Replies to post #6765 on Sector Investing

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TradingMarkets.com
Boom And Bust: What We Can Learn From The SOX
Tuesday July 11, 12:13 pm ET
By TradingMarkets Research

Semiconductor stocks (SOX) have been weak of late, but it's important to take a step back and recognize that these stocks have been weak for years now. Let's go back and retrace the incredible bull and bear run in these issues and see if we might learn something about the dynamics of market bubbles and their bursting. Indeed, as we shall see, these phenomena provide some of the market's best trading opportunities.
We start in October, 1996. The SOX is trading in the 180s. Six months later, the SOX had gained 50%, reaching the 290s in February of 1997. By August of that year, the SOX was trading in the 390's--a double within a year's time--before thudding back to earth in the 240s by the end of the year.

By April, 1998, the SOX is back to the 320s, rising about a third in several months' time, before again crashing to the 180s in October of that year.

What we see in the SOX are periods of significant boom and bust that left the average unchanged over a two-year period. Incredibly, this was before the real boom and bust had occurred! In other words, the prelude to the bubble and the burst of the bubble was significant volatility.

Now the bubble begins in earnest. From October, 1998 to January, 1999 the SOX index doubles in value. A consolidation through May of that year is followed by another 50% spike higher by September, 1999, leaving the SOX in the 570s. Within a year's time, the SOX has tripled in value.

A quick bust in October, 1999 takes about 100 points off the index, but this ground is retraced--and more--by the end of the month. Then, from October, 1999 to March, 2000, the SOX moves steadily higher to an amazing 1362: well over doubling in less than half a year's time. Indeed, in about a year's time, the SOX had almost quadrupled in value.

Now came the bust. Just one month later, in April, 2000, the SOX was down to the 870s, an amazing drop of over a third. The average made it back over 1200 by July of that year--incredible volatility--only to fall back to the 880s later that month and rise back to the 1100s in September. Then, by November, the SOX dropped all the way to 516: more than a 50% drop in just two months. We bounced to the 700s by January, 2001--still significant volatility--but that would prove the index high that year. In the aftermath of 9/11, the SOX declined all the way back to the 340s.

And the eventual market bottom? After a vigorous bounce to the 600s in March, 2002 (still phenomenal volatility), we dropped unceremoniously to the very low 200s in October of that year. With that, we had retraced nearly all gains back to that 1996 beginning.

The SOX bounced nicely after that, hitting 560 in January, 2004. Since then, levels above 500 have been stymied. Most recently, we peaked in the 530s in April, 2006 and are now trading in the 420s.

What the SOX tell us is that, even with the bull market of 2002-present, we are down 2/3 from the market peak in 2000 and down even from that bounce off the September, 2001 lows. While much of the rest of the market has been in bull mode--especially the smaller caps--the SOX (and much of its NASDAQ cohorts) has been unwinding its market bubble.

If the bubble experiences of gold in 1980 and Japan's stock market in the late 1980s are any indication, it could take years to unwind the incredible run in the SOX. Indeed, as hard as it may be to fathom, it may well be that we have not yet seen the ultimate post-bubble lows in many of these stocks.

And the bubble markets of today? We will see them first by their boom-bust volatility; then by their ramping volume and new highs. As we can see from the SOX, however, these remain volatile--and potentially profitable--trading vehicles well after their bull peaks. In their boom-bust behavior, gold (and other metals) and emerging country stocks are certainly candidates.

Brett N. Steenbarger, Ph.D. is Associate Clinical Professor of Psychiatry and Behavioral Sciences at SUNY Upstate Medical University in Syracuse, NY and author of "The Psychology of Trading" (Wiley, 2003). As Director of Trader Development for Kingstree Trading, LLC in Chicago, he has mentored numerous professional traders and coordinated a training program for traders. An active trader of the stock indexes, Brett utilizes statistically-based pattern recognition for intraday trading.

Many thanks to Harry Lew for posting this first.

http://www.siliconinvestor.com/readmsg.aspx?msgid=22615485

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From Briefing.com: 4:20 pm : Per usual, Thursday was no exception to the on-again, off-again trading pattern that has driven the stock market for some time now. After stocks posted their second biggest gain of the year yesterday, they reversed course in a noticeable manner following a mixed bag of earnings results from the technology sector that renewed concerns about the pace of a slowdown in economic growth.

The Nasdaq more than erased all of Thursday's 1.8% surge, on above average volume no less. Acting as the biggest drag was Intel Corp (INTC 17.10 -1.38), which plunged 7.5% after reporting a 57% decline in profits and lowering its Q3 sales outlook. Adding insult to injury was a 2.4% drubbing on the SnP 500's fifth most influential component -- Microsoft (MSFT 22.85 -0.55) -- as investors were hesitant to hold onto shares going into its earnings report after Thursday's close. Qualcomm (QCOM 35.85 -0.88) providing a disappointing Q4 outlook also weighed on sentiment and questioned the growth prospects of a sector that continues to underperform.

In stark contrast, there were two tech bellwethers out with solid earnings that enjoyed noticeable gains. Apple Computer (AAPL 60.50 +6.40) soared 12% after handily beating forecasts on stronger than expected Mac shipments while Motorola (MOT 20.60 +1.35) surged 7% after Q2 profits rose 48% on strong RAZR sales, which led to management guiding Q3 revenues sharply higher.

Be that as it may, with Fed Chairman Bernanke's final day of testimony as the center of attention [again] and the release of the FOMC Minutes from the June meeting only offering a slight hint of a pause on August 8th, a renewed wave of afternoon selling interest kept buyers on the sidelines for good and closed the major averages at session lows.

Even though Bernanke basically stuck to yesterday's script, managing to hit all the usual points relating to the moderating economy and risks to inflation, policy makers noting in the Minutes that "significant uncertainty accompanied the appropriate setting of policy going forward," also left investors uncertain as to whether the Fed will finally take a breather after two years of tightening. In fact, while members unanimously voted to raise rates to 5.25% at the last meeting, members had difficulty judging whether the level of rates was now "modestly restrictive or somewhat accommodative," with one member even indicating that the decision to raise rates at the June meeting was "a close call." The Fed's uncertainty aside, it is our belief, based on Bernanke's more recent testimony, that the end of the tightening effort is indeed near. BTK -1.4% DJ30 -83.32 DJTA -4.4% DJUA +0.3% DOT -2.0% NASDAQ -41.29 NQ100 -1.6% R2K -2.7% SOX -2.5% SP400 -2.3% SP500 -10.68 XOI -1.4% NASDAQ Dec/Adv/Vol 2253/745/2.06 bln NYSE Dec/Adv/Vol 2187/1079/1.43 bln

4:35PM Skyworks reports in-line, guides SepQ revs below consensus (SWKS) 4.55 -0.09 : Reports Q3 (Jun) earnings of $0.05 per share, excluding non-recurring items, in line with the Reuters Estimates consensus of $0.05; revenues rose 2.9% year/year to $197.1 mln vs the $195.3 mln consensus. Co issues downside guidance for Q4, sees Q4 revs of $197-200 mln vs. $206.53 mln consensus. Co says "while handset demand remains robust, we experienced isolated forecast changes that reduced our demand signal for Q4."

4:29PM Freescale Semi reports above consensus; guidea Q3 revs in-line (FSL.B) 28.99 +1.46 : Reports Q2 (Jun) earnings of $0.61 per share, $0.12 better than the Reuters Estimates consensus of $0.49; revenues rose 4.8% year/year to $1.6 bln vs the $1.56 bln consensus. Co issues in-line guidance for Q3, sees Q3 revs of $1525-1625 mln vs. $1.56 bln consensus.

4:24PM Microsoft beats by a penny; guides in-line; raises FY07 guidance (MSFT) 22.85 -0.55 : Reports Q4 (Jun) earnings of $0.31 per share, excluding non-recurring items, $0.01 better than the Reuters Estimates consensus of $0.30; revenues rose 16.1% year/year to $11.8 mln vs the $11600.6 mln consensus. Co issues in-line guidance for Q1, sees EPS of $0.30-0.32 vs. $0.31 consensus; sees Q1 revs of $10.6-10.8 bln vs. $10.95 bln consensus. Co raises guidance for FY07, to EPS of $1.43-1.47 from $1.36-1.41 vs. $1.39 consensus; raises FY07 rev guidance to $49.7-50.7 bln from $49-50.5 bln vs. $49.76 bln consensus. Co also announced a new share repurchase programs, comprised of a $20 bln tender offer scheduled to be completed on August 17, 2006, as well as authorization for up to an additional $20 bln ongoing share repurchase program with an expiration of June 30, 2011.

4:15PM PMC-Sierra reports Q2 results (PMCS) 6.98 -0.18 : Reports Q2 (Jun) earnings of $0.09 per share, excluding non-recurring items, and $9.4 mln of stock-based compensation expense, may not be comparable to the Reuters Estimates consensus of $0.07; revenues rose 66.2% year/year to $118.8 mln vs the $114 mln consensus. Briefing.com note: Consensus includes stock-based compensation expense.

4:15PM Cohu beats on the top line (COHU) 15.66 -1.41 : Reports Q2 (Jun) earnings of $0.23 per share, may not be comparable to the Reuters Estimates consensus of $0.15; revenues rose 24.5% year/year to $61.9 mln vs the $58.3 mln consensus.

7:42AM KVH Industries beats by a nickel; raises FY06 guidance (KVHI) 10.76 : Reports Q2 (Jun) earnings of $0.11 per share, $0.05 better than the Reuters Estimates consensus of $0.06; revenues rose 17.0% year/year to $22 mln vs the $20.7 mln consensus. Co issues in-line guidance for Q3, sees EPS of $0.05 vs. $0.05 consensus; sees Q3 revs up 12-15% (roughly $18.7-19.2 mln) vs. $18.90 mln consensus. Co issues upside guidance for FY06, sees EPS of $0.30-0.33 (vs $0.26 consensus), above prior guidance of $0.24; sees FY06 revs up 12-15% (roughly $79.8-82.0 mln) vs. $79.74 mln consensus.

