Email Version, Section 1, Sunday 03/25/2001
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In This Newsletter:
Market Commentary - Everybody Up
Definition of the Day
Friday's Split Announcements - None
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) 9,504.78 -318.63 9,100 10,000
Nasdaq (COMPX) 1,928.74 + 37.71 1,700 2,250
S&P 500 (SPX) 1,139.90 - 10.66 1,080 1,375
Russell 2000 (RUT) 443.27 + 1.47 410 508
PHLX Semi (SOX) 641.95 +100.69 530 800
Finally, traders and investors had a reason to tip a few back on
a Friday evening. It was a long time coming, but for the first
time in 2001, the three major market indices closed a Friday in
Analysts offered the standard clichi for some folks wanting to go
long into the weekend: short covering and sector rotation. I
think the reason was less obvious, if not more pragmatic:
traders had an itch to bargain hunt and had the scratch lying
around to satisfy it.
Of course, these same analysts were pooh-poohing Friday's rally
as a mere aberration -- unsustainable at best, a bear-market trap
at worst. The usual culprits were paraded forth: insufficient
volume, mild put/call readings and a too staid Volatility Index
(VIX). In other words, we still haven't seen the in-your-face
capitulation that is supposedly a prerequisite for a market
But here's a little secret that they are keeping to themselves:
we may never see it.
With so many market watchers expecting one resounding flush to
clear the air, I suspect the market will just start quietly
inching ahead, leaving many a trader bewildered as he realizes
that the major indices have advanced 15 percent and he's been
sitting on the sidelines. After all, that's the way these things
work. When everyone expects one thing, the opposite usually
Anyway, that's the distant and always opaque future. I've heard
that it's best to live in the present (at least sometimes). If
that's true, then Friday was a day to rejoice, for the Nasdaq
Composite Index (COMPX) finished its first winning week in eight,
climbing 30.98 points, or 1.63 percent, to close at 1,928.68.
What's more, the tech-laden index jumped 2 percent for the week,
snapping a seven-week losing streak, its longest since 1980.
Breadth was positive for the entire session and closed right
about where it started, with advancers leading decliners by a 2-
to-1 margin. Volume on the Nasdaq was also strong, as more than
2.27 billion shares were traded. Still, volume was not as strong
as many technicians would have liked for what many considered to
be follow through day. Then again, you can't have everything you
With Friday's advance, the COMPX has once again broken free of
its intermediate down trendline dating back to late January. I
wouldn't bet the farm, but I think the COMPX may have enough
support this week to continue trading above this line.
Chart of the NASDAQ Composite:
Helping the New Economy cause on Friday was Gemstar-TV Guide
International (Nasdaq:GMST), which rose $6.25 to $35.19 after
signing a 20-year agreement with Comcast Corp. (NYSE:CCZ) under
which Comcast's cable unit will use Gemstar's guides in the
majority of homes that receive Comcast Cable.
Also contributing to the cause was Tibco Software (Nasdaq:TIBX),
which gained $2.41 to $10.44. The company, whose software helps
computer systems communicate, said its first-quarter earnings,
before certain expenses, were $0.06 a share a share, doubling the
First Call estimate for $0.03.
As for the Old Economy, it had an interesting week to say the
least. On Friday, the Dow Jones Industrial Average (INDU)
climbed 115.30 points, or 1.23 percent, to 9,504.78, putting more
distance between itself and the bear market it flirted with
earlier in the week.
At its low on Thursday, the INDU was off more than 20 percent
from its January 2000 record of 11,720, sinking to 9,106. The
blue-chip average was the last of the three major market gauges
to cross the threshold that some analysts say defines a bear
market. However, the INDU erased most of those losses going into
the close, ending Thursday off 97.5 points to 9,389.48, or 19.9
percent below its all-time high.
The INDU was able to build on Thursday's last hour gains, as
traders poured into its financial and tech components on Friday
to lift the average back above 9,500. Citigroup (NYSE:C),
American Express (NYSE:AXP), J.P. Morgan Chase (NYSE:JPM) and
Microsoft (Nasdaq:MSFT) all added more than $2.00 to their share
price while International Business Machines (NYSE:IBM) added more
than $4.00 a share.
