Email Version, Section 1, Sunday, 06/04/2000
The SplitTrader.com Newsletter Sunday 06/04/2000 1 of 1
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In This Newsletter:
Market Commentary - What Will They Do For an Encore?
Definition of the Day
Friday's Split Announcements - KG and IWOV
Sector Watch - Breakdown by sector of market performance.
Event Calendar - Next Week's Economic reports
Editorial - American and Northwest in Talks?
Split Play-of-the-Day - VSH
Split Plays - New - Updates - Drops
In the past two weeks, SplitTrader.com has added several
enhancements to the site. We continue this weekend with the
addition of our SEC Filings Calendar. Next week, look for
Monday's "Ask the Analyst" debut, to be followed by the
introduction of our FAQ page.
For now, check out the new SEC Filing Calendar at:
What Will They Do For an Encore?
We have just completed the best one-week rally in the history of
the NASDAQ and it was a holiday-shortened week! Remember panic
selling? Now we have panic buying. In last week's Market Wrap, I
figured we would see a decent rally followed by a nervous pullback
before the employment numbers were released. Don't kid yourself.
Somebody knew the numbers would be benign and the rumor must have
spread among the trading community. That is the only way to
account for Thursday's strength. Unemployment came in at an
"unexpected" 4.1%, which was an actual increase of 0.2% over last
month's 30-year record low of 3.9%. After 6 rate hikes, the
market participants are betting that the Fed will have to review
their hawkish stance and perhaps only raise rates one more time by
a quarter point at the June 27th-28th meeting. The other key
report that came out on Friday was average hourly earnings, which
rose a less than expected .1 percent to $13.65. The markets had
priced in a 0.4% increase.
OK, let's step back for a minute and look at the big picture. Fed
rates are at their highest level in almost a decade. But there
are several reasons why the Fed has been raising rates. Although
unemployment rose we are still pretty close to full employment,
meaning that anybody who wants a job can still, in most
circumstances, get a job. Inflation has been held down by the
incredible efficiencies afforded by the technological revolution.
That said, Greenspan is still as fearful of inflation as those
teenage girls running around in Scream. But there could be a
couple of unspoken influences upon Greenspan and company.
Certainly the Fed Chief has been happy to see the speculative
bubble burst. Buying non-profitable stocks at unimaginable prices
is not your Grandfather's way to save for retirement. Higher
rates mean more attractive yields in more stable investments such
as CD's, Treasuries and Money Markets. We also have to remember
that the first couple of rate hikes were simply a correction of
the extra cuts that occurred two years ago to "save" the Asian
economy. In my humble opinion, we are probably still looking at
one, if not two more rate hikes. But it is anybody's guess, so
the best course of action is probably to remain cautious.
The numbers are simply astounding, despite becoming somewhat jaded
by the percentage moves we have seen these past 6 months. The
NASDAQ gained 19% for the week, leaving it down 6.3% for the year
and down nearly 25% from the March 10th high. The Index closed at
3813.38, up nearly 231 points for the day and just over 608 points
for the week. Naturally, the rally was led by technology shares.
The survivors and the has-beens are being separated. Among the
survivors (with the amounts up from their recent lows); CSCO up
14.38, JDSU up 36.69, JNPR up 74.50, INTC up 24.69, YHOO up 23.50
and AMAT up 24.75. These are just a few of the incredible bounces
we have seen and yet most of them are still well off their highs.
The one sector that is still the strongest is the semiconductors.
On Friday, volume was very solid at 1.85 billion and advancers
beat decliners 31 to 10.
The DOW staged a rally that was also impressive. For the week the
DOW was up 496 points or 4.8%. On Friday the Dow was up 143
points. Again, technology shares led the way with some help from
the financials. Hewlett-Packard (HWP) was a big winner, up 7 1/8
to $142.06 as it spun off its remaining Agilent (A) shares. IBM
tacked on 2 7/16 and LU gained 3 dollars to $63.13. Other solid
gainers on the NYSE were AOL up 4 1/16, EMC up 8 1/8, GLW up 13
15/16 and A gained 8 1/2. Among the financials, GS increased 10
1/2 points, C rallied almost 3 points and JPM tacked on 6 7/8
points. Volume was a vastly improved 1.12 billion. Volume was
surprisingly strong all the way into the close. Breadth was very
solid as advancers defeated decliners 22 to 9.
