Wiser Trader Stocks & Options Newsletter

Wiser Trader Stocks and Options Newsletter

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Issue No. 66 February 13, 2006 Prescott, Arizona Systems@WiserTrader.com

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1.0 Trading

The number of periods for the Williams %R has been increased from 10 periods to 28 periods to reflect a longer-term view as the market is likely to remain choppy for a while.

1.1 Settling In

Market performance is illustrated by the S&P 500 Index in Figure 1. In spite of recent choppiness and good volume, the rising wedge pattern continues to hold.

FIGURE 1

© 2005 WiserTrader.com, LLC. Members of wisertrader.com are neither licensed brokers nor licensed advisors. Trades discussed represent recommendations made by the editor for the wisertrader.com portfolio. The newsletter and web site are for information only and should not be considered as personal advice. While it is believed that the posted information is factual, mistakes can be made in transcription. Investors should trade stocks only after verifying all information and consulting with a licensed broker or adviser. WiserTrader.commarkets third party trading systems but has no other affiliation with trading system companies.

1.2 Trading with the Market

It was pointed out earlier how bull market health can be measured by the relative strength of risk takers as compared with more conservative investors. Risk takers are more interested in NASDAQ stocks while the conservative investor has more interest in large cap stocks in the S&P 500. The premise was that a healthy bull market is characterized by the NASDAQ percentage gains outpacing those of the S&P 500. The percentage change in the NASDAQ and S&P500 are plotted in Figure 2 on the left axis. Notice how they move in tandem with minor periodic changes in the distance between them. When they rise, the NASDAQ rises faster than the S&P 500. As they decline, the NASDAQ declines faster than the S&P 500. The NASDAQ changing faster than the S&P 500 directly affects the slope of the QQQQ to SPY ratio. The QQQQ/SPY ratio is plotted on the right axis.

FIGURE 2

The QQQQ/SPY ratio is quite erratic from day to day and is difficult to use as a trading guide. A simple modification can be made for short-term trading by plotting the daily change in the ratio, which is its first derivative d(Q/S), along with the 3-day average d(Q/S)_avg3, instead of the ratio itself. The first derivative and it 3-day average are plotted in Figure 3 using data from the right half of Figure 2.

The trading value of this information is found when one attempts to trade in the same direction as the major averages. When the first derivative and its 3-day moving average cross the zero axis, it is an indication that the NASDAQ (or QQQQ) is changing faster than the S&P 500 (or SPY). Consequently, the percentage change in both the NASDAQ and S&P 500 are subsequently seen to continue further in their current direction.

The rising of both lines above zero signals it is a good time to enter short-term trades on the long side, as long as the most recent move for NASDAQ and S&P 500 were both upward. More precisely, the derivative will trigger by crossing zero in a substantial manner while the 3-day average moving across zero is a confirmation. The trade remains open as long as both lines remain above zero. When the first derivative turns sharply back toward zero, it is time to get out of the trade. In many cases, this last signal gets you out of a long trade just before the NASDAQ and S&P 500 both drop substantially. However, there are cases of false signals caused by unpredictable 1-day spikes.

A similar set of reasoning can be applied for making trades on the short side when the most recent moves for NASDAQ and S&P 500 have been downward. When the first derivative and its 3-day moving average dip below zero, the major averages decrease further.

FIGURE 3

This technique is designed to let one know when major averages are continuing in the direction of trade or turning or against it. Right now, the first derivative has moved above zero while the 3-day average is waiting to confirm a continuation of Friday’s upward move. The technique requires more study and back testing to eliminate false signals.

2.0 Market Analysis

For all it movement this week, the market went nowhere. Suddenly investors are uncertain about rate increases. Last week most had already concluded that another rate hike was likely at the March 28 FOMC meeting. The market is obsessed with inflation and interest rate increases.

Key industry ETF’s in Table 2A are Biotech and Semiconductors, which confirm the NASDAQ. Transportation confirms the Dow Jones Industrial Average according to Dow Theory. Banking and Financials are confirming indicators for the S&P 500. Gold and Real Estate are respective indicators for the inverse health of the currency (inflation) and the capacity for consumer spending.