7:39AM Benchmark Elec beats by $0.07; issues guidance (BHE) 22.97 : Reports Q2 (Jun) earnings of $0.45 per share, $0.07 better than the Reuters Estimates consensus of $0.38; revenues rose 33.6% year/year to $749 mln vs the $658.9 mln consensus. Co issues guidance for Q3, sees EPS of $0.40-0.45, may not be comparable to the $0.37 consensus; sees Q3 revs of $710-750 vs. $644.04 mln consensus. Co issues guidance for FY06, sees EPS of $1.61-1.69, may not be comparable to the $1.52 consensus; sees FY06 revs of $2.76-2.85 bln vs. $2.62 bln consensus.

7:01AM Semtech expects restatement related to stock-based compensation (SMTC) 13.19 : Co announces as previously reported, the co has been engaged in an internal review of its stock option practices in light of an informal SEC inquiry. On June 9, 2006, the Audit Committee, with the assistance of independent counsel and forensic accountants, commenced an internal investigation of the co's stock option practices and associated accounting. Although the investigation is ongoing, the Committee has concluded that, pursuant to the requirements of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, the accounting measurement dates for certain stock options granted primarily during fiscal years 1998 through 2003 differ from the measurement dates previously used for such awards. As a result, new accounting measurement dates will apply to the affected option grants. Consequently, the co expects to record additional non-cash compensation expense and expects the amount of such additional expense to be material. The tax consequences that may result from these matters have not yet been determined. As a result of these adjustments, the co expects to restate its financial statements for fiscal years 2002 through 2006. The restatement will also affect financial statements for earlier fiscal years and adjustments for those earlier years will be reflected as part of the opening balances in the financial statements for the restatement period.

1:01 pm Labor Ready (LRW)

16.49 -3.87: The stock of Labor Ready, a suggested holding in our Active Portfolio, is a sorry sight to see today, as it is getting pummeled on investor concerns about a slowdown in growth at the company that emanated from its second quarter earnings report. Those concerns aren't entirely unfounded, but the sell-off seen today is overdone.

The crux of the growth matter relates to the trend in the company's same-branch sales performance since the beginning of the year. To wit, Labor Ready achieved 11.0% same-branch growth in the first quarter, followed that up with 8.0% growth in the second quarter, and is now forecasting 6.0% growth for the third quarter. The deceleration, by and large, is a result of a slowdown in the residential construction business that knocked second quarter same-branch revenue growth to the low end of the company's 8.0-9.0% guidance range due to canceled construction projects that hit home in mid-June.

Management remains upbeat about the company's prospects, noting that things have stabilized since mid-June and that it would liken the fall-off to "stepping off a small curb and onto some pretty solid ground." It was noted too that the company has a unique ability to shift residential construction workers quickly to other areas, namely commercial construction, which is viewed by management to be running at a very hot pace comparable to how residential was not that long ago. There are also encouraging signs with respect to worker demand in the light industrial, transportation, and warehousing areas.

Because of the market's uncertainty about the Fed's ability to engineer a soft economic landing, though, it is lacking faith at this time in management's forecast, which calls for third quarter earnings between $0.45-0.48 per diluted share (consensus $0.48) on revenue in the range of $380-385 million (consensus $384 mln) and full-year earnings of $1.33-1.38 per share (consensus $1.36) on revenue between $1.37-1.38 billion (consensus $1.40 bln).

Those concerns notwithstanding, we would be buyers on the weakness given our economic view that GDP growth should average 3.0% over the second half of the year, with the unemployment rate running in the range of 4.60-4.70%. Additionally, at 13.6x trailing twelve month earnings, LRW is trading at nearly a 50% discount to its 5-year historical average. With a projected long-term earnings growth rate of 19.5%, the corresponding price-to-earnings growth rate is a value-oriented 0.70. The likelihood that the company will be instituting a new buyback program in the wake of the sell-off, and Labor Ready's solid financial condition, are added factors that should generate some support for the stock at these oversold levels.

--Patrick J. O'Hare, Briefing.com

11:59 am Dow Jones & Co. Inc. (DJ)

34.45 +0.97: Dow Jones & Co. Inc. released good news for its investors Thursday when it reported second quarter earnings of $0.39 per share, excluding non-recurring items, $0.04 better than the Reuters Estimates consensus of $0.35. Revenues rose 5.9% year over year to $481.2 million versus consensus of $488.5.

The company, which provides global business and financial news, information, and insight through venues including newspapers, newswires, magazines, the Internet, indexes, television, and radio, said June advertising revenue climbed at The Wall Street Journal and internationally, but declined at Barron's as a result of less technology and general advertising.

The company said it expects third-quarter earnings to be in the low teens versus $0.16 Reuters consensus, and said it will review its editorial operations to find ways to cut costs and better serve different kinds of audiences. The review, which will be led by Dow Jones Newswires President Paul Ingrassia, will try to determine how the company's news operations can cut down on reporting duplicative news. No layoffs are planned.

Dow Jones' stock has been on a rather steady decline for the last few years, as it's struggled in the challenging environment which has plagued news providers because of slowing advertising growth, rising costs, and the migration of consumers to the Internet.

Dow Jones' focus on the markets, however, is a saving grace for the company, as the increase of electronic trade and the uncertain interest-rate outlook have added more users to the marketplace than ever before. Because of this, at about 25.3x, shares are trading at a considerable premium to other news companies, including Gannett Co. Inc. (GCI) at 10.7x and Reuters Group plc (RTRSY) at 13.4x. Investors will want to wait for Dow Jones' editorial review, however, to determine whether buying the stock is prudent at these levels.

(Disclosure: Christine Marie Nielsen owns stock in Dow Jones.)

--Christine Marie Nielsen, Briefing.com

11:43 am Illinois Tool Works (ITW)

44.85 +0.58: Illinois Tool Works said Thursday that its second quarter profit jumped 25%. The company also raised its full-year outlook due to reasonable North American market demand, improving international end market activity, and strong operating margin performance. The announcement sent shares of the Glenview, Illinois-based company, which we featured on our Large Cap page in March, up nearly 4% in early trading.

Given Illinois Tool Works' continued strong performance and solid track record of integrating new companies as the economy slows, we believe the outlook for the company remains promising.

Illinois Tool Works earned $465 million, or $0.81 per share, in the second quarter, compared with $373.8 million, or $0.64 per share, in the year ago period. Of the $0.17 per share increase, the company said $0.12 came from operations and $0.05 resulted from a reduction in the tax rate, contributions from investment income, and lower shares outstanding. Analysts were looking for a profit of $0.79 per share, according to Reuters Estimates.

Revenue in the quarter rose 8.9% to $3.58 billion, just short of the consensus estimate of $3.6 billion. Ongoing operations accounted for 4.5% of the growth, while acquisitions added 6.7% to the top line, the company said. Currency translation and other factors reduced revenues by 2.3%. Meanwhile, the company's operating margin improved 140 basis points to 18.4%.

Illinois Tool Works raised its full-year earnings outlook to $3.03 to $3.11 per share, citing relatively stable end markets in North America and modest improvement overseas. It had previously forecasted earnings in the range of $2.94 to $3.04 per share. Analysts were expecting $3.02 per share, according to Reuters Estimates. For the current quarter, the company is projecting earnings of $0.78 to $0.82 per share, versus the consensus estimate of $0.79 per share.

--Richard Jahnke, Briefing.com

11:14 am Ford Motor Co. (F)

6.26 -0.07: Demonstrating the market's skepticism and perfunctory attitude toward Ford, the needle barely moved in shares after the automaker reported a 17 cent miss in the second quarter. The automaker reported a net loss of 7 cents or $123 mln and a loss of three cents or $48 mln from continuing operations. Ford's automotive business lost money in North America, South America, and Europe. Only its Asian business remained in the green, posting a pre-tax profit of $4 mln, yet still down from $36 mln in the prior period.

On a pre-tax basis, worldwide Automotive sector losses totaled $808 mln, which is more than 3x larger than last year's period. Sales fell 3% to $37.7 bln despite higher unit sales of 1.72 bln. Overall revenues contracted by $2.5 billion from a year ago to $42 bln. Providing little relief, Ford Motor Credit Company suffered a major decline in profitability. Higher borrowing costs, lower average receivables and higher depreciation resulted in pretax profits of $646 mln vs. $1.297 bln last year.

So what did the quarter tell us? Nothing good. Ford's operating performance continues to leave much to be desired. Tack on heightened competitive pressures, rising interest rates, and mounting structural costs and it's no wonder the shares have been left for dead. Ford has already cut its third quarter production, indicting further deterioration in financials ahead.

--Kimberly DuBord, Briefing.com

11:03 am DR Horton (DHI)

20.57 -0.28: DR Horton on Thursday reported dramatically lower third quarter earnings, as the housing market continues to cool from the white-hot levels of previous years. For the latest quarter, the nation's largest homebuilder posted earnings of $292.8 million, or $0.93 per share, down from $371.7 million, or $1.17 per share, in the same period last year - still, the numbers were a penny better than the Reuters Estimates consensus. The results include a pretax charge of $0.11 per share to write off earnest money and pre-acquisition costs related to land option contracts. Revenue climbed 8.5% year/year to $3.59 billion.

In another downturn for the industry, DR Horton said net sales orders for the quarter fell 4.4% to 14,316 homes, or $3.8 billion, from 14,980 homes, or $4.1 billion, a year earlier. The company attributed the decline to more difficult selling conditions in the homebuilding industry, characterized by a greater number of new and existing homes available for sale, higher cancellation rates, and an increase in the use of sales incentives in many of its markets.

Amid a tighter housing market, DR Horton reaffirmed its outlook from a week ago for full-year earnings of $3.65 per share or greater on about 50,000 homes closed. Analysts on average are expecting $3.70 per share, according to Reuters Estimates.