There were broad based gains across many of the most closely
watched indices. Semiconductors (SOX) gained 8.48% to 1157.75.
For the week, the SOX was up an awesome 248 points as it smashed
through the 1000 resistance level to close at 1157.75.
Biotechnology (BTK) stocks also saw some nice gains. The Index
gained 8.35% and closed at 536. For the week, the BTK gained just
over 100 points or an awesome 23%. Banks (BKX) added a solid 40.52
points to 892.59, which was a gain of 4.76% for the day. For the
week, Banks were up 85.84 points or 10.6%. On the downside were
the Pharmaceuticals (DRG), posting a loss of 12.76 to 375.53. The
Oil and Gas Index (XOI) also suffered a loss, falling 15.24 to
The employment data also sparked a rally over in the bond pits.
The 10-year note gained over a point in the early going only to
fall back, finishing up 7/32's with a yield of 6.16%. The 30-year
bond also jumped early only to fall back and close up 6/32's with
a yield of 5.93%.
One of the most interesting, if not a bit fanciful, stories on
Friday was the rumor that British Columbia had offered incentives
to Microsoft to move their operations about 100 miles north to
presumably avoid their current legal travails with the Department
of Justice. Both sides of this supposed proposal deny any talks
are taking place but it certainly would be an unprecedented event
if it were to happen. Maybe MSFT executives are nostalgic for the
draft dodging days of yore. MSFT rallied a relatively modest 1.75
points to close at $66.31.
Shares of Northwest Airlines (NWAC) took flight again as
speculators try and get the jump on the possibility that American
Airlines (AMR) may make a bid for the Company in response to
United Airlines previously announced offer for US Air (U).
Takeovers are usually announced over the weekend, so look for NWAC
to pull back if a deal is not announced on Monday. NWAC was up
6.38 to $35.44.
IBM announced a broad based alliance with eight different Internet
service companies. The deal calls for each of the members of the
so-called Pervasive Computing Alliance to use IBM's wireless
software for at least half of each of the member's future wireless
offerings. The deal is somewhat of a coup for IBM as it makes its
mark in what should be a fast growing sector for years to come.
The publicly traded members of the alliance all rallied on Friday
and they are; Razorfish (RAZF), Agency.com (ACOM), Rare Medium
Group (RRRR), Organic Inc (OGNC), Luminant Worldwide (LUMT), US
Interactive (USIT) and Answerthink Consulting (ANSR).
The upcoming economic calendar is somewhat light but look for the
markets to jump all over any reports that even hint at a slowdown
in the economy. Tuesday: Wholesale inventories. Wednesday:
Consumer credit. Thursday: Initial jobless claims. Friday: The
biggest report of the week, the PPI.
There are a few stragglers coming in with earnings this week.
Monday: Bob Evans (BOBE). Tuesday: Stewart Enterprises (STEI).
Wednesday: Quicksilver (ZQK), Smithfield Foods (SFD), 4Front
Technologies (FFTI), Health Management Systems (HMSY) and Tech
Data (TECD). Thursday: National Semiconductor (NSM). Friday:
Look for some continuation of last week's momentum in the early
going next week. Most of the weekend pundits are talking about
bottoms being secure and some are calling for the all out
resumption of the bull market.
Granted, some of the interest rate concerns that have knocked the
market down are being alleviated. But remember the other reasons
why stocks are down; valuation concerns and competition from
interest bearing investments. Many traders are still in healing
mode and it appears unlikely that they will be leveraging their
margin accounts any time soon.
If you step back and look at the bigger technical picture, we are
still firmly in a trading range and we are pretty close to the top
of that range. The NASDAQ is bounded on the upside by the May 1st
high of 3982.38, which makes the round number of 4000 pretty solid
The MACD is still negative but it did cross over, triggering a buy
signal last week. This important indicator has leveled off, which
confirms that the downtrend is probably behind us but there is
still some significant work to do before we can say we are back in
a bull market.