Table 2A

Indices, Key Industry ETF’s and Sector SPDR’s

	1 month	1 wk ago	2 wks ago	3 wks ago	4 wks ago
Dow Jones Industrial Index	-0.4%	1.2%	-1.0%	2.2%	-2.7%
NASDAQ Composite Index	-2.4%	0.0%	-1.8%	2.5%	-3.0%
NYSE Composite Index	-1.6%	0.2%	-1.5%	1.8%	-2.0%
S & P 500 Index	-0.6%	-0.3%	-1.2%	2.5%	-1.5%
Russell 2000 Index	1.2%	-1.0%	-1.1%	3.9%	-0.5%
GLD, GOLD	-1.2%	-3.0%	1.6%	0.8%	-0.4%
RKH, Banking	-0.7%	1.6%	-2.1%	3.5%	-3.5%
IYT, Transportation	4.1%	1.4%	-1.0%	3.8%	0.0%
SMH, Semiconductors	-3.4%	2.7%	-3.0%	2.2%	-5.2%
BBH, Biotechnology	-4.2%	-3.1%	1.1%	-0.5%	-1.6%
IYR, Real Estate	0.8%	-0.4%	-1.3%	3.0%	-0.3%
OIH, Oil	0.2%	-4.6%	-2.2%	0.8%	6.6%
XLE, Energy	-3.5%	-4.9%	-2.5%	0.4%	3.6%
XLU, Utilities	-1.3%	0.4%	-2.3%	-1.0%	1.6%
XLB, Materials	1.0%	-0.6%	-1.6%	4.9%	-1.5%
XLI, Industrial	0.8%	1.3%	-0.6%	2.1%	-2.1%
XLK, Technology	-2.2%	1.7%	-2.0%	2.1%	-3.9%
XLV, Healthcare	-1.3%	0.1%	-0.9%	1.0%	-1.5%
XLF, Financials	-1.8%	1.1%	-1.8%	2.7%	-3.7%
XLP, Consumer Staples	-1.1%	-0.1%	-1.3%	1.6%	-1.3%
XLY, Consumer Discretionary	-0.9%	0.4%	-0.9%	1.5%	-1.8%

VTO Report on Market Sentiment Indicators

Sentiment Indicator	Current	Last Week	2 Weeks Ago	Complacent	Cautious
VIX **	12.9	13.0	12.0	< 20	> 50
VXN ***	16.9	17.5	17.3	< 30	> 70
Put/Call Ratio	0.583	0.698	0.592	< 0.6	> 0.7
%Bulls - %Bears	26.3%	26.8%	28.4%	> 29%	< 20%
At 20 day SMA = Short-term neutral. * Below 20 day SMA = Short-term buy signal.

Figure 1 compares index tracking stocks for the major averages with key ETF’s and Sector SPDR’s.

FIGURE 1

3.0 Procedure

The following watch lists contain stock candidates for consideration. They are not necessarily trades. Categories include checklists for insider buying and cash rich companies, as well as, filters that employ stock picking methods used by master traders.

Current stock rankings are based on the degree to which stocks are overbought or over sold based on the 28-period Williams %R for the past two trading days. Two columns are labeled “%R1” and “%R2” with “%R2” indicating the Williams %R for the most recent trading day. Of course, values more negative than -80 are oversold and those less negative than -20 are overbought.

One should keep in mind that oversold stocks are not necessarily ready to move upward. They could very well be in a condition of continuous decline. The lists are meant to serve as a starting point for further due diligence.

A column labeled “Monthly % Gain” was added to show the inverse relationship between price action over the past month and the Williams %R. The change from a 10-period Williams %R with a weekly percent change to a 28-period Williams %R with a monthly percent change was done to reflect a longer term view.

The “Reference” is the date that a stock passed the indicated filter and was first added to or returned to the list. The “% Change” is how the price has changed since the reference date. Stocks that are down 10% or more after being listed are removed for a period of about two months. The “% from Max” is the percentage the price has declined from the maximum price reached since the reference date. Stocks that are down 8% from their highs after being listed are flagged in yellow. Stocks that are down 15% from their highs after being listed are removed for two months. More information on filters is available on the web site.

A performance summary of filtering techniques for checklists and master trader selection methods is given in Table 3A.