Many homebuilders have lowered their financial projections for the year, citing rising interest rates, negative new order trends, higher cancellation rates, and larger inventories. Accordingly, with earnings subject to further downward revisions as the housing market continues to slow, we remain cautious on the industry, and on shares of DR Horton.

--Richard Jahnke, Briefing.com

10:47 am CBOT Holdings (BOT)

122.01 +6.50: The parent company of the Chicago Board of Trade, CBOT Holdings Inc., saw its shares gain over 5% on Thursday morning after the company said it saw second quarter earnings of $0.82 per share, $0.09 better than Reuters Estimates consensus of $0.73. Revenues rose 31.4% year over year to $158.5 million versus the $154.7 million consensus.

Gains came as the company continued to realize volume growth across each of its product categories, advance its strategic initiatives aimed at creating new opportunities for customers, and extend its reach globally.

Key for the company is that its rate per contract was up 2% quarter over quarter and in line with expectations. Rate per contract is likely to top the latest period's gains in the third quarter. Company executives said Thursday that through temporary fee waivers, the exchange is increasing trading opportunities and encouraging volume growth among traders located in countries that have not historically been active in CBOT markets.

Company executives said they continue to work with the New York Board of Trade, and remain optimistic about opportunities - including those involving the alternative fuels area. The CBOT is also adding electronic trading hours for its agricultural products beginning Aug. 1 and is seeing increased business out of Asia.

Briefing.com took a bearish stance on CBOT Holdings in April, noting that though the company has posted strong revenue growth and improved bottom-line performance in recent quarters, further revenue and volume growth will be needed to justify the upward price trajectory - especially since the CBOT lacks the profitable clearing facility which plays a part in making the Chicago Mercantile Exchange Inc. (CME) such a hot commodity. While the view on the stock is no longer negative, a neutral stance is warranted as valuation of the stock continues to exceed its fundamentals.

--Christine Marie Nielsen, Briefing.com



10:46 am E*Trade Financial (ET)

22.73 +0.32: Like competitor TD Ameritrade (AMTD), E*Trade Financial checked in with record results for its second quarter, aided by the contribution of recent acquisitions that have been successfully integrated, and raised its earnings guidance for the year.

Specifically, E*Trade's net income of $156 million, or $0.36 per share, which included a $0.01 per share impact from acquisition-related integration expenses, surged 53% from the year-ago period when it reported a profit of $0.27 per share. Net revenue increased 58% to $611 million and net interest income after a provision for loan losses soared 71% to $334 million. Non-interest income was up 45% to $277 million and operating margins expanded 700 basis points to 43%.

For the full-year, E*Trade now expects earnings of $1.42-1.52 per share. That range excludes $0.05 per share of acquisition-related integration expenses and is up from its previous range of $1.35-1.50.

The good news has given ET a lift in today's trading, although the gain is modest. That response isn't as guarded as it seems considering ET jumped 7.5% yesterday and is up 13% since its intra-day low a week ago. Frankly, we're a bit surprised the good news hasn't been viewed as a profit taking opportunity. To its credit, though, E*Trade is executing in commendable fashion and is giving investors reason to believe its earnings forecast is achievable and that its stock, at roughly 15.5x estimated earnings, remains a value-based investment option.

E*Trade has made impressive strides in its effort to diversify its business, but nonetheless, its stock is still driven to a large extent by prevailing market sentiment. While we agree that the market's reaction to Bernanke's remarks yesterday was justified, we suspect there will remain ample resistance to the idea that the Fed will be successful in engineering a soft landing. As the uncertainty over that issue persists, sentiment will likely swing from one extreme to another. Mindful of this, we wouldn't make an aggressive commitment to E*Trade at this juncture, but we would be using the recent weakness to build a minor position in the stock as it is reasonably priced relative to its growth prospects.

(Disclosure: Briefing.com has a business relationship with E*Trade Financial and TD Ameritrade)

--Patrick J. O'Hare, Briefing.com

10:19 am Qualcomm (QCOM)

36.79 +0.06: Qualcomm posted a 15% gain in third quarter earnings on Thursday, driven by strong shipments of microchips and higher royalties from companies that sell phones based on its CDMA wireless technology. However, the San Diego-based company issued a disappointing forecast for the fourth quarter, fueling investors' concerns about slowing growth.

Qualcomm said earnings for the third quarter rose to $643 million, or $0.37 per share, from $560 million, or $0.33 per share, in the year ago period. Excluding stock-based compensation, earnings were $0.42 per share, matching the Reuters Estimates consensus. Sales climbed 43.6% to $1.95 billion, from $1.36 billion last year, also in line with analysts' expectations.

For the fiscal fourth quarter, Qualcomm projected a profit of $0.39 to $0.41 per share on sales between $1.88 and $1.98 billion. The guidance falls short of analysts' forecast for earnings of $0.42 per share and sales of $1.99 billion, according to Reuters Estimates.

Based on the disappointing forecast, which exacerbates investors' concerns about slowing growth, shares of the company were moving lower in early trading. The stock is down approximately 17% since late June, when Nokia (NOK), the world's largest cell phone maker, said it would no longer make phones based on the company's CDMA wireless technology.

--Richard Jahnke, Briefing.com

10:04 am Nokia Oyj (NOK)

19.33: Contrary to numerous cautionary component datapoints, the mobile device market remained robust in the second quarter. Both Nokia's and Motorola's (MOT) results today underscore the industry's balanced growth globally from robust demand in the Emerging Markets in the low-mid range segment, to the high-end developed markets selling pricier phones with multifunctional capabilities. Nokia, the world's largest mobile phone maker, reported its fastest growth in three years as the company, under new leadership, expanded sales in India and China. Profits rose 43% to $1.44 bln, or 28 cents per share.

The Espoo, Finland-based company reported that sales rose 22% to 9.81 billion euros from 8.06 bln euros. Competition is fierce and Nokia once again lost market share, most likely to Motorola, which over the past few years has come on strong with iconic, must-have handsets that appeal to consumers worldwide. NOK's global share fell from 35% to 34%, where it expects to remain in the third quarter.

Excluding a one-time gain from the sale of Telsim Mobil, per share profits expressed in euros were 0.24 vs. consensus of 0.25. Nokia delivered 78.4 mln mobile devices - right on target with expectations. Impressively, however, WCDMA volumes increased by almost 50% from the first quarter, lifting Nokia's share in this fast-growing market to over 30%. Average selling prices for devices fell to 102 euros from 103 euros due to weaker US demand and stronger sales in emerging markets.

Looking ahead, Nokia expects mobile device volumes in Q3 to be up sequentially, although less than the second quarter increase. Operating margins were on track with expectations. Overall, it was an in-line quarter for Nokia, but we still prefer Motorola, which continues to gain in market share over all of the major handset vendors. Both stocks trade at a discount to the overall market with only a slight difference between the two. NOK trades at 14.8x forward earnings vs. MOT at 14.9x with the latter slightly cheaper on a price to sales basis at 1.1x.

--Kimberly DuBord, Briefing.com

09:44 am Allstate Corp. (ALL)

56.15: Shares in Allstate Corp. were poised to open higher Thursday after the insurance giant said it saw second-quarter earnings of $2.00 per share, $0.39 better than a Reuters Estimates consensus of $1.61. Revenues rose 1.0% year over year to $8.88 billion versus only a $6.95 billion consensus.

Adding to the up feeling was the fact that the company raised its upside guidance for the full year of 2006, seeing earnings per share of $6.70 to $7.00 versus $6.57 consensus, up from previous guidance of $6.00 to $6.40.

Certainly Allstate, which was founded in 1931 and became a publicly traded company in 1993, has long been viewed as a defensive holding in times of economic uncertainty. With a beta of about 0.88, the stock offers a lower risk than the market. However, the company has had to do a bit of damage control in recent days to stay on course.

Allstate sells 13 major lines of insurance, including auto, property life and commercial. In an effort to reduce exposure to catastrophic losses, Allstate announced that it would be dropping earthquake insurance for most of its 407,000 clients nationwide who had that coverage. Allstate also said it would drop coverage for about 12.5% of its commercial policies in Florida, where it was the second-largest home insurer as of 2004. The company plans to gradually discontinue most coverage in the state.
The company, which lost about $1.55 billion in the third quarter last year largely because of Hurricane Katrina, has also said it purchased $2 billion in "reinsurance" (or insurance for itself) to help cover future losses from named storms, earthquakes and fires after earthquakes. In 2005, almost 2,300 deaths were caused by the devastation in the Gulf Coast. Damage estimates ranged from $80 to $100 billion.

June 1st marked the start of the 2006 hurricane season in the Atlantic, Caribbean, and Gulf of Mexico, which extends to November 30th, and the question now is what type of blow the company may receive from this year's claims; however with the new measures put in place, it appears Allstate is confident it can weather future storms. Any price dips would be viewed as a buying opportunity as at about 18x trailing 12-month earnings the stock is at a bit of a premium to its competitors.

--Christine Marie Nielsen, Briefing.com

09:19 am eBay (EBAY)

25.93: Investors were bidding up shares of eBay Inc. overnight after the company said its second quarter earnings were on target thanks to growth across eBay, PayPal and Skype. Earnings per share came in at $0.24, excluding non-recurring items, in line with a Reuters Estimates consensus of $0.24. Revenues rose 29.9% year over year to $1.41 billion versus consensus of $1.41 billion.

The company also issued downside guidance for the third quarter, seeing non-GAAP earnings per share of $0.22 to $0.23 versus $0.24 consensus. EBay also said it sees third-quarter revenues of $1.355 billion to 1.430 billion versus $1.44 billion consensus. However, eBay raised its full-year earnings per share guidance midpoint, pegging earnings per share at $0.98 to $1.01 versus $1.01 consensus. That compared to prior guidance of $0.96 to $1.01. The company reaffirmed its 2006 revenues of $5.7 billion to $5.9 billion versus $5.91 billion consensus.