The RSI has plenty of room before being overbought, which helps to
confirm the theory that we will test 4000 next week. If we close
above 4000 and stay there for a couple of days on good volume,
then the picture turns more bullish.
The trading range on the DOW is also very well defined between
11,265 and 10,150. Therefore, there is some room to the upside
but do not be surprised if there is a healthy round of profit
Good Luck! And may all of your trades be winning ones!
The Regional Technical Analysis and Option Seminar was
held in Houston this week and the results were outstanding.
The following are some of the comments from attendees:
"I would absolutely recommend this seminar to others!
I only regret I did not know about your newsletter and
seminars earlier!" Kathy R.
"The seminar exceeded my expectations. Chris is truly
an exceptional speaker. I enjoyed Steve's knowledge and
Renee's presentation on Qcharts as well. I plan on
returning to another in the fall!" B. Smith
"It was great, they exceeded my expectations! I learned
so much and fine tuned what I thought I knew already."
"The delivery of complicated information was clear and
precise. This made it easy to understand and apply. The
speakers were patient with questions the seminar
encouraged more confidence in me." Maxine A.
The next seminar is in Los Angeles and we still have
several seats available. If you would like to learn
more about technical analysis and powerful option
strategies to maximize your investment returns then
you owe it to yourself to attend. There is a 100%
money back guarantee and the price is less than the
cost of a bad trade.
June 22-24 Los Angeles 3 day
June 27-28 Washington DC 2 day
July 3-6 London England 3 day
July 13-15 New York 3 day
July 21-23 Seattle 3 day
July 27-29 Atlanta 3 day
Aug 11-12 Pittsburg 2 day
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Aug 28-29 Detroit 2 day
Australia coming soon!
Has the market been beating you up? Did you give back
your gains from April? Would you like to understand
all the technical indicators our writers use? Does
the alphabet soup of technical terms like RSI, DMA,
MACD, ROC, Stochastics, Bollinger bands, sound like
Greek to you?
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Reserve your seat now for one of our regional seminars.
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Definition of the Day
A "Retail House" is a brokerage firm that tailors its business to
retail investors rather than institutional investors.
For the complete definition, please go to:
Friday's Split Announcements
Friday, June 02, 2000, Before the Bell
The King Declares a 3-for-2 Stock Split
King Pharmaceuticals, Inc. (NYSE: KG) announced today, before the
opening bell, that the Company's Board of Directors declared a
three-for-two stock split of its common shares. The payable date
will be June 21 for shareholders of record at the close of the
market on June 12, 2000. KG currently has 150 million authorized
shares with 59.7 million shares outstanding; enough for a 3:2
split, however, shareholders will be voting to increase the
number of authorized shares to 300 million at the Annual Meeting
on June 23, 2000.
For the complete announcement, please go to:
Friday, June 2, 2000, During Trading
Software Company, Interwoven, Sets Its First Stock Split
The Board of Directors of Interwoven, Inc. (Nasdaq:IWOV)
announced before today's opening bell, a two-for-one stock split
of its common shares. Shareholders of record on June 22, 2000
will receive additional shares on or about July 13. Currently,
IWOV has 24.1 million shares outstanding, with 100 million shares
authorized and a trading float of 12.5 million. This will be the
first stock split for the Company since it began trading publicly
in October of 1999.
