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Bob Coppo
Week on Wall Street

The Week on Wall Street

Friday's Action:   Stocks finished mixed but little changed Friday, as investors sifted through economic reports that showed consumer sentiment unexpectedly lower while Midwest factory strength was at a 16-year high. Trading was light ahead of the holiday weekend. Major world markets posted mixed results on Friday. London's FTSE closed down 0.51%, Frankfurt's DAX closed down 0.27%, and Paris' CAC 40 finished lower by 0.74%. Japan's Nikkei closed up 1.29%, Hong Kong's Hang Seng closed up 1.11%, and Sydney's All Ordinaries finished up 0.18%. In economic news, Personal Income in April rose 0.6% while Personal Spending showed a gain of 0.3%. Consumer Sentiment (final) for May was revised to 90.2 from 94.2 and the Chicago PMI for May rose to 68.0 from 63.9 in April. Volume came in at 1.17 billion shares traded on the NYSE and 1.25 billion shares traded on the Nasdaq. Market breadth was positive, with NYSE advancing issues over declining issues by 1.37, and up volume over down volume by 1.21; Nasdaq advancing issues over declining issues by 1.09, and up volume over down volume by 1.38. Leading sectors were Oil Services, +1.55%, Semiconductors, +1.32% and Disk Drives, +0.86%. Laggards were Airlines, -1.24%, Gold/Silver, -0.73% and Drugs, -0.54%. Nasdaq 100 futures closed unchanged to settle at 1467.50, while the S&P's settled down 2.40 pts at 1120.30.

Weekly Recap:   Stocks put in a winning performance last week, supported by a drop in interest rates and easing oil prices. Gains were made despite a warning from government officials that al-Qaeda terrorists are in the U.S. preparing to launch a major attack this summer. Technically, the major averages made some encouraging headway, as they climbed back above their 200-day simple moving averages on positive breadth.

The yield on the benchmark 10-yr T-note fell back to 4.60% at one point, or roughly 16 basis points below its close the prior week. The improved showing in the bond market came from a number of items, including trader talk that the FOMC might stand pat on the fed funds rate at its June meeting. Bonds, however, closed the week on a down note, as the stronger than expected Chicago Purchasing Manager's Index, which precedes the national ISM Index this coming Tuesday, tempered bond trader's enthusiasm and sent the yield on the 10-yr up to 4.65%. Even so, the 10-yr yield was still much improved from the prior week. Crude oil futures hit a new record high before easing somewhat, despite assurances from Saudi Arabia that it would boost its own output by 8.0% from April levels and encourage OPEC to raise production quotas by at least 2 mln barrels per day. That good news was later discounted by concerns that neither Saudi Arabia, OPEC nor the refiners have the capacity necessary to meet the rising level worldwide demand for oil and gas.

For the week, the Dow gained +2.2%, the S&P 500 finished +2.5% higher and the Nasdaq rose +3.9%. The small cap Russell 2000 gained +4.1%. Next week, which is shortened by the Memorial Day holiday, the most important item on the docket is Friday's May Employment Report.

Corporate Profits Coming Under Pressure?:   The upturn in corporate profits beginning in early 2003 (see graph below) undoubtedly spurred last year's stock market rally. But Thursday's GDP report contained some disturbing data about corporate America. For one thing, while the GDP was revised upward from 4.2% to 4.4%, it came in below expectations. The upward revision was primarily the result of inventory accumulation rather than inventory sales. Business investment was revised downward from 7.2% to 5.8%. That's not a good sign for an expanding economy. The chain deflator was revised upward to 2.6% from 2.5%, suggesting that inflation is rising while business investment is softening. Worst of all, it was reported that domestic corporate profits fell from $81.4 billion reported in the fourth quarter of last year to just $14 billion in the first quarter of this year. The GDP report didn't receive much media attention, but in most respects, it was a dismal report. If the decline in corporate profits is the start of a trend, the performance of the stock market will most certainly suffer.

SMT's Market Trend Indicator:   Our Market Trend Indicator (MTI) is an intermediate term indicator for the general US stock market. Based on the trends of more than 8,000 underlying stocks, it generates buy and sell signals for the major market averages. Over the past year, it showed gains of some 93% trading the Nasdaq 100 tracking stock (QQQ) using the standard 50% margin. The results for 2004 year-to-date are shown in the table below:

Position	Enter	Exit	% Gain	Cum Gain
Long	1/02/04	1/22/04	12.2%	12.2%
Short	1/22/04	2/04/04	12.4%	26.1
Long	2/04/04	3/25/04	-5.0%	19.8
Long	3/25/04	4/22/04	8.4%	29.9%
Short	4/22/04	5/11/04	9.0%	41.6%
Long	5/11/04	Open	6.2%	50.4%

The MTI consistently outperforms a buy-and-hold strategy. The indicator is updated daily and is available to subscribers of our Basic Service. To learn more about the MTI and the other market timing indicators available to our subscribers, click HERE.

