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TOMORROW

CPI is out tomorrow, but the focus will be on business inventories and the two schools of thought: good that they are higher or worse? That debate makes the industrial production report more important. The circle of life ala economic reports.

Even with a great number it is hard to imagine the market getting too much more upside movement on this leg. The indexes closed at significant resistance after very strong moves; they need to take a breather. How they do that will be key. Markets that are stronger tend to be stingy with their gains, refusing to give them up as they consolidate on lighter volume. The action after hours Tuesday on the heels of the AMAT earnings was sluggish, and it showed the market was a bit winded after the big moves. Now will it hang onto what it has fought for or will it be punted away in a continuation of the fall? There are the positives of the higher lows put in, follow through on strong volume, the broad rally where small, mid, and large caps all benefited. That indicates at least a further trend higher even if the rally does not mark a major bottom on the test of the September bottom.

This may not mean that we do a whole lot tomorrow. With the nice improvement in the small and mid-caps once again we will of course focus on those good upside patterns. We are also going to let some big techs that are 'outperforming' the rest set up and make moves for us. They can provide some fast upside action, but we have to realize they are not necessarily long term investments at this juncture. We rode some of them down to nice gains that we banked, and then we went back to the well and had to close out the last round without the same success. In short, we will let the move over the last two days iron out the kinks, and then when we see the moves enter positions. For now it looks as if it will continue the rally up to the next resistance levels after a pause that hopefully refreshes.

Support and Resistance

Nasdaq: Closed at 1719.05
Resistance: The second March trendline is where the index closed. Then the simple 50 day MVA at 1773.99. That is followed by 1800 where the January/March 2002 downtrendline hits, followed by the 200 day MVA at 1825.08.
Support: 1700 is some support. Some support from 1600 to 1620 from the October consolidation. 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 1097.28
Resistance: The second March down trendline at 1090 is still not totally broken. After that is 1100 from price consolidations. 1125 is the serious resistance as that represents strong price points and the 200 day MVA (1122.39).
Support: February lows at 1074. The October lows at 1050 are the last price consolidation level before the September low. There is possible support at 1000, but it is not much. The September low is 944.75.

Dow: Closed at 10,298.90
Resistance: Closed at the January/September 2000 down trendline. 10,300 is the next level that holds the key to reaching toward the March high. 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. Then the 200 day MVA (9907.33). After that two lows at 9811. 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.

5-14-02
Retail Sales, April (8:30): 1.2% actual versus 0.7% expected (revised from 0.5%)
Retail Sales ex-auto, April (8:30): 1.0% actual versus 0.4% expected

5-15-02
CPI, April (8:30): 0.4% versus 0.3% prior
Core CPI, April (8:30): 0.2% verus 0.1% prior
Business Inventories, March (8:30): -0.1% versus -0.1% prior
Industrial Production, April (9:15): 0.4% versus 0.7% prior
Capacity Utilization, April (9:15): 75.7% versus 75.4% prior

5-16-02
Housing Starts, April (8:30): 1.63M versus 1.646M prior
Building Permits, April (8:30): NA versus 1.63M prior
Initial Claims, 5/11 (8:30): NA versus 411k prior
Philadelphia Fed, May (12:00): 11.0 versus 12.3 prior

5-17-02
Trade Balance, March (8:30): -$32.3B versus -$31.5B prior
Mich Sentiment-Prel., May (9:45): 93.0 versus 93.0 prior

THE PLAYS:

Good movers: ITN, ELBO, QFAB, RAH
Targets: JILL (35)
Stop Advisories: All puts in the rally today. ARW (27, put), GCI (75.50, put), POSS (15, put), BZH (84.50, put), CTX (55.50, put).

Some new plays to look at:

After today some techs are worth looking at as they begin to form up in bases.

GNSS (Genesis Microchip--$27.62; +4.12; optionable): Semiconductor.
http://biz.yahoo.com/p/g/gnss.html
STATUS: This is one tech stock that is working on the bottom of its base, and which can give us plays on the way back up - we just have to realize that there is a lot of overhead supply that can push it back down after a run and be prepared for that type of action. Today GNSS made a strong move, running back over its 50 day MVA (27.22), as volume ran high at 5.9m (avg. 4m). Having broken support with a strong move, we can look at a play on a continued strong move. Targeting 34 on a move.
BUY POINT: Over 28.10 on continued strong volume. Target=34 Stop=26.90
POSITION: Stock and/or September $25 calls to buy (QFE IE; delta= 0.69).