Table 3A

Stock Filter Summary

Filter	Avg. % Change Since Listed	Avg. % Change Friday	1 Month	1 Week Ago	2 weeks Ago	3 Weeks Ago	4 Weeks Ago
Net Insider Buying	9.9%	-1.3%	3.2%	-1.9%	0.7%	0.6%	3.5%
Cash Rich Companies	11.7%	0.6%	8.0%	2.9%	-0.4%	9.1%	-3.3%
Price to Free Cash Flow	2.4%	-1.3%	0.3%	-1.5%	-2.9%	6.6%	-1.6%
Growth Momentum Stocks	14.2%	0.2%	4.9%	0.4%	-0.1%	5.4%	-0.6%
Lynch Stocks	22.9%	-0.1%	-0.3%	0.0%	-0.5%	2.4%	-2.2%
Buffett Stocks	17.2%	0.2%	2.7%	-1.3%	-0.4%	5.7%	-1.1%
Graham Stocks	10.5%	0.0%	-1.6%	-0.1%	-2.7%	0.9%	0.4%
Templeton Stocks	2.5%	0.1%	-0.3%	-0.4%	0.5%	1.7%	-2.0%
Zweig Stocks	15.7%	0.3%	5.0%	0.2%	0.7%	4.7%	-0.3%
Average Long Stocks	11.9%	-0.2%	2.4%	-0.2%	-0.6%	4.1%	-0.8%

Key

Passed Recent Filter

Price declined by half of stop loss setting

Oversold based on Williams %R (%R2 is most recent)

Overbought based on Williams %R (%R2 is most recent)

Companies that have experienced net insider buying within the past 6 months of 5% or more of issued stock are listed in Table 3B. These stocks should also appear in one of the master trader screens or meet additional screening criteria before being given serious consideration. This list is a mixture of stocks that are optionable and those that are not.

Table 3B

Net Insider Buying Check List

Stock	Reference	% Chg	Company	Sector	Industry	% from Max	Monthly % Gain	%R1	%R2
MWY	02/10/06	0.0%	Midway Games Inc.	Technology	Software & Programming	0.0%	-30.6%	-94	-97
SNSS	12/16/05	-0.6%	Sunesis Pharmaceuticals, Inc.	Health Care	Major Drugs	-10.5%	-5.2%	-73	-78
MMLP	11/25/05	0.0%	Martin Midstream Partners L.P.	Transportation	Water Transportation	-8.8%	-1.3%	-41	-71
NTOP	01/20/06	-0.5%	Net2Phone, Inc.	Services	Communications Services	-1.5%	-0.5%	-50	-67
AMIC	01/13/06	-3.0%	American Independence Corp.	Financial	Insurance (Miscellaneous)	-3.9%	-3.0%	-28	-63
XGEN	11/25/05	0.0%	Xenogen Corporation	Technology	Scientific & Technical Instruments	-9.7%	-0.3%	-64	-59
CWEI	12/09/05	0.0%	Clayton Williams Energy, Inc.	Energy	Oil & Gas Operations	-14.6%	-1.4%	-51	-58
NXTM	01/06/06	-3.1%	NxStage Medical, Inc.	Health Care	Biotechnology & Drugs	-7.2%	0.8%	-42	-51
TRMA	01/06/06	10.2%	Trico Marine Services Inc	Energy	Oil Well Services & Equipment	-11.8%	-6.2%	-47	-49
VSTA	10/21/05	6.7%	VistaCare, Inc.	Health Care	Healthcare Facilities	-5.4%	1.6%	-9	-42
MBRX	10/14/05	50.8%	Metabasis Therapeutics, Inc.	Health Care	Biotechnology & Drugs	-2.7%	-2.3%	-45	-28
BDOG	12/16/05	20.5%	Big Dog Holdings, Inc.	Services	Retail (Apparel)	-5.1%	6.9%	-14	-25
IDMI	01/20/06	-4.7%	IDM Pharma Inc.	Health Care	Biotechnology & Drugs	-4.7%	17.1%	-18	-18
MEAD	12/23/05	29.0%	Meade Instruments Corp.	Technology	Scientific & Technical Instruments	0.0%	17.8%	-20	-10
SOMX	01/13/06	48.3%	Somaxon Pharmaceuticals, Inc.	Health Care	Biotechnology & Drugs	-4.4%	48.3%	-1	-9
LXU	12/23/05	5.0%	LSB Industries, Inc.	Basic Materials	Chemical Manufacturing	-0.9%	9.3%	-5	-7

Companies with net cash positions that comprise at least 40% of their share price are listed in Table 3C. These stocks should also appear in one of the master trader screens or meet additional screening criteria before being given serious consideration. Again, this list is a mixture of stocks that are optionable and those that are not.

