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Email Version, Section 2, Sunday 04/22/2001
The SplitTrader.com Newsletter Sunday 04/22/2001 1 of 2
Copyright 2001, All rights reserved.
Redistribution in any form is strictly prohibited.
- Your World Leader for Trading Stock Splits on the Internet -
Posted online for members at: http://www.SplitTrader.com
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http://www.splittrader.com/htmlemail/042201_1.asp
==================================================================
In This Newsletter:
===================
Market Stats
Market Commentary - Time Out
Definition of the Day
Friday's Split Announcements - EQT
Monday's Expirations
Event Calendar - Next Week's Economic reports
Upcoming Splits for next two weeks
Successful Announcements - Last Week
New Candidates List
Expected/Likely Announcements for the Coming Week
================================================================
Market Stats For the Week
=========================
Index Close Change Support Resistance
DJIA (INDU) 10,579.85 +452.91 10,300 10,900
Nasdaq (COMPX) 2,163.16 +201.74 1,850 2,250
S&P 500 (SPX) 1,242.95 + 59.45 1,180 1,275
Russell 2000 (RUT) 466.72 + 11.70 450 485
PHLX Semi (SOX) 669.59 + 71.67 575 725
Market Commentary
=================
Time Out
And who wouldn't need one after running like the equity markets
have over the past 10 days? The Nasdaq, in particular, has been
running like a doped-up East German marathoner (No offense to
readers of German decent; I'm only referring to these
monstrosities the former East Germany used to field in the
Olympics during the 1970s). In fact, the Nasdaq Composite Index
(COMPX) has run so far as to add 32 percent to its value since
hitting its 52-week low of 1,620 back on April 4th, marking its
best 10-day return in its 30-year history. Moreover, a third of
these gains came after the Fed Reserve's surprise fed funds rate
cut on Wednesday.
So, a time out seemed in order, not that the COMPX necessarily
stopped for much of one. On Friday, the go-go index closed down
a mere 18.73 points, or 0.86 percent, to 2,163.41. The brakes
were applied by Sun Microsystems (Nasdaq:SUNW) and Ericsson
(ERICY). Both companies reported worse-than-expected first
quarter earnings late Thursday.
The Old Economy issues also opted for a sabbatical on Friday.
The Dow Jones Industrial Average (INDU) dropped 113.96 points, or
1.06 percent, to 10,579.85. Much of the INDU's losses were
attributable to Merck (NYSE:MRK), which tanked $4.66 to $73.61
after stating that it sees its second, third and fourth quarter
growth rates below that of its first quarter rate of 13 percent.
Nevertheless, despite the last-day drop in many of its
components, the blue-chip average closed the week with a 4.5
percent gain, driving its month-to-date return to 7 percent.
As for the broader market, the S&P 500 Index (SPX) slipped 10.71
points, or 0.85 percent, to 1,242.98. The SPX closed the week
with a 5 percent gain, with its month-to-date return moving to
7.2 percent. With last week's advance, the SPX has recovered to
a point where it is off 18.6 percent from its March 2000 peak of
1,527, which puts it below the 20 percent threshold many market
watchers define as a bear market.
Much of last week's gains could be attributed to the Fed, but not
all. The earnings picture also appears to be improving,
particularly in the forlorn tech issues. Microsoft (Nasdaq:MSFT)
and Apple Computer (AAPL) both beat quarterly earnings estimates
while IBM (NSYE:IBM) matched estimates on higher than expected
revenues. For the week, Microsoft gained $8.00, Apple added
$3.24 and IBM surged $18.40.
This month's renaissance in equities has revived the split scene
as well. Last week we announced no fewer than eight stock
splits, which is something we haven't done in nearly two months.
What's more, we anticipate another eight stocks to split this
week (to see our complete list click on Expected Splits
http://www.splittrader.com/indexes/ExpectedSplits.asp).
The revival of stocks in general, and splits in particular, has
kept our Current Play list moving forward. We posted strong
gains last week in Taro Pharmaceuticals (Nasdaq:TARO), Omnicom
(NYSE:OMC) and Union Pacific (NYSE:UNP) (for a complete listing
of our plays, click on Current Plays
http://www.splittrader.com/indexes/currentplays.asp).
