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Begin Part 2 of 2

TOMORROW

Initial jobless claims are out before the open. They might be able to add fuel to the upside fire but won't be a major catalyst unless they show some dramatic improvement.

Lots of upside momentum. Now we will see if the next step can be made, i.e., avoiding the immediate slap down of distribution that has killed off each previous rally attempt. This has more going for it than the recent attempts as far as a point gain. If it can avoid distribution Thursday and Friday, then it has a chance to follow through next week with a 2% or better gain on rising, above average volume.

Don't get us wrong. There are leaders in the market that can continue to lead the market higher. They are just not the tech stocks as far as we are concerned. Their patterns are not patterns of accumulation. They can give big bounces up off the lows if this is the bottom similar to what we saw after 9-11. As noted, however, we don't see bullish patterns, and there is a lot of overhead to overcome. True buying can cut through that overhead, but at some point they will have to base out and get rid of that overhead to make lasting moves.

Thus, we don't mean to say today's rally cannot be the successful test of the lows that leads to great gains from here. We just don't think technology will be able to sustain the move right now. If the rally can continue, the techs will be able to work on their patterns, and perhaps late in the year or early next year take over leadership from the early leadership groups.

For now we still see short positions that are set up, but we also see leaders that have pulled back in the rush to big name techs, and we are looking at those for more good gains when the initial tech hysteria dies down. We are holding several puts on stocks that shot up today; with most strong moves there is a test of some degree, and instead of rushing to exit, we can get a better exit point after the initial surge is over and we get a test.

Support and Resistance

Nasdaq: Closed at 1696.29
Resistance: The February lows at 1696 to 1700. That is followed closely by another down trendline from March at 1740 and resistance at 1743 to 1750. The 50 day MVA is at 1759.95.
Support: 1650 could act as some support, followed by 1620. It may try to fill that gap to 1600 at some point. 1550 to 1560 are the October lows and could try to hold. Then 1500. After that is the September low at 1387.06.

S&P 500: Closed at 1088.85
Resistance: 1080 (February closing lows) have not been completely broken, and the down trendline at 1082 is still close (18 day MVA at 1088.20). There is another down trendline from March at 1098, right on resistance at 100 from price consolidations. 1125 is the serious resistance as that represents strong price points and the 200 day MVA (1125.02).
Support: 1080 is possible, then 1063. 1050 represents the October lows and the last price consolidation level before the September low. There is possible support at 1000, but it is not much.

Dow: Closed at 10,141.83
Resistance: 10,300 holds the key to reaching toward the March high. The simple 50 day MVA (10,276.63) is running interference for that level. After that is 10,400, the barrier to the upper half of the March trading range. The top of the June, July, and August 2001 trading range at 10,600 (10,679 intraday high) marks the top half of the March trading range.
Support: 10,100 from price consolidations and the March down trendline. Below that is the 200 day MVA (9916.30). Then recent lows at 9811. The bottom of the downtrend channel is at 9700. Then 9500 to 9600 in the shelf of support from 9500 to 10,100.

Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.

5-7-02
Productivity-Prel., Q1 (8:30): +8.6% actual versus 7.0% expected and 5.5% prior (revised from 5.2%).
Wholesale Inventories, March (10:00): 0.0% actual versus -0.4% expected and -0.7% prior
FOMC Meeting (2:15): Rates held steady
Consumer Credit, March (Consumer Credit): $6.0B versus $7.1B prior

5-9-02
Initial Claims, 5/4 (8:30): 407K versus 418K prior
Export Prices es-ag., April (8:30): NA versus 0.2% prior
Import Prices ex-oil, April (8:30): NA versus 0.0%
FOMC Minutes, 3/19 (2:00)

5-10-02
PPI, April (8:30): 0.4% versus 1.0% prior
Core PPI, April (8:30): 0.1% versus 0.1%

THE PLAYS: Today we saw a lot of money chasing beaten down stocks in lousy patterns, and we saw some of the real leading stocks suffer as a consequence. We held off on covering positions that got away, and will be patient with the leaders. We are looking at stocks that have been weak that used this rally to bounce - they could set up to the downside.