Table 3C

Capital Rich Companies Check List

Stock	Reference	% Chg	Company	Sector	Industry	% from Max	Monthly % Gain	%R1	%R2
HRAY	01/27/06	0.4%	Hurray! Holding Co., Ltd. (ADR)	Services	Communications Services	-5.5%	-13.7%	-81	-74
CLCT	01/27/06	6.4%	Collectors Universe, Inc.	Services	Business Services	-5.7%	-6.0%	-43	-67
EXAR	02/03/06	-3.1%	Exar Corporation	Technology	Semiconductors	-3.1%	-1.7%	-49	-57
WSC	07/01/05	7.7%	Wesco Financial Corporation	Conglomerates	Conglomerates	-0.7%	1.6%	-40	-33
HIH	01/20/06	11.7%	Highland Hospitality Corporation	Services	Hotels & Motels	-2.2%	8.0%	-22	-19

Table 3D was added to contain companies having a low price to free cash flow (P-FCF) less than 5. Companies having P-FCF less than 10 are typically capable of financing the purchase of all their outstanding shares of stock.

Table 3D

Price to Free Cash Flow Companies Check List

Stock	Reference	% Chg	Company	Sector	Industry	% from Max	Monthly % Gain	%R1	%R2
F	11/11/05	3.8%	FORD MOTOR	Consumer Cyclical	Auto & Truck Manufacturers	-7.4%	-3.3%	-45	-53
PBR	02/10/06	0.0%	Petroleo Brasileiro S.A. (ADR)	Energy	Oil & Gas - Integrated	0.0%	0.5%	-35	-49
BBI	01/20/06	3.4%	Blockbuster Inc.	Services	Recreational Activities	-5.2%	3.6%	-34	-38

For the Peter Lynch screen in Table 3E, the number of selections is reduced by selecting only optionable stocks having P/E’s less than 30.

Table 3E

Peter Lynch Value Watch List

Stock	Reference	% Chg	Company	Sector	Industry	% from Max	Monthly % Gain	%R1	%R2
CHL	03/18/05	38.1%	China Mobile (Hong Kong) Limited (ADR)	Services	Communications Services	-9.0%	-7.5%	-92	-95
AZN	02/03/06	-1.2%	AstraZeneca PLC (ADR)	Health Care	Major Drugs	-1.2%	-7.0%	-90	-94
TM	12/13/04	37.7%	Toyota Motor Corporation (ADR)	Consumer Cyclical	Auto & Truck Manufacturers	-4.5%	-0.9%	-69	-60
KOF	04/29/05	30.0%	Coca-Cola FEMSA, S.A. (ADR)	Consumer Non-Cyclical	Beverages (Non-Alcoholic)	-1.2%	1.8%	-26	-25
BTI	08/12/05	13.9%	British American Tobacco (ADR)	Consumer Non-Cyclical	Tobacco	-1.1%	2.5%	-9	-23
SKM	02/07/05	19.0%	SK Telecom Co., Ltd. (ADR)	Services	Communications Services	-0.2%	9.4%	-3	-3

For the screen in Table 3F, the number of selections is reduced by selecting only optionable stocks having P/E’s less than 30.

