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Schaeffer's Daily Market Blog Features: Yahoo!, Nasdaq-100 Trust, Allstate, Ryland Homes, and Google

Posted on: Wednesday, 19 July 2006, 18:00 CDT

Among the stocks featured in the July 19 edition of Schaeffer's Market Blog are Yahoo! (NASDAQ:YHOO), Nasdaq-100 Trust (NASDAQ:QQQQ), Allstate (NYSE:ALL), Ryland Homes (NYSE:RYL), and Google (NASDAQ:GOOG). Schaeffer's Market Blog is just one of the many free market commentaries written every day at www.SchaeffersResearch.com - the home of Bernie Schaeffer and Schaeffer's Investment Research. The Market Blog is written throughout every trading day by Schaeffer's financial analysts and traders. They are quick insights to the day's most notable market activity from an options perspective. For additional information about this report or to have it delivered to you free via email every day click on the following link. http://www.schaeffersresearch.com/redirect.aspx?CODE=PROB12M&PAGE=1

Schaeffer's Market Blog for Wednesday, July 19, 2006:

Below are just a few of today's Market Blog entries. Click here to read all of today's Market Blog.

http://www.schaeffersresearch.com/redirect.aspx?CODE=PROB1C&PAGE=1

10:17 PM Free Stock Picks in our Podcast Interviews

Don't forget that many of our observations are available as audio presentations that you can hear on your computer or download from Apple's iTunes Music Store to play on a portable device such as an iPod. To see the full menu of observations, please visit http://www.schaeffersresearch.com/commentary/podcasts/.

12:47 PM Yahoo! Finds Support at 25 After Gapping Lower

In our Opening View column this morning, Joseph Hargett reported that Internet-portal giant Yahoo! (NASDAQ:YHOO) said second-quarter profit fell sharply to $164.3 million, or 11 cents per share, from $754.7 million, or 51 cents per share, last year. Excluding stock option expenses and one-time charges, net income rose to $237 million, or 16 cents per share, missing expectations by a penny. Sales rose 26 percent to $1.58 billion from $1.25 billion last year. Excluding payments to other web sites, sales rose 28 percent to $1.12 billion, but still lagged the Street's estimate for sales of $1.14 billion.

YHOO gapped lower this morning and, at last check, the stock was down almost 20 percent at $25.81 after dropping close to the 25 level. Despite the disappointing second-quarter results, The Street might regard YHOO as cheap at $25. However, I'm concerned that the 10-month moving average has rolled over and appears to be offering resistance in the 34 region.

Turning to the sentiment, more that six percent of YHOO's float is sold short, offering the possibility of short-covering support. Zacks lists 24 analysts who rate the stock, offering up 15 "strong buys" and 5 "buys." So far today, I've seen at least two downgrades, plus a reiteration at "buy." The intraday chart of YHOO showed that the shares bottomed shortly after midday, so it'll be interesting to watch the afternoon session.

1:18 PM Nasdaq-100 Trust Sees Increase in Call Option Activity

The Schaeffer put/call open interest ratio (SOIR) on the Nasdaq-100 Trust (NASDAQ:QQQQ) has been plunging over the past several trading sessions as call options have been added by traders significantly more quickly than put options have. In fact, since July 14, there has been about a 400,000 contract increase in call open interest on QQQQ versus about a 100,000 contract decline it put open interest on the security. The SOIR has fallen from 1.85 on June 26 to 1.11 as of yesterday. Today's options volume on QQQQ is running at nearly two calls for every one put. This should decrease the SOIR level even further. A decline in the SOIR can be a sign of increasing optimism, which could be viewed as a forecast of potential weakness from a contrarian perspective.

1:52 PM Allstate Ahead of Earnings

Allstate (NYSE:ALL) is seeing a large amount of call option activity today ahead of its earnings report, which is scheduled to be released tonight after the closing bell. The more than 20,000 call option contracts that have traded on ALL thus far today is more than 10 times the average call option volume for the security. In comparison, call volume on ALL is running at about eight times respective put volume. Clearly, the expectation is for a strong earnings report out of the company. Throw in the fact that Cramer touted the stock on Mad Money last night, and the optimistic picture comes together. A report that falls at all short of expectations could send the stock tumbling.

2:06 PM Huge Rally across the Board

After a week of going straight down, today is the bounce. It was due and extremely expected, the question now is how much room is left. My guess is we do have a few more percent higher, but over the coming months I expect lower prices into the fall. With that said, yesterday afternoon (before the rally) I couldn't find any sectors up, now I only see one that is down and that is Internet, thanks to Yahoo!'s (YHOO) little 20 percent haircut. Today's big winners are the sectors that have taken a beating the past month, with housing up over four percent - sparked by solid earnings out of Ryland Homes (NYSE:RYL) which has the shares up over six percent. One final thing that I'm noticing is how bullish the media has been today. It was just yesterday afternoon that we were making new lows across the board - now we're all bullish, quite the change.

4:41 PM More on Google Ahead of Tomorrow's Earnings

Google (NASDAQ:GOOG) reacted somewhat negatively today to Yahoo!'s earnings release. However, the stock ended about four dollars, or one percent, down. So that's not really too bad and makes me think that investors believe YHOO's problems are company-specific. We talked about GOOG in last week's Weekly Wrap-Up. On Monday Bernie noted that GOOG was battling 400. The company is set to report earnings after the close on July 20 (before option expiration). Those pieces note that GOOG sits at a multi-layered area of support. One thing I noticed recently is the drop below its short-term 20-day moving averages. Crosses above and below this trendline have been key in directing short-term trends. In fact, the last four such crosses have resulted in moves of 10 percent or more in the stock. A ten percent decline from the first close below this trendline would put the stock around 363.

For more information on these stocks or any stock in your portfolio, feel free to visit our Schaeffer's Equity Scorecard feature. Click here to read all of today's Market Blog:

http://www.schaeffersresearch.com/redirect.aspx?CODE=PROB1C&PAGE=1

Take advantage of the timely Schaeffer commentaries by signing up for their free e-newsletters -- Opening View, Market Recap and Monday Morning Outlook. Click here to have the Schaeffer's commentaries delivered to you free via email every day. http://www.schaeffersresearch.com/redirect.aspx?CODE=PROB12M&PAGE=1

About Schaeffer's Investment Research (www.SchaeffersResearch.com)

Schaeffer's Investment Research, founded by Bernie Schaeffer in 1981, is a financial information and trading resources company. It publishes Bernie Schaeffer's Option Advisor, the nation's leading options subscription newsletter. The firm's contrarian approach focuses on stocks with technical and fundamental trends that run counter to investor expectations. The firm's website, http://www.SchaeffersResearch.com, is recognized as one of the leading information sources for stock and options traders and was cited as the top options website by both Forbes and Barron's. Click here for more details about Schaeffer's trading methodology: http://www.SchaeffersResearch.com/method.

Source: Business Wire

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