As with the Nasdaq, NYSE volume was solid and breadth was
positive. Advancers topped decliners 1,982 to 1,043 on 1.36
Technically, though, the INDU still looks anemic. The average is
approaching strong resistance at 9,650. Given the waning
enthusiasm for the Old Economy issues towards the close of
Friday's session, I'm not sure that the INDU has the momentum to
break through this resistance this week.
Chart of the Dow Jones Industrial Average:
As for the broad-market barometer, the S&P 500 Index (SPX) gained
22.25 points, or 1.99 percent, to close at 1,139.83. But for the
week, the SPX finished down 0.9 percent. At its current print,
the SPX is trading at a 25 percent discount to its March 2000
closing high of 1,527.
In sector news, the semiconductors continued to advance on Friday
after putting in a blockbuster performance on Thursday. Top
computer chip maker Intel Corp. (Nasdaq:INTC) edged up $0.13 to
$28.81 after soaring $3.14 on Thursday. For the week, the PHLX
Semiconductor surged ahead 18 percent thanks to an impressive
outing by National Semiconductor (NYSE:NSM), LSI Logic
(NYSE:LSI), Advanced Micro Devices (NYSE:AMD) and Texas
Instruments (NYSE:TXN), all of which added over 24 percent to
their share value. Many traders are looking to the semis to lead
us of the doldrums, and this just may be the wake up call they've
been waiting for.
Financial stocks also moved higher on Friday thanks to Goldman
Sachs, which stated that the Fed could lower interest rates as
much as two full percentage points from current levels (that
translates to a 3.00 percent fed funds rate) by the end of the
summer to try and revive consumer confidence and a moribund U.S.
economy. In response, the NYSE Financial Index (NF) moved higher
3.2 percent on strong gains in Merrill Lynch (NYSE:MER), Banc of
America (NYSE:BAC), Bank of New York (NYSE:BK) and Goldman Sachs
Unfortunately, Goldman's interest rate call did little to help
the bond market. Treasuries slipped across maturities as
investors moved money from fixed income instruments and back into
stocks. The benchmark 10-year Treasury note fell 11/32 at 101
20/32 to yield 4.79 percent while the 30-year government bond
dropped 6/32 reaching 101 14/32 to yield 5.28 percent. In the
front end, the 2-year note declined 2/32 to yield 4.24 percent
while the 5-year Treasury note fell 5/32 to yield 4.48 percent.
On the economic front, there was little to report on Friday. The
ECRI Weekly Leading Index, a weighted average of seven key
economic data series designed to predict economic conditions over
the near term, declined last week from 121.8 to 121.3 and is
approaching the lows reached at the end of 2000.
Looking ahead, this week's economic releases could provide some
impetus for the Fed to lower the fed funds rate before its FOMC
On Monday, February sales of new homes are expected to have
decreased slightly to an annual rate of 920,000, from 921,000 in
January. Existing home sales are also due to be reported and are
expected to have declined to an annual pace of 5.02 million in
February, off from a 5.13 million annual pace in the previous
On Tuesday, the Conference Board will release its consumer
confidence report for March. The index is expected to edge lower
for the due to the palpable deterioration in business and
employment conditions lately. Recent stock market losses will
also undoubtedly dampen the confidence of consumers who have seen
portfolio values plunge over the past six months.
Finally, personal income and spending, the University of Michigan
Confidence Index and the Chicago Purchasing Management's Index
(CPM) close out the week's major economic data on Friday.
Personal incomes are forecasted to have increased 0.4 percent in
February, off from 0.6 percent in January, outpacing personal
spending, which is expected to have increased 0.3 percent during
the month. The Michigan index of consumer sentiment is expected
to have decreased to 91 in its final March posting, off slightly
from its prior estimate of 91.8. The CPM index is expected o
have risen to 44 this month, up from 43.2 in February. An index
posting of below 50 is an indication of contracting business
conditions in the Mid-West.