Table 3F

Growth Momentum Watch List

Stock	Reference	% Chg	Company	Sector	Industry	% from Max	Monthly % Gain	%R1	%R2
VIP	12/09/05	-0.6%	Vimpel-Communications (ADR)	Services	Communications Services	-9.5%	-9.5%	-90	-91
BEN	11/04/05	3.8%	Franklin Resources, Inc.	Financial	Investment Services	-6.2%	-3.5%	-89	-84
APC	02/10/06	0.0%	Anadarko Petroleum Corporation	Energy	Oil & Gas Operations	0.0%	-3.7%	-64	-75
MOT	12/09/05	-7.7%	Motorola, Inc.	Technology	Communications Equipment	-11.9%	-10.1%	-72	-72
ADTN	11/25/05	0.0%	ADTRAN, Inc.	Technology	Communications Equipment	-12.3%	-9.9%	-64	-70
BHP	09/09/05	13.6%	BHP Billiton Limited (ADR)	Basic Materials	Metal Mining	-9.5%	0.1%	-44	-70
AHC	02/03/06	0.0%	Amerada Hess Corporation	Energy	Oil & Gas - Integrated	-7.1%	-2.8%	-55	-65
UNH	04/15/05	25.7%	UnitedHealth Group Inc.	Financial	Insurance (Accident & Health)	-8.1%	-3.8%	-63	-56
CHE	05/06/05	33.3%	Chemed Corporation	Services	Business Services	-6.1%	0.3%	-50	-56
LM	08/12/05	20.4%	Legg Mason, Inc.	Financial	Investment Services	-3.1%	2.5%	-34	-37
PCU	12/02/05	23.8%	Southern Copper Corporation (USA)	Basic Materials	Metal Mining	-8.9%	17.0%	-20	-34
EXP	02/03/06	0.2%	Eagle Materials, Inc.	Capital Goods	Construction - Raw Materials	-1.4%	28.6%	-24	-28
SYT	04/08/05	31.0%	Syngenta AG (ADR)	Basic Materials	Chemical Manufacturing	0.0%	9.2%	-30	-26
ET	10/21/05	30.9%	E*TRADE FINANCIAL Corporation	Financial	Investment Services	-1.6%	4.7%	-24	-16
WCC	02/10/06	0.0%	WESCO International, Inc.	Technology	Electronic Instruments & Controls	0.0%	20.7%	-13	-15
OSK	03/12/05	38.1%	Oshkosh Truck Corporation	Consumer Cyclical	Auto & Truck Manufacturers	-1.1%	13.9%	-14	-9
GOL	12/16/05	18.2%	GOL Linhas Aereas Inteligentes SA (ADR)	Transportation	Airline	0.0%	20.6%	-27	-9
ZIGO	12/09/05	16.6%	Zygo Corporation	Technology	Semiconductors	0.0%	13.4%	-11	-8
WSO	11/25/05	15.9%	Watsco, Incorporated	Capital Goods	Misc. Capital Goods	-0.8%	7.6%	-13	-7
HCC	10/21/05	20.9%	HCC Insurance Holdings, Inc.	Financial	Insurance (Property & Casualty)	0.0%	3.5%	-45	-4

The filter for Warren Buffet style stock picking in Table 3G is for the intermediate to long term. Two requirements were added. One was to include only optionable stocks in order to find LEAPS opportunities. The other requirement was to include only those stocks having a PE of 17 or less.