Equities haven't been the only capital market beneficiaries of
rate cuts and earnings improvements. Treasuries have been
advancing, too. More importantly, though, the yield curve has
been reforming to a steeper (meaning more normal) shape. To that
end, the 10-year Treasury note closed Friday up 5/32 to yield
5.28 percent while the 30-year government bond shed 2/32 to yield
5.785 percent.
As for economic news on Friday, there was little worth noting;
however, that will change starting on Tuesday when the Consumer
Confidence Index will be reported. The index, which measures
consumer sentiment for the economy and personal finances over the
next three-month period, is expected to fall to a reading of 113,
off from 117 in March.
On Wednesday, we get durable goods orders and new and existing
home sales data. Durable goods orders for March are expected to
have risen 0.5 percent in March, up sharply from a 0.4 percent
decrease in the previous month. New home sales are expected to
have increased at a 910,000 annual pace in March, off slightly
from February's 911,000 annual pace. Existing home sales are
predicted to have increased at a 5.12 million annual pace in
March, off from 5.18 million in February.
Friday closes out the week with the Gross Domestic Product (GDP)
and the Michigan Confidence Index. GDP is expected to have risen
0.9 percent in its preliminary estimate for the first quarter,
off slightly from its prior 1 percent showing. The U. of
Michigan Confidence index (another gage of consumer sentiment) is
expected to have risen slightly to 88.3 in its final April
posting, up from its prior estimate of 87.8.
On the earnings front, the market will once again get hit with a
slew of reports. Keep an eye on JDS Uniphase (Nasdaq:JDSU),
Corning (NYSE:GLW), Compaq (NYSE:CPQ), Qualcomm (Nasdaq:QCOM),
American Express (NYSE:AXP) and Chevron (NYSE:CHV).
Dot-coms will also be out in force trying to convince investors
that they're in there for the long haul. Amazon.com
(Nasdaq:AMZN), Ask Jeeves (Nasdaq:ASKJ), Beyond.com (Nasdaq:BYND)
and Webvan (Nasdaq:WBVN) will all post first-quarter results this
week. No one in this quartet is expected to show a profit, but
they all need to show an improvement in their loss rate.
Speaking of loss rates, first-quarter profits for S&P 500 members
have fallen 7.6 percent, according to First Call, with 47 percent
of its companies reporting. For 2001, earnings are expected to
fall 2.3 percent, down from the 9.2 percent gain analysts
forecast at the beginning of the year and the 2 percent decline
projected yesterday.
That's not to say, though, there's no chance for improvement, at
least in the big-cap issues. Already 19 out of the 30 Dow
components have posted quarterly reports, with all but two
beating or matching forecasts.
Obviously, earnings will be the driving force behind the market
this week (I think it's save to say we wouldn't see another
interest rate cut). Admittedly, it's going to take some
impressive numbers to incite the market into duplicating last
week's impressive performance. One constructive sign is the fact
that all three major averages closed above their respective 50-
day moving averages.
Still, the technicals are overly bullish at this point. In fact,
I think this week may favor the short sellers. According to the
charts, the COMPX could run into serious resistance in the 2,250
to 2,300 range, which is only 111 points away. On the downside,
the index doesn't find decent support until 1,850, though it
could find mild support at its 50-dma of 2,077. Unless the COMPX
closes above 2,300 Monday or Tuesday, I think it will likely
finish flat to down for the week.
Chart of the NASDAQ Composite:
As for the Old Economy, I think there is a good chance that it,
too, will likely trade the week flat to down, particularly in
light of the INDU's MACD rolling negative on Friday. However,
unlike the COMPX, I think the downside is more limited on the
INDU. I see a first level of support being provided from the
April trendline at 10,400, with stronger support being provided
by the 10,300 level. In other words, I think trading on the INDU
could be a wash.