As for earnings this week, there isn't much in the offering that
will likely roil the markets. Palm (Nasdaq:PALM) will be one of
the few companies to watch this week because it is viewed as the
pacesetter for the handheld computer market, which continues to
grow while the PC and mobile-phone markets contract. Palm is
expected to post earnings of a penny a share on Tuesday.
Earnings for the first quarter of 2001 probably won't be much
improved over earnings for the fourth quarter of 2000. According
to First Call, analysts expect S&P 500 companies' earnings growth
to slow to about 1.5 percent this year, down from 16.2 percent in
2000. What's more, earnings for companies in the CBOE Technology
Index (TXX) are expected to plunge 18 percent.
On a more positive note, stocks are cheaper relative to earnings.
The S&P 500 is now priced at 23 times recent earnings, down from
32 a year ago, while the Dow Industrials are priced at 18, down
from a peak of 27. Then again, lower market P/Es should surprise
no one. The market's plunge has lopped $5 trillion off the value
of U.S. equities over the past year as measured by the Wilshire
Total Market Index (TMW).
As for trading the market this week, I think that the worst of
the selling is over (so long might be the way to go). In fact,
the stock market is once again showing signs of life after many
traders and investors, disappointed by the Fed's conservative
interest rate cut last Tuesday, had left it for dead.
Indeed, the Fed's latest 50 basis-point rate cut caused much
consternation on Wall Street last past week even though it,
combined with the 100 basis points in cuts administered in
January, almost completely erased an 11-month series of increases
that began in June 1999.
At this point, I think the Fed is becoming less of a pivot point
in the eventual turnaround, anyway. I think traders and
investors are beginning to realize that the economy hinges on
more than liquidity. In other words, earnings will again step to
On that end, I again think the worst is over. Most companies
that warned for the year warned during the first quarter, so I
don't see the torrent of earnings disappointments for the second
quarter that flooded the first. In fact, traders and investors
are already discounting the worst, so any positive news could
have a greater positive impact than it likely would have this
time last year. For example, Lucent (NYSE:LU) jumped 20 percent
last week on news that it had secured a $5 billion contract to
supply telecom equipment to Verizon (NYSE:VZ). Can you think of
any company that has stubbed its toe more times over the past
year than Lucent?
With that said, don't be surprised if the momentum section of our
Current Play list becomes over-weighted with more big-cap tech
issues as they begin to stir from their slumber, while our split
run and split candidates sections become over-weighted with
defensive issues, stocks that have already had their run. I know
I won't be.
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Definition of the Day
This is a limit imposed on the number of option contracts on one
class that can be exercised within a period of five business
For the complete definition, please go to:
Friday's Split Announcements
Monday's Expirations by Payable Date
For the week of March 26th, 2001
Existing Home Sales Feb Forecast: 5.04M Previous: 5.13M
New Home Sales Feb Forecast: 912K Previous: 921K
Durable Orders Feb Forecast: 0.50% Previous: -6.00%
Consumer Confidence Mar Forecast: 105 Previous: 106.8
Oil & Gas Inventories 26-Mar Forecast: NA Precious: 290.3MB
Initial Claims 24-Mar Forecast: NA Previous: 379K
GDP-Final Q4 Forecast: 1.10% Previous: 1.10%
Chain Deflator-Final Q4 Forecast: 1.90% Previous: 1.90%
Help-Wanted Index Feb Forecast: NA Previous: 76
Agricultural Prices Mar Forecast: NA Previous: 2.1%
Online Help-Wanted Index Mar Forecast: NA Previous: 112.0
ECRI Wkly Leading Idx 23-Mar Forecast: NA Previous: -4.6%
Personal Income Feb Forecast: 0.40% Previous: 0.60%
PCE Feb Forecast: 0.30% Previous: 0.70%
Chicago PMI Mar Forecast: 44.00% Previous: 43.20%
Mich Sentiment-Rev. Mar Forecast: 90.5 Previous: 91.8
Week of April 2nd
Apr 02 Auto Sales
Apr 02 Truck Sales
Apr 02 Construction Spending
Apr 02 NAPM Index
Apr 03 Factory Orders
Apr 04 NAPM Services
Apr 05 Initial Claims
Apr 06 Nonfarm Payrolls
Apr 06 Unemployment Rate
Apr 06 Hourly Earnings
Apr 06 Average Workweek
Apr 06 Wholesale Inventories
Apr 06 Consumer Credit
Mark Leibovit, the #1 market timer in the nation.
