most overbought of the indices, and likely to fall the most near term.
Dell Computer was +1.00 in after hours on earnings up 25%, but that's a 1-day event.
The last time TV media and brokerage analysts were so bullish, Dell was way over 50,
and the Nasdaq Composite was over 5,000, with Cramer and friends predicting 10,000.
These fund managers and Cramer have been telling CNBC viewers to buy Cisco and Dell
ever since mid-2000 when Cisco was 64 and Dell was 52. That was over four years ago.
CSCO closed at 18.74 +0.30 (+1.63%) and DELL closed at (4 PM) 37.25 +0.40 (+1.09%).
QQQ closed 38.29 +0.50 (+1.32%) at 1.29% above an uptrend, stochastics at 90%/78%.
Nasdaq 100 tracking QQQ opened at 37.91 with narrow range low 37.86 to high 38.38.
QAVWH put closed 0.05 +0.03 No Bid, Ask 0.05 volume 40 open interest 377,109
QQQWI put closed 0.05 +0.01 No Bid, Ask 0.05 volume 46 open interest 262,416
For all intents and purposes, these QQQ puts are worthless, expiring on Nov. 19.
Thanks for reading this edition of Stock Market Direction by Steve Zito.
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