For the complete announcement, please go to:
As of Market Close - Friday, June 2, 2000
Broad Market Bearish/Bullish Last Posture/Since Alert
DOW Industrials 10,200 11,400 10,794 Neutral 5.05
SPX S&P 500 1,350 1,500 1,477 Neutral 5.30
OEX S&P 100 725 800 793 Neutral 5.30
RUT Russell 2000 450 550 513 Neutral 5.05
NDX NASD 100 3,000 4,000 3,756 Neutral 5.30
MSH High Tech 800 1,000 1,012 BULLISH 6.02 **
XCI Hardware 1,250 1,600 1,484 Neutral 5.30
CWX Software 1,050 1,300 1,312 BULLISH 6.02 **
SOX Semiconductor 850 1,200 1,158 Neutral 5.30
NWX Networking 900 1,100 1,134 BULLISH 6.02 **
INX Internet 500 800 633 Neutral 5.30
BIX Banking 530 600 643 BULLISH 6.01
XBD Brokerage 400 500 495 Neutral 5.05
IUX Insurance 540 620 654 BULLISH 5.16
RLX Retail 850 1,000 915 Neutral 6.02 **
DRG Drug 355 400 376 Neutral 4.28
HCX Healthcare 710 800 764 Neutral 4.28
XAL Airline 140 155 165 BULLISH 5.25
OIX Oil & Gas 265 300 303 BULLISH 5.11
Sector Watch Alert
Tame inflation numbers sent investors into a buying spree this
past week, as the Dow gained +4.9% while the NASDAQ added a
stunning +19%. Sectors leading the way Friday include Internet
(+11.21%), Brokerage (+8.73%), and Semiconductors (+8.48%). With
this most recent action, we have upped Retail to Neutral from
Bearish. We have also upped Software, Networking, and the Morgan
Stanley High Tech to Bullish from Neutral.
This section of the investment advisory website highlights
SplitTrader.com's stated Sector Watch across broad market indices
and industry sectors. SplitTrader.com is the only website that
states and regularly updates its Sector Watch across industry
sectors. Investors who reference this section first before
planning their trades will gain a decided advantage. The time
horizon of our stated Sector Watch is generally 2-3 weeks and is
based upon a number of fundamental, technical and sentiment
An important feature to our stated Sector Watch is the key
benchmark levels. These levels represent important near-term
support and resistance points. By viewing the sliding bar for
each index, investors can quickly view the relative strength of
our position and better anticipate when we are likely to change
our Sector Watch. These benchmarks are determined using technical
and sentiment indicators. It's important to realize that our
Sector Watch may be contrary to the overall trend when compared
to longer-term moving averages. This is because our stated Sector
Watch is designed to help investors take positions before others
see major trend reversals. For each sector, we highlight the index
symbol, key benchmarks, last level, stated Sector Watch and the
date we changed our position (since).
For industry sectors signaling BULLISH, investors may want to
consider long/call positions. For sectors signaling BEARISH,
investors may want to explore short/put positions. For sectors
flashing Neutral, investors may want to develop hedge positions.
As investors allocate capital, we encourage BULLISH traders to
pursue industry sectors that are trending higher and trading above
moving averages and BEARISH traders to pursue sectors trading
below declining moving averages. Investors can view these moving
averages over a six-month chart by double clicking on the industry
indexes links within the matrix.
For the week of June 5, 2000
NAPM Services May Forecast: 63.0 Previous: 65.0
Productivity - Rev. Q1 Forecast: 2.4% Previous: 2.4%
Wholesale Inventories Apr Forecast: 0.4% Previous: 0.7%
Consumer Credit Apr Forecast: $7.5B Previous: $9.1B
Initial Claims 06/03 Forecast: 280 K Previous: 286 K
Export Prices ex-ag. May Forecast: N/A Previous: -0.2%
Import Prices ex-oil May Forecast: N/A Previous: 0.1%
PPI May Forecast: 0.2% Previous: -0.3%
Core PPI May Forecast: 0.1% Previous: 0.1%
Week of June 12th
06/13 Retail Sales
06/13 Retail Sales ex-auto
06/14 Core CPI
06/14 Business Inventories
06/14 Fed Beige Book
06/15 Initial Claims
06/15 Industrial Production
06/15 Capacity Utilization
06/15 Philadelphia Fed
06/16 Housing Starts
06/16 Building Permits
06/16 Michigan Sentiment
American and Northwest in Talks?
By Matt Paolucci
According to folks familiar with the situation, AMR Corp.
(AMR), the parent of American Airlines, has approached
Northwest Airlines (NWAC) regarding the possibility of a
merger, though the talks still seem to be in the early stages.
