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  • Rev Shark:

    Key an Eye on the Technicals
    8/4/2005 8:49 AM EDT

    "Caution is not cowardly. Carelessness is not courage."

    -- Unknown

    The major indices did little yesterday and the overall market picture looks just fine, but there are a few niggling problems that we need to keep an eye on. Although things still look quite bullish, we don't want to be careless and give back hard-won profits.

    Caution doesn't mean you have to sell everything and anticipate that the bottom will drop out of the market, but it never hurts to think in terms of profit and capital preservation. Unless you have been stubbornly bearish, the past few months should have added some nice gains in your accounts and the last thing you want to do is give them back.

    On Wednesday, the major indices were basically unchanged but breadth was rather poor. The major indices had a big assist from Microsoft (MSFT:Nasdaq), which helped mask some of the underlying weakness. It wasn't major selling but the small-caps are looking tired lately and that is an indication that the momentum/speculative buyers may be taking a rest.

    Market leadership has also gotten a bit problematic. Yesterday gold and silver stocks led to the upside as the dollar weakened. The metals were leaders earlier this year when the major indices were struggling. So we now have a market being led by oils and metals, which is not a bullish scenario. A good market is not led by these defensive stocks, and if that continues it bodes ill.

    Although there are still many sectors acting rather well, we did see weakness on Wednesday in perhaps the most important one of all, the semiconductor group. Nevertheless, the market still remains in good shape technically but we need to watch closely for signs of weakness, such as breaches of key support, distribution, trendline breaks and so on. Watching for these issues doesn't mean we turn bearish. So long as the market continues to act favorably, the best approach is to seek out the best-looking long-side trading candidates.

    The market remains somewhat extended and in need of a rest/dip but that has been the case for a while now and can continue longer than seems reasonable. The Nasdaq has good technical support in the 2190 area, and the S&P 500 support remains at 1230.

    The market looks fine technically, but the price of crude oil is a concern, as is new-found gold/silver leadership. The market is dealing with the negatives very well now, although as we all know things can change quickly so a little caution is not a bad idea.

    We have a little weakness to start the day. Overseas markets were negative, oil up and the dollar are up a bit.

    No positions in stock mentioned

  • Gapping Up

    Gapping up on strong earnings/guidance: ORBT +38%, DAVE +23%, BOOM +14%, CKFR +11% (also upgrades from Jefferies and FBR), EDS +10% (also upgrades from JP Morgan and Jefferies), TFSM +9%, CNXS +12%, MFLX +9%, BVF +8%, QSII +4%, TEX +3.6%, CRYP +3.6%, CETV +3.4%, TOPT +2.8%, OATS +2%, SINA +1.9%... Other News: WTSLA +8.3% (strong July same store comps), NFLX +3.6% (Jefferies upgrade), ISIS +6% (positive phase 1 data), EPNY +5% (to be acquired by SSA Global), CPN +5%, SBS +5% (Mad Money mention), IIJI +4% (splits shares), CX +2.2% (Mad Money mention)... Security Stocks are strong: SYNX +6.7%, MAGS +4.6% (reports a $4.2 mln order)... Under $3: GNLB +12% (co's Hep C compound advances into preclinical development).

    Gapping Down

    Gapping down on disappointing earnings/guidance: ULBI -21%, AMLN -7.5%, ELOS -6.3%, FSH -4.3% (also Baird downgrade), NTIQ -4.2%, SLE -3%, HET -2.7%, EXTR -2.2%.... Gapping down on disappointing July same store sales/guidance: ROST -6%, CHS -5.5%, ANF -4.9%, CHRS -4.4%, AEOS -3.6%, TGT -1.7%... Other News: PPC -6.2% (prices offering), MNST -3.5% (employment index dips slightly in July; also JOBS earnings report), MLNM -2.6%, ZGEN -3% (prices offering at $18), IBI -3% (prices offering), CD -2.1%, DCX -2.1% (announces new plan to reward suppliers - Detroit News)... Under $3: DFIB -10% (reports Q2).

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