Chart of the Dow Jones Industrial Average:
With that said, I think it will be prudent to maintain a
defensive posture this week. I don't think it safe to go hog-
wild on the tech issues quite yet. I think they are ripe for
more profit taking. A 32 percent move in any index over a 10-day
trading span is a move that's gone too far too fast.
Finally, I'll again remind you to keep those stop losses tight.
Don't let the gains you achieved last week get away from you. If
you follow our Current Play regularly, you'll notice we
religiously move up our stops to help lock in profits. At this
point, the economy still isn't sufficiently strong to support a
long-term up trend. Volatility will likely be the norm until the
second half of 2001, so trade accordingly.
S.P. Brown
Editor
www.Splittrader.com
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Definition of the Day
=====================
Order Imbalance
A large number of buy or sell orders causing an unusually wide
spread between the bid price and the ask price.
For the complete definition, please go to:
http://www.splittrader.com/glossary/viewglossary.asp?glossaryid=279
============================
Friday's Split Announcements
============================
Friday, April 20, 2001 After the Market
Equitable Declares Split; Stock Surges During Record Quarter
Equitable Resources Inc. (NYSE:EQT) Board of Directors announced
late Thursday, plans for a 2-for-1 stock split. If regulatory
approval is achieved, the payable date will be June 11 to
shareholders of record on May 11, 2001.
For the complete announcement, please go to:
http://www.splittrader.com/announcements/042201_1.asp
====================================
Monday's Expirations by Payable Date
====================================
Cardinal Health, Inc. (CAH) splits 3:2
MBIA Inc (MBI) splits 3:2
==============
Event Calendar
==============
For the week of April 23rd, 2001
Monday
======
SEMI Book-toBill Ratio Mar Forecast: NA Previous: 77.00%
Tuesday
=======
Consumer Confidence Apr Forecast: 113 Previous: 117
Wednesday
=========
Durable Orders Mar Forecast: 0.50% Previous: -0.40%
Existing Home Sales Mar Forecast: 5.100M Previous: 5.180M
New Home Sales Mar Forecast: 910K Previous: 911K
Oil&Gas Inventory 20-Apr Forecast: NA Previous:313.3MB
Thursday
========
Initial Claims 21-Apr Forecast: NA Previous: 385K
Employment Cost Index Q1 Forecast: 1.10% Previous: 0.80%
Help-Wanted Index Mar Forecast: NA Previous: 71
Online Help wanted Idx Apr Forecast: NA Previous: 112.5
Friday
======
ECRI Wkly Leading Idx. 20-Apr Forecast: NA Previous: -5.5%
GDP-Adv. Q1 Forecast: 0.90% Previous: 1.00%
Chain Deflator-Adv. Q1 Forecast: 3.00% Previous: 1.90%
Mich Sentiment-Rev. Apr Forecast: 89 Previous: 87.8
Week of April 30th
=================
Apr 30 Personal Income
Apr 30 PCE
Apr 30 Chicago PMI
May 01 Auto Sales
May 01 Truck Sales
May 01 Construction Spending
May 01 NAPM Index
May 02 Factory Orders
May 03 Initial Claims
May 03 NAPM Services
May 04 Nonfarm Payrolls
May 04 Unemployment Rate
May 04 Hourly Earnings
May 04 Average Workweek
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===============
Upcoming Splits
===============
Symbol Company Name Splits Payable Executable
CAH - Cardinal Health 3:2 04/20/2001 04/23/2001
MBI - MBIA Inc. 3:2 04/20/2001 04/23/2001
SBUX - Starbucks Corp. 2:1 04/27/2001 04/30/2001
PFGC - Performance Food Group 2:1 04/30/2001 05/01/2001
PPDI - Pharmaceutical Product 2:1 05/11/2001 05/14/2001
MKT - Advanced Marketing Service 3:2 05/11/2001 05/14/2001
SOTR - SouthTrust Corp. 2:1 05/11/2001 05/14/2001
STZ - Constellation Brands 2:1 05/14/2001 05/15/2001
WM - Washington Mutual 3:2 05/15/2001 05/16/2001
CHS - Chicos FAS, Inc. 3:2 05/16/2001 05/17/2001
UHS - Uninversal Health Services 2:1 05/23/2001 05/24/2001
=====================================================
Successful Announcement Predictions For The Past Week
=====================================================
Symbol Company Date Announced
=====================================================
PPDI Pharmaceutical Prdt Dev. 04/16
UHS Universal Health Services 04/17
CHCS Chico's FAS, Inc. 04/19
EQT Equitable Resources, Inc. 04/20
================================
NEW SPLIT CANDIDATES LIST
================================
ACF - AmeriCredit Corp. $43.80 (+7.92)
ACF last split its shares 2:1 back in 1999 at around $30. With
the stock's recent surge higher, we are right back into split
territory. The big auto loan company is set to benefit from the
recent rate cut and looks poised to challenge the $50 level soon.