Mark is Chief Market Strategist for VRTrader.com, a Premier
Investor Network website, a technical consultant and former
'Elf' on Louis Rukeyser's Wall Street Week for 7 years.
His Annual Forecast Model has been subscribed to by Wall
Street's most elite. Mark is presently ranked #1 timer in
the nation by TIMER DIGEST and #2 on AmericasBestTimers.com.
For information on his extremely accurate Annual Forecast
Model for your own viewing, click here:
Symbol Company Name Splits Payable Executable
RSAS - RSA Security Inc. 3:2 03/23/2001 03/26/2001
INOD Innodata Corp. 2:1 03/23/2001 03/26/2001
TWRI Trendwest Resorts 3:2 03/27/2001 03/28/2001
NYCB New York Community Bancorp 3:2 03/29/2001 03/30/2001
FSCR Federal Screw Works 5:4 04/02/2001 04/03/2001
RMCI - Right Management Consult. 3:2 04/06/2001 04/09/2001
JP - Jefferson Pilot 3:2 04/09/2001 04/10/2001
UCBH - UCBH Holdings 2:1 04/10/2001 04/11/2001
GVA - Granite Construction 3:2 04/13/2001 04/16/2001
SBL - Symbol Technologies 3:2 04/16/2001 04/17/2001
CAH - Cardinal Health 3:2 04/20/2001 04/23/2001
MBI - MBIA Inc. 3:2 04/20/2001 04/23/2001
Successful Announcement Predictions For The Past Week
Symbol Company Date Announced
BJS BJ Services Company 03/22
NEW SPLIT CANDIDATES LIST
BKH - Black Hills Corporation $43.00 (-0.50)
This energy and communications provider last split its shares 3:2
back in 1998 at around $38. Since then, the stock has roared
higher on the heels of increased demand for both energy and
communications products, putting it right back to historic split-
levels. We are looking towards the firm's next earnings release
on 5/3/01 as the next likely time for another split announcement.
RCII - Rent-A-Center $45.13 (+1.32)
Rent-A-Center is now trading at all time highs. Although the
company has never split its shares, we feel it could certainly be
time, given the stocks strong relative strength and the amount of
authorized shares it has available. RCII's next earnings release
comes on 5/9/01, which is when we are anticipating a 3:2 split
Expected/Likely Announcements for the Coming Week
Symbol Company To Announce
GPSI Great Plains Software 03/27
CCR Countrywide Credit 03/29
OMC Omnicom Group 03/29
GPSI - Great Plains Software $62.19 (+2.38)
This provider of business management software has never split its
shares, but is in historic split territory for its industry.
GPSI has 100 million shares authorized and only 20 million
outstanding, so a 2:1 may be in the cards. The company releases
earnings on 3/27, which we feel would be an excellent time to
reward shareholders with a stock split.
CCR - Countrywide Credit $43.80 (+1.04)
Countrywide is currently trading off its highs, but is still well
into split territory. The company last split its shares 3:2 back
in May of 1994 at $22/share. Although, historically the firm
prefers to enact splits at around the $40 level. With 116
million shares outstanding and 240 million authorized, CCR can
easily do another 3:2. We are anticipating an announcement out
of its 3/29 earnings release.
OMC - Omnicom Group $81.75 (-1.35)
OMC is another stock that is off its highs, but that is still
hovering at split-levels. The company last split its shares 2:1
at $78.81 on 12/29/97. We are obviously above these levels now
and since authorized shares won't be a problem, we are banking on
a split announcement to coincide with OMC's BoD meeting scheduled
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