The SplitTrader.com Newsletter         Sunday 12/17/2000 1 of 2
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In This Newsletter:
===================

Market Commentary - Mr. Softee Melts the Market
Definition of the Day
Friday's Split Announcements - None
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 Commentary
=================

Mr. Softee Melts the Market

Just when you think it can't get any worse on the earnings
front, it gets worse.  Late Thursday, the king of all computer
tech companies, Microsoft (MSFT), warned for the first time in
a decade that revenue and earnings would not meet analysts'
expectations.

More specifically, the software giant reported that sales in
its second quarter ending December 31 will be nearly $400
million below the $6.8 billion average estimate of analysts
surveyed by I/B/E/S International, while earnings are expected
to be $0.46 to $0.47 a share, versus an average estimate of
$0.49 a share.

Microsoft then went on to cut its 2001 revenue and earnings
projections. (If you're going to get undressed, why not get
completely naked?) The company now expects to post revenue of
between $25.2 billion and $25.4 billion for 2001, a 5 percent
reduction from previous estimates.  Additionally, earnings per
share are now estimated to be between $1.80 and $1.82 a share,
versus the consensus estimates of $1.91.

On Friday, Microsoft's stock was torpedoed for $6.31 a share
and now changes hands at $49.25, the same price it was
changing hands at in October 1998.

Also torpedoed were the Dow Jones Industrial Average (INDU),
the Nasdaq Composite Index (COMPX) and the S&P 500 (SPX),
which should come as no surprise considering Microsoft is a
major component of each index.

The INDU dropped 240.03 points, or 2.25 percent, to close at
10,434.96.  The blue-chip average obliterated its 50-dma and
10,500, both of which were purported to be support levels.
Next up is 10,325 if the trend isn't reversed.

Chart of the Dow Jones Industrial:



In addition to Microsoft, the INDU was pressured on Friday by
was Hewlett-Packard (HWP), which lost $1.88 to $31.63 thanks
to an earnings estimate reduction from Goldman Sachs.  Other
INDU stocks moving conspicuously lower included IBM (IBM),
Intel (INTC), General Motors (GM) and Honeywell (HON).  When
the session was over only four INDU stocks closed higher: Walt
Disney (DIS), 3M (MMM), J.P. Morgan (JPM) and Caterpillar (CAT).

Over in the New Economy exchange, the post-Microsoft blowout
was even more severe.  The COMPX finished the day down 75.24
points, or 2.76 percent, to 2,653.27, capping off a dreadful
week that saw the tech-heavy index lose 9 percent of its
value.  Technically, the COMPX looks a mess.  Since early
September, it's been caught in an agonizing downward channel.
If the trend isn't reversed soon, we could see 2,250 before
the end of the year.

Chart of the NASDAQ Composite:



Not coincidently, the demise of the market-cap weighted COMPX
coincides with the demise of the Triplets.  Since September,
Microsoft has dropped 30 percent of its value, Intel has
jettisoned 57 percent while Cisco (CSCO) has shed 28 percent.

Speaking of Cisco, don't be surprised if the network routing
and switching giant sheds even more value this week.  After
the market close on Friday, Bloomberg reported that the
company had informed the Securities and Exchange Commission
that it set aside $275 million in its 2001 first quarter to
make up for losses from unpaid customers, which is three times
higher than what Cisco reserved for similar expenses a year
ago.

The increase in Cisco's loss reserve could be a sign that
concerns over a slowdown in networking equipment are
legitimate.

Another sign all may not be well in the networking sector has
been the recent performance of Sun Microsystems (SUNW).  Last
week, the networking server giant saw 23 percent lopped off is
stock price amid increasing worries that the slowing economy
will adversely affect the company's growth outlook. Sun is
down a bruising 52 percent from its 52-week high of $64.63.

As for the broader market, the S&P 500 lost 28.78 points, or
2.15 percent, to 1,312.15, which means the broad-based index
needs to gain 20 percent in value over the next two weeks to
reach Goldman Sachs' strategist Abbey Joseph Cohen's year-end
target of 1,575.  Don't hold your breath.

Volume in both major exchanges was extremely heavy Friday
thanks to triple-witching, which is a quarterly event that
sees the simultaneous expiration of futures, options on
individual stocks and options on stock indices. Nasdaq volume
surged to 2.58 billion shares, which was nearly 50 percent
above Thursday's level.  Volume on the NYSE spiked 50 percent
to 1.55 billion shares, a new record.

In stock news, earnings (or the lack thereof) continue to set
the market's mood, which is one reason the mood has been so
sour lately.  CMGI (CMGI) continues to lose money like a
drunken sailor on leave.  The Internet incubator fell $0.75 to
$8.31 after posting a loss of $638.5 million, or $2.07 per
share, which doesn't compare favorably to the $122.3 million
loss, or $0.54 per share, for the same year-ago period.

Meanwhile, Artesyn Technology (ATSN) was whacked for $9.19 to
$15.45. The company, which makes power conversion equipment
for the telecommunications industry, lowered quarterly
guidance. It now expects earnings per share between $0.22 and
$0.25, well below previous estimates of $0.39 per share.