We will be keeping an eye out for any BoD meetings.
===
MKL - Markel Corporation $197.25 (+3.33)
The insurance holding company did a 6:5 split back in 1995, but
has steered clear of splitting its shares ever since. We believe
that since MKL is now challenging the $200 level, that management
can no longer ignore the issue. We are targeting the firm's
earnings release date of 5/2/01 as the next likely time for a 2:1
split announcement.
==================================================
Expected/Likely Announcements for the Coming Week
==================================================
---------------------------------------------------
Please use courier new font to view table
---------------------------------------------------
Date Expected
Symbol Company To Announce
EOG EOG Resources, Inc. 04/23
GDW Golden West Financial 04/23
MMM Minnesota Mining & Mfg. 04/23
OMC Omnicom Group, Inc. 04/24
AHC Amerada Hess Corp. 04/25
CHV Chevron Corp. 04/25
NNS Newport News Shipbldg. 04/25
PPL PPL Corporation 04/25
LLL L-3 Communications Hldgs. 04/26
----------------------------------------------------
EOG - EOG Resources, Inc. $43.70 (+1.06)
EOG last split its shares 2:1 in 1994 when the stock was trading
at around $45. We are expecting a 2:1 split announcement in
conjunction with earnings on 4/23.
===
GDW - Golden West Financial $59.80 (-1.76)
GDW last announced a split in November of 1999 when the stock was
trading at $43.25. Given the stock's recent run up, we are
expecting a 3:1 split announcement with GDW's earnings release on
4/23.
===
MMM - Minnesota Mining & Mfg. $112.50 (+5.69)
MMM last split its shares 2:1 in April of 1994 when the stock was
trading at $102.38. We are anticipating a 2:1 split announcement
out of the company's earnings release on 4/23.
===
OMC - Omnicom Group, Inc. $90.69 (+6.49)
OMC last announced a 2:1 split 3:2 in September of 1987 at
$70.50. Given the current price, we are banking on another 2:1
split to come out of OMC's earnings date of 4/24.
===
AHC - Amerada Hess Corp. $83.54 (+3.37)
It's been over 20 years since AHC has split its shares, but given
its huge run up lately, we feel it's time again. We are looking
towards the firm's earnings release of 4/25 as a good time for a
2:1 split announcement.
===
CHV - Chevron Corp. $93.25 (+2.45)
CHV last split 2:1 in June of 1994 when the stock was at $90.75.
A quick glance at its current price is all it takes to see why we
believe another 2:1 could be in the cards on CHV's earnings date
of 4/25.
===
NNS - Newport News Shipbldg. $56.16 (+4.15)
NNS has never split its shares but given that NNS is now over
$50, we feel a 2:1 split announcement could come on 4/25, the
boat builder's earnings date.
===
PPL - PPL Corporation $51.76 (+1.11)
PPL last split 2:1 in May of 1992 when the stock was at $51. We
are now expecting a 2:1 announcement to accompany earnings on
4/25.
===
LLL - L-3 Communications Hldgs. $83.90 (+1.00)
LLL has never split its shares but is trading at historic split-
levels for the communications industry. We are expecting a 2:1
split announcement out of the company's earnings release on 4/26.
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