Table 3G

Warren Buffett Value Watch List

Stock	Reference	% Chg	Company	Sector	Industry	% from Max	Monthly % Gain	%R1	%R2
MDC	01/20/06	-7.0%	M.D.C. Holdings, Inc.	Capital Goods	Construction Services	-7.0%	-7.2%	-79	-95
SPF	02/03/06	-6.0%	Standard Pacific Corp.	Capital Goods	Construction Services	-6.0%	-15.4%	-89	-95
APA	02/03/06	-5.6%	Apache Corporation	Energy	Oil & Gas Operations	-6.5%	-2.9%	-77	-81
MTH	01/27/06	-4.3%	Meritage Homes Corporation	Capital Goods	Construction Services	-4.3%	-9.1%	-70	-77
FNF	10/21/05	1.5%	Fidelity National Financial	Financial	Insurance (Property & Casualty)	-6.1%	-1.5%	-75	-75
SCHN	02/10/06	0.0%	Schnitzer Steel Industries, Inc.	Basic Materials	Iron & Steel	0.0%	0.6%	-71	-73
HDI	10/14/05	5.2%	Harley-Davidson, Inc.	Consumer Cyclical	Recreational Products	-7.2%	-2.1%	-69	-66
DSPG	02/07/05	7.4%	DSP Group, Inc.	Technology	Communications Equipment	-10.7%	-0.4%	-58	-61
ABFS	04/29/05	37.3%	Arkansas Best Corporation	Transportation	Trucking	-4.9%	-4.5%	-84	-60
LNCR	12/27/04	-1.2%	Lincare Holdings Inc.	Health Care	Healthcare Facilities	-9.5%	-3.1%	-71	-57
NKE	09/23/05	3.9%	NIKE, Inc.	Consumer Cyclical	Footwear	-7.6%	-2.0%	-56	-49
RI	09/02/05	28.5%	Ruby Tuesday, Inc.	Services	Restaurants	-4.3%	5.0%	-46	-42
NUE	04/15/05	64.8%	Nucor Corporation	Basic Materials	Iron & Steel	-8.4%	15.8%	-42	-38
STLD	12/16/05	26.5%	Steel Dynamics, Inc.	Basic Materials	Iron & Steel	-9.1%	19.0%	-42	-37
PCU	02/10/06	0.0%	Southern Copper Corporation (USA)	Basic Materials	Metal Mining	0.0%	17.0%	-20	-34
RS	04/15/05	102.4%	Reliance Steel & Aluminum	Basic Materials	Misc. Fabricated Products	-6.4%	19.9%	-39	-32
ASH	10/28/05	20.6%	Ashland Inc.	Capital Goods	Construction Services	-2.5%	-0.2%	-38	-26
CCRT	12/30/05	5.6%	CompuCredit Corporation	Financial	Consumer Financial Services	-1.5%	-0.5%	-31	-23
BTI	12/30/05	1.9%	British American Tobacco (ADR)	Consumer Non-Cyclical	Tobacco	-0.9%	2.5%	-9	-23
THO	04/15/05	60.5%	Thor Industries, Inc.	Capital Goods	Mobile Homes & RVs	-1.1%	2.1%	-20	-21
RCII	10/21/05	42.5%	Rent-A-Center, Inc	Services	Rental & Leasing	-3.3%	13.5%	-21	-21
AH	02/03/06	-2.1%	Armor Holdings, Inc.	Capital Goods	Aerospace and Defense	-2.1%	10.1%	-20	-16
PSUN	12/09/05	-0.2%	Pacific Sunwear of CA	Services	Retail (Apparel)	-1.7%	5.4%	-15	-15
ACS	04/29/05	31.1%	Affiliated Computer Services, Inc.	Technology	Computer Services	-1.2%	3.6%	-13	-12

Stocks from Benjamin Graham’s style of utility investing are listed in Table 3H. A requirement was added to include only those stocks having a PE of 17 or less.

Table 3H

Benjamin Graham Utility Watch List

Stock	Reference	% Chg	Company	Sector	Industry	% from Max	Monthly % Gain	%R1	%R2
OKE	11/11/05	-1.2%	ONEOK, Inc.	Utilities	Natural Gas Utilities	-9.4%	-6.7%	-91	-95
WPS	02/07/05	2.1%	WPS Resources Corp	Utilities	Electric Utilities	-11.6%	-7.1%	-91	-91
PGN	01/10/05	-2.6%	Progress Energy, Inc.	Utilities	Electric Utilities	-6.2%	0.0%	-76	-81
PNW	01/10/05	-3.1%	Pinnacle West Capital	Utilities	Electric Utilities	-10.0%	0.1%	-76	-75
WGL	12/23/05	-0.9%	WGL Holdings, Inc.	Utilities	Natural Gas Utilities	-3.2%	-1.2%	-63	-73
ATO	04/01/05	-2.4%	Atmos Energy Corporation	Utilities	Natural Gas Utilities	-11.7%	-1.2%	-57	-71
CPK	05/06/05	18.6%	Chesapeake Utilities	Utilities	Natural Gas Utilities	-12.4%	-2.7%	-57	-69
ATG	10/21/05	7.2%	AGL Resources Inc.	Utilities	Natural Gas Utilities	-2.4%	-0.6%	-39	-61
UGI	12/30/05	5.7%	UGI Corporation	Utilities	Natural Gas Utilities	-2.9%	-2.2%	-45	-48
SRE	01/10/05	29.7%	Sempra Energy	Utilities	Natural Gas Utilities	-2.8%	-0.7%	-47	-46
KEP	01/10/05	71.5%	Korea Electric Power Corporation (ADR)	Utilities	Electric Utilities	-6.1%	0.7%	-40	-41
UU	06/10/05	1.0%	United Utilities PLC (ADR)	Utilities	Electric Utilities	-1.3%	3.0%	-36	-20

Optionable stocks from John Templeton’s style of investing are listed in Table 3I.