BONUS PLAYS: RHI is still weak, looking to test the 200 day and then drop on the put. PBY looks like it could be ready to go, and UAG could turn back up again now after its test.

WM (Washington Mutual--$38.18; +0.17; optionable): Savings & Loans
http://biz.yahoo.com/p/w/wm.html
STATUS: WM broke from a cup with handle in early May, hitting a high of 39.98 (all-time high 42.99) before coming back to test the move. A nice, low volume test it has been, today showing a doji over the prior handle highs and 10 day MVA, at 38.10. Volume remained steady at 3.25m (avg. 3.9m). Looking for a run back up. Target: 44.
BUY POINT: Bounce: Over 38.70 on above average volume. Stop: 37
POSITION: Stock and/or July $35 calls to buy (WM GG).

WB (Wachovia--$38.04; +0.63; optionable): Bank
http://biz.yahoo.com/p/w/wb.html
STATUS: Broke out from a cup in March, and after a bit of erratic behavior, has held the 18 day MVA (37.64). It has formed an ascending wedge, using the 18 day as support and today move up from that level on increased volume (3.22m; avg. 2.84m). Showing good money flow, and looking for a continued strong move to break out. Target: 45
BUY POINT: 38.97 on volume of 3.8 million. Stop: 37
POSITION: Stock and/or July $37.50 calls to buy (WB GU).

DISH (Echostar--$25.86; +0.36; optionable): Electronic equipment
http://biz.yahoo.com/p/d/dish.html
STATUS: Turned back in April from its January highs near 30, and could not hold the 200 day MVA (26.40), dropping very hard last Friday after gapping through and testing that former support. We got a relief bounce Tuesday, and DISH was setting up with a put. DISH got caught up in the rally today, but could only reach 26.25 (10 day MVA) before pulling back showing a loose doji as volume spiked up to 4.88m (avg. 3m). We are expecting the 200 day to continue to act as firm resistance, and are looking at a put play on a drop. Target: 22
BUY POINT: A drop through 25 on continued strong volume. Stop: 26.60.
POSITION: June $30 puts to buy (UAB RF).

PRE-ANNOUNCEMENTS: No announcement from EXPD, which had tanked going into the forecast. AROW blasted up, and CTAS continued its breakout! BER is one of those that suffered as money chased techs; it could hold the 50 day MVA and set up again.

EASI ($51.04; +0.04): Forecast to announce a split the week of 5-27-02 with earnings. At this time, the company cannot confirm this date. Did not move with the market today, but still holding up in a nice cup with handle pattern. 52.23 on volume of 290k, with stock and/or August $50 calls to buy (UFE HJ).

ATK ($108.00; +0.49): Forecast to announce a split on 5-9-02 before the open with earnings. Sold a bit harder Tuesday, but held the 18 day MVA (107.12, with prior pattern highs), with a doji on light volume today (258k; avg. 303k). We will see if we get the announcement tomorrow, and we can add to positions on a move with the news. Over 110 with volume of 400k or better, with August $105 calls to buy (ATK HA).

KSS ($71.66; +0.51): Forecast to announce a split on 5-16-02 after the market closes in conjunction with earnings or on 5-21-02 in conjunction with its annual shareholder meeting. After giving up the 50 day MVA (71.40) and making a weak test of that level Tuesday, we were looking at a put. Still are, with KSS gapping over the 50 day today but pulling back from an intraday high of 73 to close with a doji. Still watching for a fall through 70.20 on average or better volume, with July $80 puts to buy (KSS SP).