Investors who have been watching this stock for a while know that the company often gives guidance that leans toward the pessimistic side. While this habit tends to weigh on market enthusiasm, other announcements are tipping the scales toward the positive.

The company on Wednesday said its board of directors has authorized the repurchase of up to $2 billion of the company's stock within the next two years. Ebay executives said the repurchase plan underscores eBay's confidence in its ability to generate strong profitability and cash flows while investing in the future of the company.

EBay also said this week that it will raise fees on the online stores that had been diverting traffic from eBay's auctions. EBay's new listings totaled 596 million in the second quarter, 35% higher than the 440 million new listings reported in the second quarter of 2005.

Furthermore, eBay's decent showing in combination with expectations of a strong earnings release from Google Inc. (GOOG) this evening could power a bit of a rebound in the sector. And at 34x trailing 12-month earnings, eBay's discount to Amazon.com Inc. (AMZN) and Google make it the most attractive pick in the litter.

--Christine Marie Nielsen, Briefing.com

09:08 am Pfizer (PFE)

23.30: Pfizer, the world's largest drug maker, reported a 30% drop in second quarter profit, as loss of revenue from patent expirations and generic competition offset growth from in-line and new products. Specifically for the period, the company, which has agreed to sell its Consumer Health business to Johnson & Johnson (JNJ), earned $2.42 billion, or $0.33 per share, compared with $3.46 billion, or $0.47 per share, a year earlier. Excluding one-time items, such as merger related expenses and restructuring costs, earnings were $0.50 per share - two cents better than the Reuters Estimates consensus.

On the top line, revenue edged up 3% to $11.74 billion, but fell short of the consensus estimate of $12.71 billion. The increase was driven by strong sales of cholesterol-lowering medicine Lipitor and arthritis drug Celebrex. Lipitor achieved 9% revenue growth during the latest quarter, while Celebrex, Geodon, and six other major in-line products each delivered double-digit revenue growth. Two new products, Lyrica and Sutent, also demonstrated strong performance in the quarter, the company said.

"We said in the beginning of the year that 2006 would be the year when we begin to substantially offset the loss of revenue due to patent expirations with growth from in-line and new products," said chief executive Hank McKinnell. "We understood the scope of the challenges we were facing, and we realized that we had set ambitious revenue targets for the full year for some of our key products, in particular Lipitor and Celebrex. I'm pleased to report that we are making substantial progress in creating the next-generation Pfizer."

Given the robust performance of its best-selling drug Lipitor, Pfizer raised its adjusted full-year earnings forecast to $2.00 per share, up from its previous guidance of $1.93 per share. According to Reuters Estimates, analysts on average are predicting $2.01 per share.

Briefing.com currently has a Market Weight rating on the Health Care sector; however, we continue to favor growth industries such as managed care over pharmaceutical, which continues to face a host of patent expirations and increased generic competition. Pfizer, in particular, is losing roughly one third of its Human Health revenue between 2004 and 2008.

--Richard Jahnke, Briefing.com

08:43 am Apple Computer Inc.

59.75: For the high-end consumer product market, it has been a very good 24 hours with Motorola, Apple Computer, and Nokia all reporting strong second quarters. For its part, Apple, whose shares have been bruised and battered by the bears, repeated rewards this quarter on robust sales of the Mac. The Mac is back and it plans to take full advantage of Microsoft's Vista delay. The trifecta of results signals that consumer demand is stronger than many market participants expected, which in turn is lifting stock index futures this morning on optimism over sustained profit growth.

Taking the spotlight from the iPod, this quarter was all about the Mac. Shipments topped 1 million units for the seventh straight quarter, benefiting from the transition to faster, Intel-based chips. Shipments increased 12% year/year driven by a 61% spike in notebook units, following the widely successful launch of the Intel-based MacBook. As a result, net income swelled by 48% to $472 mln or 54 cents per share as sales rose 24% to $4.37 bln.

iPod shipments rose 32% year/year, but fell sequentially from 8.5 mln to 8.1 mln units. Nonetheless, shipments exceeded expectations. Continued cost declines and new product refreshes and launches underscore Apple's strong profit outlook. The market is waiting with bated breath for Apple's newest products for the back to school and holiday seasons, which are expected to be announced during the Aug 7th technology conference.

The street is still ahead of Apple in terms of Q4 guidance. The company targets sequential revenue growth of 3-5% and EPS of $0.46-$0.48 vs. $4.9 bln and $0.51 per share, respectively. The recent sell-off gives investors an attractive entry point, as we continue to think APPL remains a strong long-term investment given its marketing-moving innovation, brand integration, and market share dominance.

--Kimberly DuBord, Briefing.com

08:00 am Motorola Inc. (MOT)

19.25: We think the market is finally beginning to dial into the Motormomentum the Schaumberg-based mobile device maker continues to exhibit quarter after quarter. Shares are set to open up almost 10% above Wednesday's closing price, after the world's second largest handset company reported a strong second quarter result, besting analysts' expectations and raising the bar for the third quarter.

Over the last two years, Motorola has been gaining market share, generating strong revenue growth, and driving margin expansion. And the story just keeps getting better. We expect that Motorola, a suggested holding in our Active Portfolio, will continue to benefit from its product positioning at the high-end and in the high-growth emerging markets, driving overall profitability through ongoing cost reduction and operating efficiencies. The company targets $10.9-$11.1 bln in revenues for the third quarter, over 6% above consensus of $10.3 bln.

This quarter, MOT sold 52 million mobile device units, well above expectations on robust growth in Asia and Latin America, along with strong demand for its new "Q" device and RAZR phones. And while the mobile devices segment is its largest revenue and profit generator, growth was broad-based this quarter from infrastructure, to government, to connected home segments. Second quarter revenues were $10.9 bln, up 29% year/year, while per share profits topped expectations by a few pennies at $0.33.

--Kimberly DuBord, Briefing.com

07:50 am Intel (INTC)

18.49: Expectations were on the low side heading into Intel's second quarter earnings report and it is fair to say that the chip maker lived down to those expectations.

Revenue of $8.0 billion was at the low end of the company's guidance range and its net income of $885 million, or $0.15 per share on a GAAP basis, was down 57% from the year-ago period. Alas, it mattered little that its EPS figure was two cents above the downwardly-revised consensus estimate.

Aided by the earlier than expected qualification of its Conroe microprocessor, Intel's gross margin of 52.1% was a positive surprise. Any enthusiasm there was mitigated, though, by its forecast for gross margins in the third quarter to be 49%, plus or minus a couple of points, and its revenue to be $8.3-8.9 billion. The mid-point of the revenue guidance range is comfortably below the $9.04 billion analysts had been expecting.

On the conference call, management made note of the competitive pricing environment and some overall softness in the PC market that drove down average selling prices, but they continued to express optimism about the introduction of the company's Core 2 Duo processors across the server, desktop, and mobile PC lines that will provide it with a "compelling technology advantage at every price point." Analysts on the call seemed to acknowledge the market opportunity available to Intel, but many couldn't help but to express their reservations about Intel's significant inventory build (+$765 million to $4.33 billion) since April 1 in the face of what appears to be a slowing worldwide economy.

Management shot down the inventory concerns, noting they didn't want to be in a position again where the company didn't have enough inventory to meet demand, and thus, open the door for competitor AMD to take market share. In turn, the inventory build was rationalized because management expects there to be strong demand for its dual-core microprocessors (Woodcrest, Conroe and Merom), which increase computing capabilities using less power.

The demand ramp isn't likely to happen in a significant way, though, until the fourth quarter, so Intel will continue to work on clearing out older inventory as it gears up for what it expects to be a much improved performance in 2007 that is facilitated by its current effort to cut costs by $1 billion. On that note, CFO Andy Bryant, in response to a question, hinted on the call that more job cuts are likely to be announced before the end of the year. He also suggested that newer products will be a higher percentage of revenue in the fourth quarter, and as a result, that Intel should start delivering better margin performance as the company's unit costs improve quarter by quarter through next year.

In looking at Intel's stock, it clearly isn't a pretty picture. The ramp of the dual core processors, though, should invite better returns in the year ahead provided the worldwide economy doesn't go into recession (which neither Intel nor Briefing.com expects to happen). In the interim, Intel is apt to trade in a choppy manner, and in a fairly narrow range, as the market vacillates in terms of its thinking about economic prospects. Given our favorable economic outlook and Intel's strong product roadmap, we are standing by the stock as a suggested holding in our Active Portfolio and would use the weakness as a long-term buying opportunity.

--Patrick J. O'Hare, Briefing.com

09:59 am Elec For Imaging: Oppenheimer reiterates Buy. Target $32 to $25. Firm lowers price tgt following Q2 results. The firm says a delay in the launch of an O.E.M product resulted in lower than anticipated top and bottom line. The firm notes mgmt indicated same O.E.M is likely to delay several products scheduled for 2H into 4Q and 1Q07.

09:57 am Alliance Data: CIBC Wrld Mkts reiterates Sector Outperform. Target $60 to $63. Firm raises price tgt following another very strong qtr. The firm says despite the headlines, they believe data points about the high-end consumer remain encouraging: wages inch upward and unemployment remains steady. The firm says they anticipate charge-off to rise to 6.5% in 2H, vs. an unsustainable 4.7% in 2Q. This should not surprise investors.

09:56 am Lam Research: Am Tech/JSA Research upgrades Sell to Hold. Firm upgrades saying while timing of industry weakness remains unclear within the 3Q06-1Q07 time period, as well as the duration of the downturn, it remains clear that it is inevitable and they argue will hold back investor interest on the sector. Furthermore, LRCX will stop issuing order guidance beginning in January 2007 as the company, and they, believe orders are becoming less useful in a shortened lead time environment. They remain cautious and neutral on the semi equipment sector. Co raises their CY06 EPS est to $3.66 from $3.19 (consensus $3.20) and CY07 from $3.25 to $4.05 (Street at $3.03).