Another earnings loser was C-Cube Microsystems (CUBE), which
fell $5.63 to $11.75. The maker of TV set-top box equipment
said it would see lower-than-expected results this quarter,
earning $0.07 per share on $61 million in revenue. C-Cube was
expected to earn $0.13 per share on $75 million in revenue.

Stinking up the joint in the Old Economy was bleach maker
Clorox (CLX), which washed away $3.94 of its value to $30.06,
a level not seen in over two years.  Clorox warned revenue and
earnings for the quarter and fiscal year will miss estimates
by about $0.03 a share, or 21 percent less than analyst
estimates.  This is a head-scratcher to me.  During economic
slowdowns, do people stop wanting their whites to be as white
as they can be?

Fortunately, all the earnings news wasn't negative.  Harry
Potter's publisher, Scholastic (SCHL) spiked $4.81 to $75.56.
The book company earned a $2.95 per share for its latest
quarter, 11 percent better than analyst expectations. Driving
revenues were the books about the aforementioned Mr. Potter
and the just-acquired Grolier encyclopedia unit.  The company
also announced a 2-for-1 stock split.

In other news, Oracle (ORCL) rose $1.06 to $2.56. The software
maker, whose stock had fallen 41 percent since September 1,
said sales of its new Internet-based business programs surged
during the quarter.  Apparently, Internet-based business
software is a zero-sum game because Oracle competitors Siebel
Systems (SEBL) closed down $2.13 to $77.25 after paring a 12
percent drop, while I2 Technologies (ITWO) lost $0.31 to
$50.69 after falling 7.8 percent.

On the economic front, the rate of inflation came in as
expected in November, with the Consumer Price Index (CPI)
advancing at the consensus 0.2 percent on Friday, though the
core CPI (CPI less food and energy) increased by 0.3 percent
against expectations of 0.2 percent.  For the final three
months of the year, the CPI is on pace to rise at a 2.2
percent annual rate, which would be slowest rate of increase
since the first quarter of 1999.  In other words, the Federal
Reserve no longer has an excuse not to cut interest rates.

Speaking of the Fed, the central bank's policy-making arm --
the Federal Open Market Committee (FOMC)-- will announce its
decision on interest rates on Tuesday the 19th.  The FOMC is
expected to leave rates unchanged.  However, the Fed is likely
to reverse its inflation-controlling bias, which should lead
to rate cutes in January.  To that end, the February fed funds
futures contract has an implied yield of 6.21 percent, more
than a quarter percentage point lower than the Fed's current
target fed funds rate of 6.5 percent.

Also worth noting this week is Gross Domestic Product (GDP)
and the Philadelphia Federal Reserve Branch report on business
activity in the region, both of which will be reported on
Thursday.  GDP is expected to hold steady at 2.4 percent in
its final revision of the third quarter, unchanged from its
prior posting, while the Philly Fed's index of regional
business activity is predicted to fall to 4 percent in
December, off from 5.2 percent the prior month.

As for earnings this week, we get a smattering of smaller
technology companies and one giant financial concern. Palm
(PALM), Liberate (LBRT), 3Com (COMS), TIBCO software (TIBX)
and Jabil Circuit (JBL) are expected to report, as is Morgan
Stanley Dean Witter (MWD).  As always, company guidance will
matter more to the market than the actual numbers.

As for trading this week, the key will be the Federal Reserve
and the prospect for interest rate cuts.  I think the market
is expecting the Fed to leave rates unchanged but set the
stage for a 25 basis point cut in January, so I wouldn't be
surprised if the market sells-off if that's all it gets.
After all, last week we saw a classic example of selling the
news once the presidential election was finally settled on
Wednesday -- the market's sold off Thursday and Friday.

Another factor influencing trader sentiment, as always, will
be earnings.  The number of companies saying they will not
meet fourth-quarter sales or earnings forecasts is up 70
percent from the same time last year, to 362 from 213,
according to First Call.  Analysts are now forecasting 7.7
percent profit growth for the companies in the S&P 500 this
quarter, down from 15.6 percent as of October 1.

With that dreary forecast said, I wouldn't be surprised if the
market continues to sell-off this week, particularly in the
tech issues.  The fact is, there still are plenty of high-tech
companies sporting nose-bleed price-to-earnings (P/E) ratios
that have a long way to fall before reaching current market
multiples.

So, if you're going to trade his week, I would suggest keeping
the picks conservative and the trailing stops tight.  That's
the way we've been playing the market for the past three
months and will likely continue to play it for the foreseeable
future.  The fact is, some of our best performers this month
have been stodgy companies with pedestrian businesses like
Quest Diagnostics (DGX), Philip Morris (MO) Adolph Coors (RKY)
and Danaher (DHR).

Given current market conditions, don't be surprised if more of
these types of companies make our current play list this week.

S.P. Brown
Editor


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Definition of the Day
=====================

Envelope

Lines which are plotted around the price movement on a chart.