MGA ($74.14; +1.19): Forecast to announce a split 5-9-02 with earnings (time not supplied). Lost its steam last week after a promising bounce, and although it bounced up today on higher volume (468k; avg. 324k), it could only manage a doji at the short-term MVA's. A tough time to gain momentum even with an announcement. Riding current positions, cautious of a break of the 50 day (72.54). On an announcement, still something of an aggressive play on a move over 75 on increased volume. Stock and/or August $70 calls to buy (MGA HN).

ABC ($75.99; -0.07): We are researching a forecast date. One we are being patient with, holding its pattern after being passed over in the rally today. Still looking for a move over 78, with volume of 1.2m or better. Stock and/or August $75 calls to buy (ABC HO).

PRE-SPLITS: ZRAN and MCHP bounced with the violent move up today. We did not get out after the big gaps up, but are looking for better exit points to come. ANN hopped up but did not sustain the move, closing with a doji. PNRA suffered with the tech chase, but is still holding support after higher volume selling.

LLL ($128.75; +1.80): Splits 2:1 effective 5-21-02. Bounced up slightly, showing another doji. Still looks good on this test of the breakout, riding positions, and we are still looking for a strong bounce. Hit the buy point today, but we can still catch this one on a move over 130, with July $125 calls to buy (LLL GE).

IFNY ($18.25; +0.15): Splits 2:1 effective 5-14-02. Made a nice bounce Monday after having held the 50 day MVA (16.49), and has paused on lower volume the last couple of sessions, today a doji on very light volume (21,600; avg. 47,800). From a head & shoulders to a shallow double bottom with handle, looking for a move over 18.75, with stock.

BBY ($74.80; +1.67): Splits 3:2 effective 5-13-02. After the low volume relief bounce Tuesday, BBY gapped up today in the upside mania, but could only manage a 'hanging man' doji as volume remained below average (2.36m; avg. 2.73m). We were looking at a put before the buying craze of today, and we are still looking at a put after this weak bounce. It could pierce the 50 day, but we expect a drop back, and on a drop through 73.60 on above average volume, June $ 80 puts to buy (BBY RP). Stop: 75.50

CONTINUING CANDIDATES: KLAC jumped as expected. APPB pulled back on increased volume, but it could have been a victim of the charging tech market today.

HB ($63.62; +1.62): Has drifted back to test its April breakout, holding the prior highs (and 50 day MVA) at 62. Today HB bounced, with slightly increased volume of 147,600 (avg. 141k). A nice bounce, and HB closed right at the short-term MVA's. Looking for a continued move, and on a move over 64 on increased volume, an options play with September $60 calls to buy (HB IL - currently only 6 OI; plenty at the $55 strike). High is 66.48, targeting this bounce to continue up to 70.

POST SPLITS: CHS made a big bounce, rebounding after faltering on the initial breakout move. OPTN made a strong move up, and looks interesting although a sloppy pattern. PRHC is holding up on its test.

DF ($37.27; +1.92): Split 2:1 effective 4-24-02. DF gave up the 50 day MVA (36.06), with volume continuing to be quite low. It closed at recent lows made on another breach of 50 day, and then got some good earnings news and news of an acquisition, and today gapped back over the 50 day. Volume was much higher and strong at 904k (avg. 407k), and DF is just below the high made on its last, low volume move (37.50; all-time high at 38.33). A good start to a move, and on a move over 37.60 on continued strong volume, stock and/or September $32.50 calls to buy (DF IZ). Stop: 35.20. Target: 43.

Good Investing!
Jon L. Johnson and the Stock Split Report Staff.

All of the foregoing is commentary for informational purposes only. All statements and expressions are the opinion of Online Investment Services, LP or its paid consultants and are not meant to be a solicitation or recommendation to buy, sell, or hold securities. We are not licensed or registered in the securities industry. The information presented herein and on our related web site has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. The security portfolio of Partners of Online Investment Services, LP or its paid consultants may, in some instances, include securities mentioned herein and on our web site. Estimates, assumptions and other forward-looking information are subject to the limits of forecasting. Actual future developments may differ materially due to many factors.

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