A Northwest-American combo would help Fort Worth,
Texas-based American keep pace with United in terms of size and
help solidify its weak Asia presence, while increasing
Northwest's footprint in Latin America.
For the complete article, please go to:
Monday's Expirations by Payable Date
The PLAY LEGEND:
SplitTrader.com Split Run Play Recommendations.
Split Run Play-of-the-Day is our number one split run play
recommendation for the following trading day.
Updates are just that - updates on continuing plays
New plays are brand new for the newsletter.
Drops are closing plays that we feel have lost the advantage.
You will see:
Stock Symbol, Company Name, Closing Price, (change for the week)
Picked at date and Change since picked
BoD = Board of Directors meeting
ADV = Average Daily Volume
dma = daily moving average
>>at the SplitTrader.com website, we have comprehensive profiles
for each stock that we are playing or have played in the past, as
well as hundreds of others. Please take the time to visit the site
to view the profile of the stock(s) you wish to learn more about.
SPLIT RUN PLAY-OF-THE-DAY
VSH - Vishay Intertechnology $76.75 (+5.25)
Please see details in the Split Run Play Updates section below.
Picked on May 25th @ $69.19
Change since picked +7.56
Chart = http://www.splittrader.com/charts/charts.asp?symbol=VSH
New Split Run Plays 06/04/00
CMB - Chase Manhattan Corporation $80.69 (+10.06)
Welcome to Bill and Don's excellent investment! Who are Bill and
Don? William Harrison and Donald Boudreau, the CEO and Vice
Chairman of Chase Manhattan Corporation, that's who. Let's just
say this is one investment you can bank on. Chase Manhattan
Corporation is a bank holding company that is organized into
three major businesses: Global Bank, National Consumer Services
and Global Services. The Company conducts domestic and
international financial services businesses through various bank
and nonbank subsidiaries. Now strap in and let's take a ride on
the money train. Our journey begins on January 1st of this year
when the stock, which has been channeling between $68-$88 since
1999, bounced off support and started back up. By March 24th, the
stock had broken through resistance and had hit a high of $100,
before joining the broader markets in the recent sell-off. On
April 17th, the Company reported earnings that beat analysts by
.04 cents. Unfortunately, the down draft of the market was too
strong and CMB continued its slide. On May 17th, shareholders
approved a 3:2 stock split with a scheduled paydate of June 9th.
This is the bank's second stock split. Then in an unprecedented
move, CS First Boston issued a "sell" recommendation on the stock
on May 24th. The stock laughed off the downgrade and has headed
higher ever since. Most recently, with signs of a slowing economy
on the horizon, investors who have been acquiring bonds over the
last few months have been converting them back to cash,
presumably to reinvest in equities. Technically, CMB appears to
be in split run mode. On Friday the stock gapped open and closed
above the 200-dma for the first time since the middle of April.
The stock now has support at the 200-dma at $79. The next level
of resistance will be felt at $85 and then heavy resistance at
$88. Friday's volume of 5.9 million shares surpassed the daily
average by 20%. Open new positions with a strong bounce off
support on good volume. Positive momentum in the index (BKX)
along with the broader markets would enhance this play as well.
We will have a stop in place at $77.88, just below support.
Picked on June 4th at $80.69
Change since picked 0.00
Chart = http://www.splittrader.com/charts/charts.asp?symbol=CMB
Split Run Play Updates 06/04/00
CPN - Calpine Corporation $111.31 (+10.31)
"I split, therefore I am". My apologies to Rene' Descartes for
modifying his quote, but hey it works. We are now just 4 trading
days away from the paydate for the 2:1 split for Calpine
Corporation. Calpine is a utility stock; they are in the business
of the development, acquisition, ownership and operation of power
generation facilities. Fundamentally and technically, CPN is a
sound company. On May 26th, Morgan Stanley Dean Witter agreed
with that fact and upgraded the stock to a strong buy from a
neutral. The stock is ranked in the top 4% of all stocks with
regard to its Relative Strength. Especially impressive were the
gains achieved on Friday when clearly the market was more focused
on big cap and tech stocks. Friday's gains came on less than
average volume of 706K shares. The final leg of this present
split run will depend to a large degree on the market's
continuation of Friday's rally. The stock will next encounter
resistance at $113 and then a retest of the March high at $123.