09:52 am Applied Industrial: BB&T Capital Mkts upgrades Hold to Buy. Target $31. Firm upgrades saying they believe AIT stock is currently fetching a recessionary multiple, but that the cycle has legs yet. The firm believes there are a couple ways to profit: investors get comfortable with the industrial outlook and bid up the multiple and/or strong fundamentals yield higher earnings.

09:50 am Motorola: Piper Jaffray upgrades Market Perform to Outperform. Target $25 to $26. Firm upgrades based on strong handset sales and increased confidence in margin expansion.

09:48 am Insignia Sys: Miller Johnson initiates Outperform. Target $5.5. Firm initiates saying the co is in the early stages of a renewed growth phase following several very challenging years where sales and earnings declined steadily. While recent performance has been highly encouraging, firm stresses that ISIG shares are still quite speculative due to the historical lack of profits and limited visibility. Firm also notes that fundamental trends have improved considerably and new business activity has accelerated.

09:47 am Bioscrip: Avondale Partners initiates Mkt Perform. Target $5. Firm initiates noting BIOS was formed by a combination of two underperforming publicly-traded specialty pharmacy companies. The firm says integration has been slower than expected resulting in weak earnings and management transition. They say while there is significant potential in the combined operations, there remain significant challenges as well. The firm would prefer to see some evidence of earnings improvement before recommending an investment in these shares.

09:32 am St. Jude Medical: CE Unterberg Towbin downgrades Buy to Market Perform. Firm downgrades saying although mgmt reiterated yesterday that it is optimistic that it can achieve a minimum 15% growth in rev and earnings per share in 2007, they believe that they will be unable to do so on the top line. The firm believes that since approx 40% of projected 2006 rev is generated from low-single-digit growth pacemaker and cardiology businesses, this creates too much of a burden on the other faster growing businesses to overachieve in order to hit the 15% 2007 rev tgt.

09:30 am MGI Pharma: Am Tech/JSA Research downgrades Buy to Hold. Firm downgrades saying MOGN is now expecting an authorized generic version of competitor GSK Zofran, earlier than both the firm, and mgmt, had previously expected. The company now expects a generic version to be available in early 4Q06, potentially significantly disrupting sales in that quarter.

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Amateur Investors Weekend Market Update (7/22/06)

http://www.amateur-investor.net/Weekend_Market_Analysis_July_22_06.htm

This week I thought I would comment on the historical price of Crude Oil and what affect it has had on the market since the early 1960's. The chart below is a yearly price chart of Crude Oil since 1960 which is adjusted for inflation. As you can see the price of Crude Oil was very stable in the 1960's but began to rise sharply starting in 1973 and peaked in 1980 (points A to B). After topping out in 1980 the price of Crude Oil then dropped through the middle to late 1980's before making a bottom in the late 1990's (points B to C) which has then been followed by another substantial rise.



Meanwhile if we take a look at the chart of the Dow going back to the 1960's we can see that as the price of Crude Oil began to rise in the early 1970's the Dow eventually peaked and then went through a major sell off (points D to E) which was then followed by a substantial rally (points E to F). Meanwhile from 1975 through 1980 as the price of Crude Oil continued higher the Dow got stuck in a trading range between 750 and 1050. Then beginning in the early 1980's as the price of Crude Oil began to sell off the Dow was finally able to break out of its longer term trading range and make new highs (points G to H) which was the start of a Cyclical Bull Market that continued through the late 1990's as the price of Crude Oil continued to drop.



Next if we take a look at the current chart of the Dow going back to the late 1990's one could argue we are seeing a similar pattern develop like occurred in the 1970's. As the price of Crude Oil began to rise in the late 1990's then Dow eventually peaked in early 2000 and then went through a sustained sell off through the late part of 2002 (points I to J) much like we saw in the early to mid 1970's. Next the Dow then rallied from the late part of 2002 through the early part of 2006 (points J to K) but stalled out just below its early 2000 high (point I). Keep in mind this is very similar to what happened from late 1974 through 1976 when the Dow rallied strongly (points E to F) but stalled out below its early high made in 1973 (point D) in the chart above. Furthermore it took nearly 10 years for the Dow to finally exceed the high in made in early 1973 just above the 1050 area (point D).



If we see another 10 year cycle develop like occurred from the early 1970's through the early 1980's then it's possible the Dow may enter a phase where it begins to develop a longer term trading range over the next few years and may not exceed the high made in early 2000 until sometime in 2009 if history were to repeat itself. I'm not saying that this is a 100% certainty but it's something to think about especially if the price of Crude Oil continues higher over the next year or two and eventually reaches the high made in 1980.

In addition to the price of Crude Oil another thing to watch over the next several months which will have an impact on the Nasdaq is the Semiconductor sector. The Semiconductor Index (SOX) has formed a Bearish looking Double Top pattern (looks like an upside down "W") and looks poised to retest the low made in the Fall of 2002 near 360 at some point which appears to be a key longer term support level.



Furthermore the 360 level is very close to the SOX's 61.8% Retracement Level calculated from the Fall 2002 low to the highs made in early 2004 and 2006 near 560. What happens to the SOX if it does drop back to the 360 level at some point may well determine the longer term prospects for the Nasdaq over the next several months. If the SOX was able to hold support near the 360 level in the months ahead and then mount a strong rally this would likely have a positive affect on the Nasdaq for the longer term. However if the SOX were to fail to hold support near the 360 level then this could have dire consequences as the SOX may then eventually drop back to its 2002 low just above 200. If this were to happen then this would likely have a substantial negative affect on the Nasdaq for the longer term. Thus I can't stress enough how important it will be for the SOX to hold support near the 360 level in the months ahead.



Finally with the market currently in a correction your best opportunities will come from the Exchange Traded Funds (ETF's) and not individual stocks. Our Daily ETF Signal's are something that may be of interest to those that generally invest in the ETF's. Our research involving Stochastics on multiple timeframes and the Volatility Index (VIX) shows that there are certain things to look for that will signal a nearing Oversold Rally. One of the signals we look for is when our Stochastic Indicator drops to a value of "0" which indicates the market is extremely oversold in the near term. Since 2004 this signal has occurred 7 times and has led to an average gain in the SPY's of 2.6% over the next few days. The most recent example occurred on July 13th when the Stochastic Indicator dropped to "0" which gave us a Buy Signal for Friday July 14th which was followed by a $2.50 move in the SPY's 3 days later.

 
 Date Vix Vix Vix % Stochastic Buy SPY SPY SPY SPY  
  Open Close Change Indicator Signals Open High Low Close  
 7/10/2006 14.17 14.02 1.06 46.2  126.94 127.43 126.41 126.85  
 7/11/2006 14.31 13.14 8.18 86.6  126.61 127.41 125.94 127.41  
 7/12/2006 13.39 14.49 -8.22 17.2  127.21 127.4 125.72 126.05  
 7/13/2006 15.17 17.79 -17.27 0  125.5 125.68 124 124  
 7/14/2006 17.57 18.05 -2.73 23 Buy 124.16 124.26 122.83 123.52  
 7/17/2006 18.73 18.64 0.48 14.8  123.5 124.1 123.15 123.34  
 7/18/2006 18.2 17.73 2.58 60.4  123.75 124.05 122.39 123.97  
 7/19/2006 17.62 15.55 11.75 77.3  124.18 126.26 124.15 125.69  
 7/20/2006 15.1 16.21 -7.35 45.9  126.12 126.3 124.66 124.83  
 7/21/2006 16.23 17.56 -8.19 21.4  125.15 125.19 123.82 123.95

This is just 1 of 6 different signals we look for when determining if the market has become oversold in the near term.

Signup today for a "Free" 2 Week Trial Membership to Amateur Investors and have access to our Daily ETF Signals. In addition you will also have access to our current Stocks to Watch Buy List which contains stocks that are currently developing a favorable chart pattern such as the Cup and Handle, Double Bottom and Flat Base which can be used with either our Long Term Investing Strategy or Short Term Investing Strategy.

Also you will have access to these other investment products.

Daily Breakout Reports
Market Timing Indicator

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Technical Analysis: Breakdowns
By Paul Shread

http://www.internetnews.com/bus-news/article.php/3630866

The Dow and S&P (first two charts below) broke their uptrends today, following the Nasdaq's (third chart) breakdown yesterday. Again, the indexes could be starting a "C" wave down here to complete the correction begun in May, just in time for the four-year cycle low next month. The Dow closed right at 11,330 support, with 11,250 below that. Resistance on the blue chips is 11,430 and 11,460. The S&P faces resistance at 1305, and support is 1289-1292 and 1281. The Nasdaq needs to hold 2150 or 2132 and 2115-2125 come into play. Resistance is 2175, 2195 and 2200. Bond yields (fourth chart) flirted with a breakout but then turned back.

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Amateur Investors Weekend Stock Market Analysis (10/21/06)

http://www.amateur-investor.net/Weekend_Market_Analysis_Oct_21_06.htm

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From Briefing.com: 5:15 pm Weekly Wrap

It was a very good week for the stock market. There was a modestly bullish underlying tone and a sharp decline in oil prices helped provided a broader push.

Oil closed the week at $52.99 a barrel, down from $56.31 a barrel last week. The bullish implications for inflation and the economy were clearly a factor in the positive tone this week. When oil dropped sharply on Thursday, the S&P posted its biggest gain of 9 points.

The S&P was up four out of five days, however, and the only decline was a one point loss on Tuesday. It wasn't exactly a raging bull, but the tone was clearly upbeat.

The limited amount of news this week helped. The only major economic release was a solid 0.9% gain in December retail sales. Excluding autos, the gain was 1.0%. The November gains were 0.6% for total retail sales and 0.7% excluding autos. These back-to-back gains indicate that the housing slowdown hasn't had much impact on consumer spending. Real GDP growth in the fourth quarter probably held up at over a 2% annual rate, providing good momentum into the first quarter.