The COT Report:   The latest Commitments of Traders report from the CFTC shows that Commercial Hedgers bought some 8,900 S&P 500 futures contracts last week to bring their net short position to -20,051 contracts. Large Traders remained net short -36,975 contracts, with the entire offsetting net long position of +57,026 contracts held by Small Traders, the so-called "weak hands". For the Nasdaq 100 futures, Commercials bought some 1,400 contracts to bring their net long position to +22,261 contracts. Small Traders were net short -10,469 contracts in the Nasdaq. Commercial action in Dow futures saw the smart money sell some 900 contracts to bring their short position to -1,054 contracts.

Commercial Hedgers were better buyers in the S&P's last week, while Small Traders were better sellers. For the intermediate term however, their opposing net positions should still be considered bearish.

Sentiment Surveys:   The latest Investors Intelligence survey showed that the percentage of bullish newsletter writers came in at 42.4%, while the percentage of bears registered 27.3%. The bullish ratio (bulls/bulls +bears) was 60.8%.

The latest AAII survey showed a decrease to 36% bulls, and an increase to 40% bears. The bullish ratio came in at 47%, while the 4-week moving average dropped to 49%. One thing to note about the AAII survey is that, while membership in this organization is quite large as investor groups go, the number of members that actually participate in the survey is very small. Thus, large fluctuations in survey results from week to week are not uncommon.

The latest Market Vane survey came in at 63%, indicating that the majority of commodity trading advisors (CTA's) remain bullish on the future direction of the S&P's.

The Short Term Outlook; 1-5 Days:   We said in Thursday night's column that the odds favored making higher highs on Friday, but the Naz had a better chance of closing lower on the day. We made higher highs, and the Naz closed unchanged. Friday's price action was mixed, so we don't have a clear directional bias for Tuesday. In last week's commentary, we said that any hint of weakness in energy prices would be potentially bullish for the short term. That certainly happened last week, as the oil price dropped from an all-time closing high on Monday of $41.72 to below $40 on Friday. The oil price is poised to fall further in the near-term, with support coming in at the $37.50 level. If that happens, stock prices should benefit.

Also helping the stock market last week was the action of the US Dollar. For some time now, stocks have been moving in the opposite direction to the dollar, i.e., when the dollar is weak, stocks rise. This is not necessarily a normal inter-market relationship, but as long as it persists, we need to take notice. The dollar fell below its 50-day moving average last week and now has near-term support at the 87.50 level. Continued weakness in the dollar should also benefit stocks.

SMT's Pivot Point Forecast; 1-2 Weeks:   Our Pivot Point RS indicator is currently on a BUY signal. Our next Pivot Point is forecast to occur on or near May 21st.

The 60-mn NDX chart below shows that the StochRSI indicator is in the BUY zone. For Tuesday, resistance for the S&P's comes in at 1126 and then 1130. Support lies at 1116 and then 1113. For the Naz, resistance comes in at 1478 and then 1484. Support lies at 1455 and then 1447.

The Intermediate Term Outlook; 2-6 Weeks:   After trading below its 40-week moving average for most of May, the Nasdaq Composite ended the month above not only that average, but also above its 10-week sma. The Comp has trend-line resistance at the 2025 level, which it needs to clear for the current upleg to continue, but the chart below is showing some promise. For one thing, the Comp bounced off a three-point support line going back to the October, 2002 low. The other positive is the Commodity Channel Index, which is turning up from oversold territory for the first time in over year.

Our Market Trend Indicator (MTI) is currently positive and trended slightly higher on Friday.

Good Trading!

