Watch For This Negative Divergence

October 8, 2003
Vincent Mao

Stocks are
lower this midday after five consecutive
days of gains. The major indices are now heading lower after earlier session
gains. Better-than-expected earnings from Alcoa
(
AA |
Quote |
Chart |
News |
PowerRating), as well as SAP’s
(
SAP |
Quote |
Chart |
News |
PowerRating)
higher revenue guidance are failing to boost the averages. As the first Dow
component to report third-quarter results, Alcoa posted their biggest quarterly
profits in two years. German business software maker SAP
(
SAP |
Quote |
Chart |
News |
PowerRating) lifted its
revenue guidance due to better closure rates.

Both the Dow and S&P 500 came
very close to their Sept. 19 highs. The Dow came within 14 points of its prior
highs while the S&P got within 0.21 index points away from its prior milestone.
Meanwhile the Nasdaq broke out to the highest level since March of 2002. However,
stochastics are showing negative divergence.

In economic news, Wholesale
Inventories in August fell by 0.2%, economists were expecting a 0.1% rise.

The 10-year US Note
is -065 at 112 140.

The dollar is -0.10 at
92.08.

Gold is -2.00 at 375.80.

Crude Oil is -0.85 at
29.56.

Volume is 680,000,000 on
the NYSE, and 1,100,000,000 on the Nasdaq.

Market breadth is Negative,
with NYSE declining issues over advancing issues by 1.14 and down over up volume
by 1.40. Nasdaq declining issues over advancing issues at 1.42, and up volume
over down volume at 1.10.

Top Dow stocks are:

Stocks in the news:

Boise Cascade
(
BCC |
Quote |
Chart |
News |
PowerRating)
is higher by 2.3% after the company announced that its third-quarter results
will exceed current analysts’ estimates. Thanks to higher lumber prices, Boise
said that results from its building solutions unit posted “sharply higher”
results. The company now sees earnings of 40 to 44 cents a share, compared to
consensus estimates of 29 cents a share.

Aluminum producer Alcoa
(
AA |
Quote |
Chart |
News |
PowerRating) is higher by 2% after the Dow component reported third-quarter results
that topped expectations by 4 cents. Late yesterday, the company reported
earnings of 33 cents a share, compared to 23 cents a share in the year-ago
quarter. Revenues rose 3% to $5.3 billion. According to CEO Alain Belda,
“Strength in the aluminum market and continued focus on productivity and cost
control helped deliver the most profitable quarter in two years.”

Home video and DVD retailer
Movie Gallery
(
MOVI |
Quote |
Chart |
News |
PowerRating) is higher by 6.7% after lifting its third-quarter
targets. Due to stronger-than-expected same-store sales, the company now sees
earnings of at least 29 cents a share. Previously the company had expected 25 to
27 cents a share.

Business software maker SAP
Aktiengesell
(
SAP |
Quote |
Chart |
News |
PowerRating) is higher by 11.5% after the company raised its
third-quarter revenue guidance. The German-based software company sees revenues
of 1.65 billion euros or $1.95 billion. Analysts are currently looking for $1.80
billion.

CSG Systems
(
CSGS |
Quote |
Chart |
News |
PowerRating)
is lower by more than 33% after the company announced that its third-quarter
results would be hurt due to a negative ruling. As a result over a contract
dispute, CSG was ordered to pay Comcast $120 million in damages. CSG’s
third-quarter results could be negatively impacted by 9 to 16 cents a share.

If you have any comments or questions, please
feel free to email me.

Vincent Mao

vincentm@tradingmarkets.com

Watch For This Negative Divergence

BUY THE FEAR, SELL THE GREED

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