The December US treasury data also deserve a mention. The December surplus of $44.5 billion brought the trailing twelve month deficit down to just $208 billion. That is down to 1.5% of GDP (through fourth quarter estimates). It is down sharply from 3.8% of GDP when the deficits exceeded $400 billion in late 2003. The US federal deficit has been cut by more than half in a little over three years. When state surpluses are included, the national deficit shrinks even further.

This past week technically kicked off earnings season. Alcoa had a good report, as did Genentech. But the real action starts next week after the Monday holiday. The flood of earnings reports will dominate market action next week.

There were a couple of earnings warnings this past week, but not enough to alter overall expectations. Sprint, AMD, SAP, and Tellabs all warned of lower than expected profits.

That didn't alter the forecasts which call for about 10% growth in operating earnings for the S&P 500 in aggregate for the upcoming fourth quarter numbers. First quarter estimates are currently at about 8%. This reflects a slowdown in growth from the 22% level of the third quarter and the estimated 15% for all of 2006. The degree to which companies guide estimates for 2007 will have a tremendous impact on the market outlook the next couple of weeks.

The market remains surprisingly resilient to any downturn. The fundamentals remain good, as economic growth is apparently steady, if a bit below long-term trend. Earnings growth is slowing, but decent. There is nothing to suggest a sharp pickup in inflation. The 10-year note yield did rise to 4.78% this week, but remains well below levels that would start to hurt the stock market outlook.

Next week, it will be all about the earnings reports.

 
 Index       Started Week Ended Week Change % Change YTD  
 DJIA         12398.01    12556.08   158.07    1.3 % 0.7 %  
 Nasdaq        2434.25     2502.82    68.57    2.8 % 3.6 %  
 S&P 500       1409.71     1430.73    21.02    1.5 % 0.9 %  
 Russell 2000   775.87      794.26    18.39    2.4 % 0.8 %

4:20 pm : More evidence that a soft landing for the U.S. economy remains on track helped extend Thursday's broad-based buying efforts. The Dow finished in record territory again while the Nasdaq hit a new six-year high.

December retail sales checking in with their biggest gain (+0.9%) since July - providing further evidence that the consumer is alive and kicking - was the biggest reason behind Friday's impressive follow-through effort. Retail sales (ex-autos) were also stronger than economists expected, rising 1.0% - the largest increase since January. Not only did the data alleviate concerns about the slowdown in housing curtailing consumption, but the absence of significant weakness increased the likelihood that Q4 GDP estimates will be revised higher.

Of the eight sectors closing in positive territory, Energy led the charge (+2.6%). The return of Energy's leadership, following four straight down days that had the sector down 3.5% for the week and off more than 8% already this year, more than acted as an offset to the 2.1% bounce in oil prices.

After plunging 13% so far this year and selling off over the last four days, a rebound of some sort in oil prices was not a big surprise. It is also worth noting that oil was still down nearly 6% for the week and is 33% below record levels reached last July.

Materials turned in the day's second best performance; but its 1.1% advance still didn't provide as much support as continued upward momentum in Technology. The more influential sector was in focus Friday after Advanced Micro Devices (AMD 18.27 -1.91) said Q4 revenue will miss expectations. AMD's warning prompted several analyst downgrades and initially renewed concerns about earnings prospects of other chip makers.

However, ongoing fears of missing out on an extended tech rally overshadowed AMD's expected revenue shortfall. Case in point, rival Intel (INTC 22.13 +0.21) was down as much as 1.4%, but the stock, which is also a recommended holding in the Briefing.com Active Portfolio, bounced back to close up nearly 1%. Fellow Dow component and tech bellwether Hewlett-Packard (HPQ 43.57 +0.93), which is a big beneficiary of the ongoing price wars between AMD and Intel, surged 2.2% to a multi-year high.

Building on Thursday's impressive 3.5% advance, Microsoft (MSFT 31.21 +0.51) hitting a new 4 1/2-year high also lent notable support for all three major averages for a second straight day. DJ30 +41.10 NASDAQ +17.97 SP500 +6.91 NASDAQ Dec/Adv/Vol 1147/1900/2.15 bln NYSE Dec/Adv/Vol 1113/2140/1.50 bln

9:00AM Magma Design says third and final patent in California litigation accepted for reexamination (LAVA) 8.76 : Co says that the third and final patent at issue in its lawsuit with Synopsys (SNPS) has been accepted for reexamination after the U.S. Patent and Trademark Office found "substantial new questions of patentability as to all 54 of the patent's claims". As a result, co says all three patents at issue in the companies' California litigation are under reexamination and on a path that could result in their invalidation.

8:53AM Ultratech: Thales Fund Mgmt files 13D showing 11% stake (UTEK) 12.12 : "We are the largest shareholder in your company with over 2.5m shares (representing 11.0% of the shares outstanding, per our 13D-filing of today to which a copy of this letter is attached). We believe that Ultratech has unique, market leading technologies that are severely undervalued at its current stock price... Both Advanced Packaging and Laser Spike Annealing have significant growth prospects, and if the current underperformance continues into 2007 we will have to conclude that these opportunities can be better monetized as part of a larger organization. To that end, we hope that the board as well as senior management will be open-minded and proactive in contemplating a sale of the company as a way to maximize shareholder value.

4:41AM ASE Test Ltd. announces new Chief Financial Officer (ASTSF) 11.01 : Co announces that it has appointed Mr. Kenneth Hsiang as its new Chief Financial Officer effect January 11, 2007.

09:16 am Advanced Micro: Nollenberger Capital reiterates Sell . Target $13 to $8. Nollenberger cuts their tgt on AMD to $8 from $13 saying after the co preannounced lower than expected 4Q06 results. The firm says AMD appears to have rested too long on its laurels in 2006 and is now quite vulnerable in 2007 in terms of CPU/GPU market share as well as ASP declines. The firm suspects AMD's server A.S.Ps are also under duress. They caution longer-term AMD bulls that,the 4Q miss is not a mere aberration due to supply constraints or some form of an Intel "price war." The firm believes AMD's pain is chronic and will only get worse as 2007 progresses, as the co is vulnerable from both a manufacturing and product positioning perspective. Firm reits Sell.

09:28 am Samsung Electronics

Samsung Electronics, one of the world's largest semiconductor and consumer electronics makers, reported an 8.5% drop in fourth quarter profits as a weak environment for flash memory and flat screens offset strong memory chip growth. The ramp in flash capacity has greatly increased industry-wide pricing and inventory concerns heading into the first quarter, weighing heavily on stocks. While not unexpected, Samsung's results underscore a weak flash and LCD market that will likely linger into a seasonally weak first quarter.

Samsung earned 2.346 trillion won ($2.5 bln) in net profits and revenues of 15.69 tln (up 1.2% year/year) in the quarter that ended on December 31st - inline with consensus estimates. This compares to 2.563 tln won earned in the previous year and 2.187 trillion last quarter. Samsung has been converting flash capacity to DRAM on the eve of Microsoft's (MSFT) O/S Vista debut. A strong DRAM market likely stemmed the downside in the quarter given the fact that gross and operating margins actually improved sequentially.

The company noted healthy seasonal PC shipments, up 13% sequentially, as well as greater adoption of DDR2 shipments for PCs, boosting its semiconductor division's profits. This underscores our positive view on the DRAM market, which we feel is poised for extended seasonal growth.

Samsung is expected to regain its footing in the second half of the year as the supply/demand picture improves. The company's net profit is likely to rise 16% to 9.2 tln won from 7.93 tln in 2006 for the full year, according to Reuters Estimates. Still, this figure is well short of the company's 2004 record of 10.79 tln. The stock recovered lost ground following its results after announcing a $2 bln share buyback program.

--Kimberly DuBord, Briefing.com

07:50 am Adv. Micro Devices (AMD)

20.18: As its name implies, chip maker Advanced Micro Devices works to be ahead of the innovation curve in its business. It has made some terrific strides in that regard, but today, it is drawing attention for being ahead of the pack in issuing a revenue warning for its fourth quarter.

AMD didn't give any color as to the factors contributing to its top-line miss, but it did add that its gross margin and operating income were impacted by significantly lower microprocessor average selling prices that offset a significant increase in unit sales. The company clarified that fourth quarter operating income, excluding ATI and acquisition-related charges, will still be positive but substantially lower than the third quarter.

Following its third quarter report, AMD said it expected the fourth quarter to be "seasonally strong." Recent seasonal growth in the period has ranged from 6-13% with an average of around 10%, so there is no mistaking that AMD's guidance is a disappointment. It's not as big a disappointment, however, as the consensus estimate of $1.84 billion implies since that estimate includes ATI.

A Jefferies analyst appearing on CNBC said his revenue estimate, excluding ATI, was $1.45 billion.

AMD's news is likely to weigh on Intel (INTC), which is a suggested holding in Briefing.com's Active Portfolio, yet one can't help but wonder in the absence of guidance from Intel if it managed to gain at AMD's expense. Intel, which has seen its market share erode in the face of AMD's progress, has left little doubt that it is intent on regaining the lost share by leveraging the strength of its updated product suite.

We raised the latter point in our review of AMD's third quarter report and cited it as a factor for why we would avoid AMD's stock. Our cautious view has been validated by AMD's warning. Although one can't take for granted that Intel will deliver a positive surprise, it is the name we would want to own between the two companies given that it is now ahead of the curve with its product line-up and has the financial muscle to withstand an intense pricing environment.

--Patrick J. O'Hare, Briefing.com

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Chart of the Day - COTD - Dow at top of 3 Year Channel:

http://www.chartoftheday.com:80/20070209.htm?T

Despite a host of concerns (weakening economy, softening housing market, geopolitical issues, etc.), the Dow continues to trade near record highs. However, it should be noted that the Dow is not yet in the clear as the Dow currently trades at the top of the three-year trading channel (see red line). Stay tuned...