Charts and data appearing in today's column are courtesy of:
StockCharts.com
Economagic.com

Symbol	Fri. Close / %	Forward P/E	52-week high/low	Short-term Target	Gain/ Loss for the 2 weeks
GB	$25.00 / -15.91%	16.89	$45.15 / $24.40	$28.00	+9%
EDS	$16.07 / -1.23%	20.87	$15.85 / $25.44	$17.90	+2%
ADIC	$8.13 / -19.27%	21.39	$7.50 / $19.79	$9.80	+11%
BEAS	$8.35 / -22.54%	18.98	$8.26 / $15.50	$10.00	+3%
SFP	$3.40 / +22.74%	N/A	$2.50 / $15.20	$4.40	+66%
KKD	$20.76 / -2.63%	16.48	$20.08 / $49.74	$24.00	+3.4%
CMNT	$5.36 / -6.78%	14.49	$5.35 / $11.84	$6.28	+13%
FHCC	$15.00 / -1.51%	10.27	$14.99 / $28.88	$17.00	+0%
NOK	$13.19 / -2.15%	13.06	$13.05 / $23.52	$15.00	+4.3%
IASG	$4.90 / -37.58%	8.17	$4.50 / $12.50	$6.00	+22%

Have you traded any of our recommended plays along the way? We'd love to hear from you and how you did. Please send your stories to comments@talkingpoints.com.

Jeff Neal
Tech Watch

Fighting Spam

By Jeff Neal
Optionetics

As spam continues to be a thorn in the side of many email users, many technology companies are lining up to provide solutions to combat this growing concern. The variety of companies that are delivering spam range from the latest diet plans to investment ideas. Essentially spam originates from just about every type of entity doing business on that Internet. Not every company utilizes spam but virtually every industry certainly does.

Well, now it seems that some companies are offering ways to battle this unwanted influx of emails. One such spam-fighting tool is called the bonded sender that comes from IronPort, a privately owned company in San Bruno, California. Microsoft is currently using this latest technology to reduce spam and allow legitimate emails to be delivered.

The bonded sender software does not concentrate on filtering email content rather the basic idea behind this program is that legitimate mass emailers will be willing to risk their money to guarantee the integrity of their respective content. To do this they would post a bond that puts them on a list that would allow mail at the network level to proceed through. The bond fee structure is based on the quantity of mail delivered.

In addition, a company cannot just buy their way onto the list. Firms must go through and pass a screening procedure. Once on the list if a number of complaints start coming through for a particular company the bonds are then debited costing that firm money. If the problems persist and the company reaches a certain threshold level they are then removed from the list.

The concept has seemed to caught on with many companies as the list of bonded sender participants include such names as eBay, NASDAQ, Major League Baseball, and Warner Music just to name a few. Even though it is much too early to tell if the bonded sender will be effective Microsoft claims that the amount of spam has been reduced significantly since implementing the bond sender program.

Another approach being offered by an e-mail service called ZoEmail blocks spam from illegitimate senders while allowing mail in from senders given special keys. The technology is based on patented technology from AT&T labs and is touted to be able to forever end spam problems.

The ZoEmail technique involves reformatting the e-mail address. Given that most e-mail addresses consist of a username and domain components, ZoEmail generates another piece they call the key. The key is comprised of randomly created or user generated numbers and letters. This information is then inserted in between the user name and domain and is now an e-mail address tied to a specific sender. An e-mail coming in without the proper key is not allowed through.

In order to set the senders you want e-mail from the user has to send mail through ZoEmail. The first time this is done a key is assigned to the recipient and is then posted to the user’s ZoEmail address book. The recipient to be able to send e-mail to the user must either write down the keyed address or post it in their contacts folder.

The ZoEmail service allows the user to organize keys in all sorts of different ways. The keys can be tied to an expiration date and of course if the user wishes they could delete the recipient’s key at anytime. The service is relatively cheap and has gained traction among many e-mail users. The cost is around $12.00 per year for 12 MB of storage and $19.00 per year for 50 MB of storage.

Spam has been such an issue for so long that it is obvious that there are an abundance of e-mail users that are seeking relief. Going forward look for more and more innovative solutions to be offered to address the spam problem.

Happy Trading.

Each week, Mr. Swing analyzes his database of more than 9,200 securities to scan for swing trading opportunities. But be warned: Do not expect a fast way to make money. Mr. Swing is going to show you how you can accumulate small gains weekly, ultimately making money through a disciplined, low-risk trading approach. While he realizes that this short-term swingtrading approach is not for everyone, he hopes that the information given at MrSWING.com will be useful to you in the near future...