Table 3I

John Templeton Watch List

Stock	Reference	% Chg	Company	Sector	Industry	% from Max	Monthly % Gain	%R1	%R2
WSM	09/02/05	1.2%	Williams-Sonoma, Inc.	Services	Retail (Specialty Non-Apparel)	-14.8%	-8.3%	-88	-96
DHI	02/03/06	-7.2%	D.R. Horton Inc.	Capital Goods	Construction Services	-7.2%	-18.2%	-88	-96
MDC	12/30/05	-2.4%	M.D.C. Holdings, Inc.	Capital Goods	Construction Services	-9.5%	-7.2%	-79	-95
MIK	12/30/05	-8.8%	Michaels Stores, Inc.	Services	Retail (Specialty Non-Apparel)	-8.8%	-4.1%	-87	-89
CHD	11/18/05	-0.1%	Church & Dwight Co., Inc.	Consumer Non-Cyclical	Personal & Household Products	-9.4%	0.5%	-87	-86
LOW	11/18/05	-5.0%	Lowe's Companies, Inc.	Services	Retail (Home Improvement)	-9.8%	-5.5%	-79	-77
EWBC	12/30/05	-2.2%	East West Bancorp, Inc.	Financial	Regional Banks	-5.1%	-4.2%	-86	-76
AMSG	10/14/05	-7.2%	AmSurg Corp.	Health Care	Healthcare Facilities	-12.3%	-4.9%	-78	-74
CAKE	10/21/05	6.1%	The Cheesecake Factory Incorporated	Services	Restaurants	-5.4%	-0.1%	-63	-69
GISX	12/30/05	1.6%	Global Imaging Systems, Inc.	Technology	Office Equipment	-4.3%	-3.4%	-67	-60
UNH	12/30/05	-5.7%	UnitedHealth Group Inc.	Financial	Insurance (Accident & Health)	-6.8%	-3.8%	-63	-56
CPS	05/27/05	10.6%	ChoicePoint Inc.	Services	Business Services	-4.3%	-2.3%	-47	-43
HHS	10/28/05	13.5%	Harte-Hanks, Inc.	Services	Printing & Publishing	-3.6%	9.4%	-39	-39
PCU	02/10/06	0.0%	Southern Copper Corporation (USA)	Basic Materials	Metal Mining	0.0%	17.0%	-20	-34
DGX	08/19/05	3.6%	Quest Diagnostics Incorporated	Health Care	Healthcare Facilities	-1.4%	2.0%	-12	-14
ORLY	01/20/06	6.2%	O'Reilly Automotive, Inc.	Services	Retail (Specialty Non-Apparel)	0.0%	4.3%	-16	-4
SFG	05/27/05	38.8%	StanCorp Financial Group, Inc.	Financial	Insurance (Life)	-1.7%	4.3%	-17	-3
EDMC	12/16/05	4.8%	Education Management Corp	Services	Schools	0.0%	8.1%	-7	-2
JBHT	02/03/06	5.8%	J.B. Hunt Transport Services, Inc.	Transportation	Trucking	0.0%	7.0%	-22	-1
SNV	05/27/05	-4.6%	Synovus Financial Corp.	Financial	Regional Banks	-6.8%	4.1%	-47	-1

Optionable stocks from Martin Zweig’s style of investing are listed in Table 3J.

Table 3J

Martin Zweig Watch List

Stock	Reference	% Chg	Company	Sector	Industry	% from Max	Monthly % Gain	%R1	%R2
BEN	10/28/05	9.3%	Franklin Resources, Inc.	Financial	Investment Services	-6.2%	-3.5%	-89	-84
APA	12/23/05	-1.5%	Apache Corporation	Energy	Oil & Gas Operations	-8.3%	-2.9%	-77	-81
BR	12/02/05	17.9%	Burlington Resources Inc.	Energy	Oil & Gas Operations	-4.4%	-0.8%	-71	-78
MOT	01/20/06	-3.9%	Motorola, Inc.	Technology	Communications Equipment	-5.9%	-10.1%	-72	-72
CRDN	08/19/05	70.0%	Ceradyne, Inc.	Capital Goods	Aerospace and Defense	-11.6%	4.0%	-38	-50
MDU	01/27/06	0.9%	MDU Resources Group, Inc.	Utilities	Natural Gas Utilities	-3.2%	1.9%	-42	-44
CAE	06/10/05	19.5%	Cascade Corporation	Capital