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InvestmentHouse Weekend Update:

http://www.investmenthouse.com/1weekendmarketsummary.htm

- No relief move to end a harsh week
- The economy is fine as long as we don’t let our leaders wreck it.
- Weekend worry likely to lead to more selling to start the week but that will foster the interim rally.
- What to do when the panic sets in

The week that got everyone talking.

There were many signs things were weakening. We talked about the extended run, the distribution that eroded the market foundation and tossed back every NASDAQ rally attempt, and the flattening trendlines. Each time things got the least bit dicey, however, new money flowed back in and propped up the advance. Of course that all ended last week when a confluence of events finally gave the buyers pause. The Greenspan misquote, China’s threat to crack down on speculation, Japan warning the carry trade was going to end, and tanking durable goods orders brought it to a head and brought on the selling. The market was in a nice pullback, but when this news hit the buyers lost their appetite.

Friday started weak, unable to continue the Thursday rebound off of the early session knife lower. No specific news, just more malaise that later turned into some much more aggressive selling into lunch and into the close. Dell was down on its poor earnings but there were some upgrades (LUV, XLNX) and the Fed’s Poole said there was no recession coming. Didn’t help. The market was in a bad mood and was ready to continue its sulking.

Technically a weak week weakened further on Friday with the lower close, but it did not make a new low. It was an inside day on the main indices, and that can be a precursor to change. It all depends upon which way they break from this signal moves; guess that really makes this something of a non-signal.

We were looking to see if the rebound would start with some short covering on Friday. That is typically what happens on the Friday a sell off starts. It didn’t and thus this coming week will likely start lower once more as the indices add to their losses.

As an aside, many market recaps on the talk shows were talking about how far the indices were down for the week. Interesting, but the selling started before this week. DJ30 sold 4 sessions ahead of the Tuesday plunge. As noted Thursday, from the highs in the last couple of weeks in February to the Thursday intraday low, NASDAQ lost 6.8%, SP500 5.5%, DJ30 5.8%. Hefty chunk of change for the initial leg of a sell off.

High volume and massively negative breadth started the move, and though breadth improved as the week closed out the Friday volume and breadth was not light. With this kind of negative action and the commensurate jump in negative sentiment you have to start looking for the relief move to germinate and break bud. We are still looking for a relief move to start in the near future, one that can last anywhere from 1 to 3 or so weeks. It will be choppy as they often are (up a few days then back a couple, then back up, etc.). Nonetheless, when they get going they are typically pretty solid.

Solid enough to give people a false sense of security that they can wade in. You can wade in, but you have to know that you are stepping into faster water and there are potholes in the bottom. Thus you stay light. That said, there are definite cycles in these corrections, and we are just waiting for this initial phase to end and the next cycle to start. Given the indices are close to testing the October and November peaks that held on the Thursday low, this is a great place to start that next phase of the correction. After another blow down to start the week we will look for an intraday reversal once more that likely sets the bottom for this leg.

THE ECONOMY

Everyone is worried about the economy. That is good, except that those wanting to do the most about it don’t have an economic clue or prefer to make political hay to our detriment.

The economic data last week was definitely a mixed bag. More sub-prime mortgage worries, a big revision in Q4 GDP, the tank in durable goods orders, and the second sub-fifty Chicago PMI. That coupled with Greenspan even entertaining a question with the ‘R’ word in it helped cement the view that the economy was much worse off than anyone thought. As the week wore on, however, the national manufacturing report showed an excellent, across the board advance. Spending and income were solid. ECRI continues to show not a decline, but a bottom and more robust growth toward the fall.

What about inflation? The PCE rose to 2.4% year/year and the Fed wants it below 2%. Gold, which had been on a tear and was growing worrisome as an inflation indicator with its gains, reversed and closed at 644, down 21 on Friday alone. Even with all of this worry about the sub-prime mortgage market and supposedly poor economy, credit spreads are narrower now than same time last year. A narrow spread means no worries about weaker times ahead. Indeed, they can widen and still be in solid shape.

Problem is, there are those that never liked the policies of the current administration and have ignored the results and talked down the advances all the way up. As the economic gains kept piling up they had to shift their arguments. From no jobs, to few jobs, to poor jobs to low paying jobs they have changed their tune as the data keeps improving. Friday night we heard one congressman dogmatically state that the current deficits were record deficits. Only if you have absolutely no economic savvy would you say that. In unadjusted dollars they are bigger. Of course, the economy is much larger than it was in the 1980’s, the last time we had big deficits. At 1.7% of GDP, these are BELOW the historic average. To argue the current deficits are more dangerous than those in the past is the same as arguing a $10K per month mortgage for someone making $500K per year (2% of the income) is more burdensome than a $5K per month mortgage for someone making $100K per year (5% of the income). Yes it is twice the other in gross dollars, but it is much smaller as part of the overall financial picture. If this were not the case lenders would not lend more to those making more. Of course that makes no sense, but that is one of the arguments you continue to hear. It is absurd, but it is also politics.

That is the problem: there are political agendas setting the course ahead as democrats try to take the White House and republicans try to hold on. That leads to these absurd statements . . . along with a pathetic understanding of economic cause and effect and how economic cycles work.

One senator on Thursday panned job growth yet again, complaining we lost jobs to foreign countries and that wages were poor. Well, most companies report a dearth of skilled workers to fill positions that desperately need filling. Headhunters confirm this problem. Unemployment is at 4.6%. Over the past few years we have created more jobs than the rest of the world combined. Since 1976 we have created 43M jobs, far outpacing all industrial nations.

Another senator said free trade and the trade deficit are hurting US jobs and crushing the middle class. Well, the jobs speak for themselves. We have run trade deficits every year since the mid-1970’s, importing $6.5T more goods and services than imported, yet we have those 43M jobs. Further, the middle class grows wealthier, not poorer. Wage earnings for the middle class have grown 22% inflation adjusted over the past 27 years. The current economic expansion cycle is in its middle age and is just now starting to show the wage increases many of these senators attribute to the expansion in the 1990’s. They forget it took until the middle of that expansion to really get wages rising. You think with all of the shortages of labor that wages are staying lower? They are not.

Instead, however, we hear calls for tariffs on China and some even starting to champion limiting foreign ownership of our treasuries and other assets. How 1980ish. How absurd. Does Japan own the US 20 years later? No. Its companies are building plants here and putting US citizens to work. That is investing in the US. But who cares about history or reality when you are running for political power or have no grasp of economic cause and effect? These people want to make us pay higher prices for our goods in order to save some jobs that should move offshore to cheaper labor markets. Would we not be better off if those with jobs that followed the lower wages off shore retrain themselves in order to take fill those higher paying jobs begging to be filled right now? We could invest the money we continue to save on cheaper foreign goods into even more technological advances and even further improve our standard of living. That is investing in the future and not clinging to the past; ironic as many who say we must invest in the future actively try to pass legislation that forces diversion of funds from that very investment as they try to keep nineteenth century jobs here in the US.

And more talk about deficits.

At the same time they decry the budget and trade deficits that are somehow going to kill our future and burden our children in the event someone ‘calls’ the debt. We don’t like profligate spending; it takes our hard earned money and squanders it on pet projects or failed programs such as instituted in the 1960’s and have only further entrenched the underclass. Further, that wasted spending takes the lifeblood from the economy and thus holds us back from reaching our true potential.

Those are serious arguments against wasteful spending. The notion that someday we will have to pay the piper for our deficits is absurd as long as we let our system work and produce to its potential. If we do that means others will want to put their money here just as they do now. Countries pay for the privilege to hold US Treasuries and have access to the US consumer market. They are willing to give us this money as the price for selling their goods here. If they ‘call the note’ as some people put it, they would only be slicing their own economic throats because the bulk of their production would dry rot.

Some day the Chinese people will start consuming more than they export and thus reduce their dependence on the US consumer and their willingness to buy our treasuries. It is not because they are going to ‘call the note,’ but instead just less need to buy as much. That, however, is not a reason to adopt protectionist programs and stymie our economic strength by raising taxes, confiscating profits from companies enjoying an upswing (if the oil companies then why not any other sector that has a boom cycle?) and over-regulating industry. As for the last, just look at our telecom industry. It was heavily regulated as a utility until the breakup in the 1970’s. As a result our telecom industry is far behind that of the rest of the world. Sad to say we lag Europe in a technology, but we do. Until very recently you could only use US cell phones in the US. Even now just one service provides extra-US service. The rest of the world could use theirs anywhere but the US. 3G and higher technology? It was in use in the rest of the world well ahead of the US rollout. Pathetic, but that is what you get when our leaders get involved in controlling industries. Without the free market competition, there is no push to come up with something better and to do so fast.

Thus we need to promote investment in the economy even more in order to better compete when that inevitable time comes when some of our big trading partners don’t need us as much. We have seen what restricting trade and regulation does for our ability to compete. The last thing we need is to head back down the road of limiting what we can do with our money, and that starts with how much the feds take from us in the first place. If the fat man known as the federal government doesn’t have as much to eat it will lose weight.

THE MARKET

MARKET SENTIMENT

VIX: 18.61; +2.79. Highest close of the recent run but still well below the 23.81 hit in June 2006, about a month before that sell off bottomed. It is still early in the game for any kind of bottom, but note that just before that first leg low was hit last summer the SP500 sold off and volatility rose to the current levels. That preceded a modest, two-week, 35 point rise in SP500. Then SP500 headed down to put in the first leg of the double bottom.
VXN: 23.66; +2.15
VXO: 19.12; +2.91

Put/Call Ratio (CBOE): 1.3; -0.12. Down again but an eighth day in a row closing above 1.0. As discussed Thursday, some of the other indicators such as VIX are coming into line in terms of an interim bounce. Anything beyond that is a stretch right now.