Larry Swing MrSwing.com

These are your Swing Trading Opportunities for this week: Talking Points member - Over the nearly two years that we have carried the Mr. Swing's Place column, Larry's picks have consistently put in great performances. Don't miss out on the full swing-trading content available at Mr. Swing.com. Take advantage of some of the great programs available by clicking here. Long Swings: bullish   SWINGS ^ click here AAPL,Apple Computer CMVT,Comverse Technology BC,Brunswick Corp KEY,KeyCorp WHR,Whirlpool Corp MAV20 >=500000 AND CLOSE>12 AND FORCE3<= 0 AND FORCE13>=0 AND ADX10>30 AND HIGH < HIGH1 and HIGH1 < HIGH2 AND CLOSE > SMAC10 and CLOSE > SMAC20 Short Swings: bearish what is short selling? SWINGS ^ click here MDT,Medtronic, Inc T,AT&T Corp BSG,BISYS Group INTU,Intuit Inc CBRL,CBRL Group MAV20 >=500000 AND CLOSE>12 AND FORCE3>=0 AND FORCE13<=0 AND ADX10>30 AND LOW >LOW1 and LOW1 > LOW2 AND CLOSE < SMAC10 and CLOSE < SMAC20 WINDOW ^ click here BIIB,Biogen Idec KEY,KeyCorp ESV,ENSCO Intl HIG,Hartford Finl Svcs Gp CHB,Champion Enterprises MAV20 >=500000 AND CLOSE>7 AND ADX10 > 30 AND PDI10 > MDI10 AND HIGH < SMAC5   WINDOW ^ click here BEAS,BEA Systems MO,Altria Group MDT,Medtronic, Inc ADM,Archer-Daniels-Midland PDLI,Protein Design Labs MAV20 >=500000 AND CLOSE>7 AND ADX10 > 30 AND PDI10 < MDI10 AND LOW > SMAC5 1-2-3-4 ^ click here STX,Seagate Technology KEY,KeyCorp WHR,Whirlpool Corp FNF,Fidelity Natl Finl AH,Armor Holdings MAV20 >=500000 AND CLOSE>12 AND ( ADX10+ ADX20)/2 > 30 AND ( PDI10+ PDI20)>( MDI10+ MDI20) AND LOW< LOW1 and LOW1< LOW2 AND HIGH< HIGH1 and HIGH1< HIGH2   1-2-3-4 ^ click here AMGN,Amgen Inc T,AT&T Corp KKD,Krispy Kreme Doughnuts EDS,Electronic Data Systems BSG,BISYS Group MAV20 >=500000 AND CLOSE>12 AND ( ADX10+ ADX20)/2 > 30 AND ( PDI10+ PDI20)<( MDI10+ MDI20) AND LOW> LOW1 and LOW1> LOW2 AND HIGH> HIGH1 and HIGH1> HIGH2 CROSS ^ click here XOM,Exxon Mobil HAL,Halliburton Co XLE,S&P Sel Energy SPDR Fund VRSN,VeriSign Inc SLB,Schlumberger Ltd MAV20 >= 500000 AND CLOSE >12 AND SMAC5 > SMAC15 AND CLOSE < SMAC5 AND CLOSE > SMAC15 AND HIGH<HIGH1 AND CLOSE > OPEN   CROSS ^ click here AMGN,Amgen Inc MDT,Medtronic, Inc ADM,Archer-Daniels-Midland PBR,Petroleo Brasileiro S.A. ADS PDLI,Protein Design Labs MAV20 >=500000 AND CLOSE>12 AND SMAC5< SMAC15 AND CLOSE> SMAC5 AND CLOSE < SMAC15 and LOW > LOW1 and CLOSE < OPEN REVIVAL ^ click here PHRM,Pharmion Corp AAP,Advance Auto Parts MAV20 >=500000 AND CLOSE>12 AND (CLOSE1 - LOW1) <= 0.1 * ( HIGH1- LOW1) AND ( CLOSE - LOW) >= 0.95* ( HIGH- LOW) AND CLOSE > SMAC15 AND CLOSE > SMAC50   REVIVAL ^ click here ADM,Archer-Daniels-Midland CPB,Campbell Soup MAV20 >=500000 AND CLOSE>12 AND( CLOSE1 - LOW1) >= 0.9 * ( HIGH1- LOW1) AND ( CLOSE - LOW) <= 0.1 * ( HIGH- LOW) AND CLOSE< SMAC15 AND CLOSE < SMAC50 REVERSE ^ click here 0 MAV20 >=500000 AND CLOSE>12 AND HIGH2 > HIGH1 AND HIGH1 > HIGH AND LOW2 > LOW1 AND LOW1 > LOW AND CLOSE2 <= OPEN2 AND CLOSE1 <= OPEN1 AND CLOSE >= OPEN AND VOLUME>1.5* MAV20   REVERSE ^ click here 