The first level of support is measured at the 20-dma at $105,
followed by the century mark. The stock has a propensity to sell-
off quickly; so keeping a close watch on this one is advisable.
In the last 2 weeks the stock has seen a 20% price appreciation
so investors may be ready to take their profits. We will be
exiting this play ahead of the paydate per our normal policy or
if the stock hit our stop at $108.88.
Picked on May 28th @ $101.00
Change since picked +10.31
Chart = http://www.splittrader.com/charts/charts.asp?symbol=CPN
MTZ - MasTec Inc. $72.31 (+9.75)
We have gone from tech wreck to tech trek and MasTec certainly
has not been left behind. MTZ is a huge builder of the
telecommunications backbone. They provide just about every
communications network system available. From wireless to copper,
the Company designs, builds and implements Internet and other
computer communications systems for everybody from cable
television operators to energy corporations. The Company is also
a player in the fiber optic cable industry and compares favorably
on a valuation basis to such stalwarts of the market like JDSU
and GLW. As impressive as the 4-day rally has been, MTZ has not
made any huge technical strides. The stock is still below the
50-DMA at just above $77, a good resistance point and volume has
been a little light. The stock seems to be rallying more on the
strength of the market than on its own merits. There is a 3:2
split being paid on June 19th, so perhaps that event could spark
a little more interest. OBV is still positive but still well off
its highs. RSI has rallied nicely after it approached oversold
levels two weeks ago. There is plenty of room before the stock
would be considered overbought. We will protect our profits by
raising our stop to $69.88, which is just above the 10-DMA. If
the rally continues we will exit this position before the split
Picked on May 25th @ $66.38
Change since picked +5.93
Chart = http://www.splittrader.com/charts/charts.asp?symbol=MTZ
VSH - Vishay Intertechnology $76.75 (+5.25)
I think I can, I think I can; like the little train that could,
Vishay Intertechnology is chugging along into their 26th stock
split. On Friday the passive electronic manufacturer joined the
party that was thrown after release of the Employment Report. VSH
is a worldwide leader in manufacturing and distributing
resistors, capacitors, diodes and other electronic components.
Next Thursday, June 8th, is the paydate for the 3:2 stock split
for VSH. The Mardi Gras like atmosphere on Friday helped VSH to
appreciate 3 points for the day on better than average volume. To
put the finishing touches on this split run we need two more
ingredients. First, the rally needs to continue on Monday with
similar volume and commitment as we had Friday. Secondly, VSH
needs to bust through present resistance at the 20-dma just
overhead at $77.65. The stock now has support at the 10-dma at
$74.50. If the resistance level can be conquered, then VSH may
charge the old high at $88.50. After the close, all crystal balls
were fully charged as market mavens pontificated on the impending
direction of the market. Since you can't do anything until
Monday, have an exit strategy in place for VSH and enjoy the rest
of your weekend. We will exit this play ahead of the paydate per
our normal policy or if the stock hits our stop at $71.88.
Picked on May 25th @ $69.19
Change since picked +7.56
Chart = http://www.splittrader.com/charts/charts.asp?symbol=VSH
Split Run Play Drops 06/04/00
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This newsletter is a publication dedicated to the education
of online stock traders. The newsletter is an information
service only. The information provided herein is not to be
construed as an offer to buy or sell securities of any kind.
The newsletter picks are not to be considered a recommendation
of any stock but an information resource to aid the investor
in making an informed decision regarding how to trade stock
splits. It is possible at this or some subsequent date, the
editors and staff of SplitTrader.com may own, buy or sell
securities presented. All investors should consult a qualified
professional before trading in any security. The information
provided has been obtained from sources deemed reliable but is
not guaranteed as to accuracy or completeness. SplitTrader.com
staff makes every effort to provide timely information to its
subscribers but cannot guarantee specific delivery times due
to factors beyond our control.