Other new plays:

GMRK (Gulfmark Offshore--$44.35; +2.23; no options): Oil and gas
http://biz.yahoo.com/p/g/gmrk.html
STATUS: Broke out of a cup with handle (within a bigger cup base) just after mid-April and ran to a high at 48.50. There it topped out and was taken down on some profit-taking to a test of the 50 day MVA (currently at 40). The stock didn't make it all the way to the support, but Monday's low at 41 on strong volume was a good test. Tuesday the stock bounced back up on continued strong but lower volume (113,500; avg. 58,227). Pulled off the high at 45.50 to close just cents under its 10 day MVA (44.48), but we will look for a hold above the 18 day (43.73) for a continued bounce on rising volume.
BUY POINT: Aggressive: 44.60 on rising volume (150K or better). Target=55. Stop=42
POSITION: Stock.

http://www.investmenthouse.com/ct/gmrk.html

SKS (Saks Holdings--$15.47; +0.72; optionable): Department stores
http://biz.yahoo.com/p/s/sks.html
STATUS: Test of breakout. Broke out of a cup with handle base in late April and was testing the move until Tuesday when SKS broke out again as volume soared (1m; avg. 356,400). Support was at the 18 day MVA (14.67), from where the stock made its move, closing at the intraday high. This is SKS' second bounce from the 18 day and we could get a third after another pullback to it. Looking for a continued pop; SKS just cleared the April closing high at 15.38; the April high is at 15.75. Money flow and relative strength breaking out; the base from which the stock broke out shows good accumulation.
BUY POINT: 15.60 on continued strong volume. Target=21. Stop=14.50
POSITION: Stock and/or August 12.50c to buy (SKS HV; delta=0.76). We will be focusing on using options to leverage the move.

http://www.investmenthouse.com/ct/sks.html

On the current report:

Notes on some current plays:
BDK: Still solid in the handle to its cup base. Volume fell again though the stock gave a little bounce ($0.70) but remains below the buy point.
EXPE: Continued its bounce from the 50 day MVA; the rally really helped it out since volume was lower on Monday's move up to the 18 day MVA, which EXPE broke through on the move today.
VMC: Put. Crossed over the 50 day MVA, through the stop advisory at 47.50. Volume higher but still low and resistance at 48 can push it back down to the 50 day for a test and another chance to exit remaining positions.
SCS: Bounced from the 50 day MVA after selling back to that support Monday, disturbing the handle in the small cup. Volume was much lower, however, though we can now look for the stock to hold the 18 day MVA (16.70) as the handle resumes.

CDI (Cdi Corp--$29.71; +0.11; no options): Staffing and outsourcing
http://biz.yahoo.com/p/c/cdi.html
STATUS: Flag. Threw a flag in April and is pulling back in another, using the 10 day MVA as support the last week (29.26). Volume kicked higher Tuesday (76,300; avg. 49,400) and with that CDI looks ready to make its move. After testing the 50 day MVA in early April, the stock is ready for its second bounce. High money flow and relative
strength.
BUY POINT: Aggressive: 30 on volume of 50K or higher. Target=34.75.
Stop=28
POSITION: Stock.

http://www.investmenthouse.com/ct/cdi.html

PCLE (Pinnacle--$9.65; +0.63; optionable): Photo equipment
http://biz.yahoo.com/p/p/pcle.html
STATUS: Cup with handle. Popped from the 18 day MVA on strong volume (606,600; avg. 385K), moving up nicely in the handle to the 4-month cup/saucer base. Looking for a breakout! Money flow ahead of price, along with relative strength. Hit 9.69 on the high.
BUY POINT: Aggressive: 9.75 on volume in the range of 375K or higher. Breakout: 10.27 on volume of 560K or higher. Target=13. Stop=9.40.
POSITION: Stock and/or October $7.50c to buy (PUC JU).

http://www.investmenthouse.com/ct/pcle.html

Watchlists: Other stocks besides those listed below that broke above major resistance today: INTC, MGAM, GCI, BRCD, ARW, TROW, WL, AAPL

HZO (Marinemax--$13.94; +0.49): Specialty retail
STATUS: Flags. Was working on another flag, but the pattern lost the sideways characteristic as the stock completed a pullback to the 50 day MVA. It bounced up there to close just above the 18 day MVA. Volume was down and very low; the stock is set up nicely for the upside run to commence.
BUY POINT: 14.50 on volume of 125K or higher. Target=17.40. Stop=13.75
POSITION: Stock.

KROL (Kroll, Inc.--$20.59; -0.05; optionable): Security services
STATUS: All-time high. As suspected, KROL topped out after its nice run, but after testing the 18 day MVA Monday, snapped back and held Tuesday with a hammer doji just above support (10 day MVA, 20.39). Volume was lower and below average; the stock can head back up from here after a continued hold here. A hold for buys at 20.20. Target=24. Stop=18.75.

Good Investing!
Jon L. Johnson and your Technical Traders Report Team

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 in 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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