For the complete definition, please go to:
http://www.splittrader.com/glossary/viewglossary.asp?glossaryid=125



============================
Friday's Split Announcements
============================

None



====================================
Monday's Expirations by Payable Date
====================================

BARRA, Inc. (BARZ) splits 2:1



*************
COMING EVENTS
*************

For the week of December 18, 2000

Monday
======

None Scheduled


Tuesday
=======

Trade Balance         Oct  Forecast:-$33.2B     Previous:-$34.3B
FOMC Meeting           NA  Forecast:    NA      Previous:    NA
NAHB Housing Index    Nov  Forcast:     65      Previous:    NA


Wednesday
=========

Oil & Gas Inventory 8-Dec  Forecast:288.7MB     Previous:     NA
Housing Starts        Nov  Forecast: 1.550M     Previous:  1.532M
Building Permits      Nov  Forecast:    NA      Previous:  1.537M
Treasury Budget       Nov  Forecast:-$23.7B     Previous: -$27.0B
SEMI Book-to-Bill     Oct  Forecast:  1.17      Previous:     NA


Thursday
========

GDP-Final              Q3  Forecast:  2.40%     Previous:   2.40%
GDP Chain Deflator     Q3  Forecast:  1.90%     Previous:   1.90%
Initial Claims     16-Dec  Forecast:    NA      Previous:    320K
Philadelphia Fed      Dec  Forecast:  4.00%     Previous:   5.20%
FOMC Minutes           NA  Forecast:    NA      Previous:     NA


Friday
======

Durable Orders        Nov  Forecast:  1.30%     Previous:  -5.50%
Personal Income       Nov  Forecast:  0.40%     Previous:  -0.20%
PCE                   Nov  Forecast:  0.30%     Previous:   0.20%
ECRI Weekly Index   8-Dec  Forecast:  -3.1%     Previous:     NA


Week of December 25th
====================

Dec 26  Existing Home Sales
Dec 26  Consumer Confidence
Dec 27  Leading Indicators
Dec 28  Initial Claims
Dec 28  Help-Wanted Index
Dec 29  Chicago PMI
Dec 29  Michigan Sentiment


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===============
Upcoming Splits
===============

BARZ - BARRA, Inc.                    2:1  12/18/2000  12/19/2000
MUSE - Micromuse, Inc.                2:1  12/19/2000  12/20/2000
ILI  - Interlott Technologies         2:1  12/20/2000  12/21/2000
BRCD - Brocade Comm                   2:1  12/21/2000  12/22/2000
UNH  - UnitedHeath Group Inc.         2:1  12/22/2000  12/26/2000
SPIR - Spire Corporation              2:1  12/22/2000  12/26/2000
CRY  - CryoLife                       3:2  12/27/2000  12/28/2000
HOTT - Hot Topic Inc.                 2:1  12/27/2000  12/28/2000
IWOV - Interwoven                     2:1  12/29/2000  01/02/2001



=====================================================
Successful Announcement Predictions For The Past Week
=====================================================

Symbol         Company              Date Announced
=====================================================

SCHL           Scholastic Corp.        12/14
SEIC           SEI Investments Co.     12/14



================================
NEW SPLIT CANDIDATES LIST
================================

New Split Candidates:

RE - Everest Re Group, Ltd.  $65.25 (-1.38)
Although this stock does not have split history, we believe that
due to its steady move higher this year, its current price
justifies a split.  The company has been surfing the same wave
that has carried all the insurance stocks higher.  The property
and casualty reinsurance firm will be unofficially reporting
earnings the last week in January.  We believe that this would be
a likely trigger event for a 2:1 split announcement.

Chart = 

===

SAWS - Sawtek, Inc.  $65.00 (-10.06)
Sawtek's products are used in a wide variety of digital wireless
systems, digital microwave, cable and digital LAN's. The mover and
shaker within the communications arena last announced a split at
$65.63 during an earnings release.  Although the stock is
currently off its recent highs, we believe it is still well within
its historic split range.  Sawtek's next earnings report (our
target for the announcement) is scheduled for 1/25/01.

Chart = 

===

PNC - PNC Financial Services  $66.56 (+0.50)
The diversified financial services company has wondered back into
split territory after plummeting at the end of last year.  PNC
last split at $54.50 back in November of 1992.  The trigger event
for the announcement back then was a Board of Directors meeting.
We are targeting the company's next earnings release on 1/18/01 as
the most likely time for an announcement.

Chart = 


==================================================
Expected/Likely Announcements for the Coming Week
==================================================

---------------------------------------------------
                                       Date Expected
Symbol         Company                 To Announce

DUK            Duke Energy               12/20

----------------------------------------------------

DUK - Duke Energy  $82.69 (-3.06)
If you have taken a close look at your utility bill recently, it
becomes immediately apparent why energy companies have rocketed to
new highs.  The combination of rising energy prices and falling
temperatures has taken these stocks to new highs this year.  Duke
is no exception.  We anticipate a 2:1 stock split announcement to
come out of the company's Board of Directors meeting on Wednesday,
December 20th.  Duke last split at $55.63 on 09/28/90 as a result
of an announcement from a BoD meeting.  With 1 billion shares
authorized and 369 million issued, Duke has plenty of room for a
2:1 split.

Chart = 


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