0 MAV20 >=500000 AND CLOSE>12 AND HIGH2 < HIGH1 AND HIGH1 < HIGH AND LOW2 < LOW1 AND LOW1 < LOW AND CLOSE2 >= OPEN2 AND CLOSE1 >= OPEN1 AND CLOSE <= OPEN AND VOLUME>1.5* MAV20 TRIANGLE ^ click here EL,Lauder (Estee) Co RHAT,Red Hat Inc CA,Computer Assoc Intl ADSK,Autodesk, Inc TOL,Toll Brothers MAV20 >=500000 AND CLOSE>12 AND CLOSE> SMAC20 AND HIGH2 > HIGH1 AND HIGH2 > HIGH AND LOW2 < LOW1 AND LOW2 < LOW AND HIGH1 > HIGH AND LOW1 < LOW   TRIANGLE ^ click here PEP,PepsiCo Inc SEPR,Sepracor Inc ONXX,ONYX Pharmaceuticals BEN,Franklin Resources GB,Wilson Greatbatch Tech MAV20 >=500000 AND CLOSE>12 AND CLOSE < SMAC20 AND HIGH2 > HIGH1 AND HIGH2 > HIGH AND LOW2 < LOW1 AND LOW2 < LOW AND HIGH1 > HIGH AND LOW1 < LOW BREAKOUTS ^ click here UTSI,UTStarcom Inc DITC,Ditech Communications CDWC,CDW Corp NAP,Natl Processing MAV20 >=200000 AND CLOSE>7 AND HIGH>=MAX40 and HIGH1 <> MAX40_1 AND VOLUME>1.5 * MAV20 AND CLOSE > OPEN AND VOLUME1 < MAV20 and ( ( CLOSE - LOW ) ) >=0.75*( HIGH - LOW )   BREAKDOWNS ^ click here 0 MAV20 >=200000 AND CLOSE>7 AND LOW<=MIN40 AND LOW1<> MIN40_1 and VOLUME>2*MAV20 AND CLOSE < OPEN AND VOLUME1 < MAV20 and ( ( CLOSE - LOW ) ) <=0.25*( HIGH - LOW) REVERSALS ^ click here 0 MAV20 >=200000 AND CLOSE>12 AND LOW <= MIN40_1 AND VOLUME>2* MAV20 AND CLOSE > OPEN   REVERSALS ^ click here 0 MAV20 >=200000 AND CLOSE>12 AND HIGH >= MAX40_1 AND VOLUME>2* MAV20 AND CLOSE < OPEN REVIVAL (Track1) + REVERSE (Track2) + TRIANGLE (Track3) are different scans developed by MrSwing. Try for yourself to find the LIST that fits you the BEST... Tracks, Breakouts & Reversals are explained in our new section called: SWINGLAB... REVIVAL (Track1) + REVERSE (Track2) + TRIANGLE (Track3) are different scans developed by MrSwing. Try for yourself to find the LIST that fits you the BEST... Tracks, Breakouts & Reversals are e explained in our new section called: SWINGLAB... HDV (Long) - Chart of the Week Larry Swing Larry’s Swing Recommendation For Monday May 31, 2004: Hovnanian Enterprises Inc. has been selected as one of my top (long) swing ideas for this week. To reduce your capital outlay and increase your leverage, I recommend buying this Company’s call options to maximize short-term profitability. Please read on for more trade details…        Recommended Option Swing Play: Hovnanian Enterprises Inc. (NYSE:HOV) Industry: Construction Services   Sector: Capital Goods Employees: 2,370  Market Cap: 2.16 Billion Institutional Ownership: 50.1% Insider Ownership: 48.6% Shares Issued & Out: 61.08 Million Company Information: www.khov.com Option Summary: Option Information: www.optionsxpress.com Option Symbol: HOVFF   Type: CALL   Exchange: AMEX Strike Month: JUNE 2004   Strike Price: 30.00 Swing Trade Information: Trade Strategy: Buy Call Options (Short-Term : Bullish) Trade Targets: Common (7%) / Option (50%+) Trade Composition: 40 % Technical / 60 % Fundamental Trade Duration: 1 to 15 days Entry Strategy: Buy HOVFF When HOV Trades Above $35.35 I recommend that traders buy the call options (symbol:HQVFF) w