Bulls versus Bears:

Bulls: 50.5%, up modestly from 50.0%. Ticking higher after falling from 51.1% two weeks back and 53.3% just over a month ago. Not a lot of movement, but we can make book on it being lower next week. Still quite a bit of bullishness though backing down from the 55% threshold hit to end 2006 and considered bearish as it signals pretty much everyone is in the market.

Bears: 24.2%. Definitely more angst as bears rose from 22.2% and 21.1% before that. Held in the low twenties for 2 months but starting to come to life and will surge next week. Hit a post-2002 high in that late June 2006 move, eclipsing the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005).

NASDAQ

Stats: -36.21 points (-1.51%) to close at 2368
Volume: 2.445B (-13.27%). Volume was significantly lower Friday but still well above average as NASDAQ continued lower. Hard to argue there was any improvement given the continued high volume but infinitely better than higher volume on the selling.

Up Volume: 420M (-298.137M)
Down Volume: 2.008B (+101.208M). Still impressive at -4.7:1.

A/D and Hi/Lo: Decliners led 2.99 to 1. Ouch. Not as bad as the -10:1 on Tuesday. Suffice it to say there were very few NASDAQ stocks anyone wanted on Friday.
Previous Session: Decliners led 1.91 to 1

New Highs: 58 (+19)
New Lows: 95 (-13)

NASDAQ CHART: http://www.themarketbeat.com/videonewslettercharts/NASDAQ.jpeg
If the link does not open, cut and paste the link into your browser.

NASDAQ gapped lower, made a couple of token runs higher mid-morning, but found resistance at 2400. Turned lower with a big downside move through lunch, and an afternoon rebound attempt failed woefully with a 12 point drop in the last half hour of trade. That kept NASDAQ just over the Thursday low (2359) and at the October and April 2006 highs. That is pretty solid support and enough to send NASDAQ back up on the interim rebound. As noted Thursday, we would anticipate a rebound in the range of 2450 (the 50 day EMA at 2450) to 2470 (the November and December highs). Then another run lower, this one taking it toward the 200 day SMA. You can see the prior uptrend channel on the attached chart.

SOX (-1.77%) fell through the 50 day EMA, landing at some support at 460ish. That last move looked promising but took it to 490 where the November and December highs were. It rolled over and has a suspicious looking double top here. Next support is the 200 day SMA (454) or price support at 450.

SP500/NYSE

Stats: -16 points (-1.14%) to close at 1387.17
NYSE Volume: 1.864B (-13.07%). Volume fell sharply, falling below 2B but still well above average. Not as many sellers but still an above average number.

Up Volume: 229.842M (-537.849M)
Down Volume: 1.626B (+198.788M). -7:1 downside volume. That is pretty nasty.

A/D and Hi/Lo: Decliners led 3.11 to 1. Not the -5:1 from Tuesday, but as with NASDAQ, very respectable, in a negative sort of way. These high readings are an indication that things are getting to more extreme, sold out levels. Previous Session: Decliners led 1.57 to 1

New Highs: 74 (+47)
New Lows: 45 (+34)

SP500 CHART: http://www.themarketbeat.com/videonewslettercharts/SP500.jpeg
If the link does not open, cut and paste the link into your browser.

Similar to NASDAQ, the large caps faded from the 90 day MA and closed in on the Thursday low (1380) on lower but still strong volume. It is just below the October peak (1389) but there is support as well at 1375. Likely to blow lower once more and move at 1375 and then start the interim bounce. You can see the prior uptrend channel on the attached chart.

SP600 (-1.80%), after holding up decently, has imploded, falling all the way back into the bottom half of its December to January saucer that made up the handle to its larger cup with handle base. It closed 2 points above its October peak. That level at 395 on down to 390 is game for the next dip, but on Thursday it tapped and held the July/August up trendline at 396.50.

DJ30

An inside day as well on the blue chips as they too tested toward the Thursday low (12,059). It has slipped past the October peak at 12,167. There is some minor support at 12,075 to 12,070. Some additional support at 12,000. Looks as if it will test near that level and then try to rebound. You can see the prior uptrend channel on the attached chart.

Stats: -120.24 points (-0.98%) to close at 12114.1
Volume: 315M shares Friday versus 372M shares Thursday. Similar fade in volume but still strong.

DJ30 CHART: http://www.themarketbeat.com/videonewslettercharts/DJ30.jpeg
If the link does not open, cut and paste the link into your browser.

THIS WEEK

Negative sentiment and hype likely to grow over the weekend.

Seems hard to believe, but when investors have a chance to recap the week, see the headlines and hear the talk show commentary the negative sentiment is likely to climb. If the usual punditry were not enough, the political yapping dogs will try to make some more hay out of the decline. It is rather pathetic how you take a week’s worth of correction (or in some case two days) after a 7 month run and within an ongoing 4.5 year recovery and try to style it as a failure of all prior policies. Yes, the small sliver of time that is a correction somehow becomes the rule. Right. As if there were no nasty corrections in the 1990s (remember 1996, 1997, 1998: sharp corrections and then a resumption of the moves. 1998 was even a short bear market). Pretty shameless, but as we have seen, it is a shameless business.

In any event, the negativity that is generated is likely to be useful in the bigger picture. After the severe blow off the past week it won’t take much to get fear and selling to the point of a near term washout. Individuals will sell some more and some of those newer hedge funds will have to sell either through their risk managers’ orders or out of fear, panic, or some primal yet to be revealed emotion. A run lower on this fear and you likely get a reversal to start the interim relief bounce.

We will take some downside profit on that move, particularly if the indices hit those next support levels and hold. Then we look at what held up well during the selling and see what is leading the way higher. At this juncture you don’t know which ones will take the point, but we will cast our net and put those on that look good and see which ones the big money moves to.

A final thought on the selling last week. All of the downside and the negative news have many worried. The fires of 2000 to 2002 are still glowing in many minds. When they see this kind of virulence they think things are over and they worry about a downward spiral ahead, panicking in the selling and making poor decisions. Resist. Don’t get caught up in the heat of battle trying to map out a new game plan. That is called a losing game plan.

You know the cycles; we have discussed them. Don’t lose site of them as the events unfold. They may not tick off like clockwork, but historically there is a pattern even in corrections. Even when your stomach is queasy and your gut is screaming, if you go with your gut you typically make the wrong decision. Stomach pain and market selling are definitely tied; the point at which your stomach cannot take it anymore, the moment you feel if you were just out everything would be so much better, the moment you hit that sell button, that is the moment the market changes direction. In our seminars we teach that when you just cannot take it anymore and the sell command appears in your mind as some kind of miracle drug for your pain, get up and take a jog, stroll through the neighborhood, change that hard to reach light bulb, call your mother in-law, clean the grease trap, kick the dog. Do something that pulls you back from the edge. Nine times out of ten in that situation there is a better exit point to come than at the point you feel life would be grand if you were only out of the market.

Support and Resistance

NASDAQ: Closed at 2368.0
Resistance:
The July/August trendline at 2422.
The 90 day MA at 2434
The 50 day EMA at 2450
2468.42 is the November 2006 high
2471 is the December 2006 high
2509 is the January 2007 high
2523 is price resistance November 2000

Support:
2412 from June 1999 low
2400ish from the late November and late December 2006 lows.
2384 is an interim peak from January 1999
2379 is the October high.
2376 is the April high, the former post-2002 high
2368 is the early October handle high.

S&P 500: Closed at 1387.17
Resistance:
1408 is the November high
The 90 day MA at 1414
1425 is an interim high from November 1999
The 50 day EMA at 1426
1432 is the December 2006 high
1440 is the mid-January high
1444 from February 2000
1445 is the late November to February up trendline
1468 is the upper band of the current channel
1475 from peaks in December 1999 and January 2000

Support:
1400 is some price support trying to hold.
1389 is the October peak.
1353 is the early October consolidation range

Dow: Closed at 12,114.10
Resistance:
12,361 is the November 2006 high
The 90 day MA at 12,387
12,499 is the December intraday high.
The 50 day EMA at 12,483
12,672 is the up trendline connecting the November and January intraday lows.
12,820 is the upper channel line marking the November to date uptrend channel.

Support:
October high is 12,167. Giving way.
11,986 is price support from mid-October and the early November low.
11,865 from the early October consolidation
11,750.28 is the pre-2000 all-time high

Economic Calendar

These are consensus expectations. Our expectations will vary and are discussed in the ‘Economy’ section.

March 5
- ISM Services, February (10:00): 57.5 expected, 59.0 prior

March 6
- Q4 Productivity, revised (8:30): 1.7% expected, 3.0% prior
- Factory orders, January (10:00): -4.0% expected, 2.4% prior

March 7
- Crude oil inventories (10:30): 1.4M prior
- Federal Reserve Beige Book (2:00)
- Consumer Credit, January (3:00): $7.0B expected, $6.0B prior

March 8
- Initial jobless claims (8:30): 335K expected, 338K prior

March 9
- Non-farm payrolls, February (8:30): 100K expected, 111K prior
- Unemployment rate (8:30): 4.6% expected, 4.6% prior
- Average hourly earnings (8:30): 0.3% expected, 0.2% prior
- Trade balance, January (8:30): -$60.0B actual, -$61.2B prior
- Wholesale inventories, January (10:00): -0.1% expected, -0.5% prior.

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The traditional definition of a Hindenburg Omen has five criteria:

http://en.wikipedia.org/wiki/Hindenburg_Omen

That the daily number of NYSE new 52 Week Highs and the daily number of new 52 Week Lows must both be greater than 2.2 percent of total NYSE issues traded that day.
That the smaller of these numbers is greater than 79.
That the NYSE 10 Week moving average is rising.
That the McClellan Oscillator is negative on that same day.
That new 52 Week Highs cannot be more than twice the new 52 Week Lows (however it is fine for new 52 Week Lows to be more than double new 52 Week Highs). This condition is absolutely mandatory.

These measures are calculated each evening using Wall Street Journal figures for consistency. The occurrence of all five criteria on one day is often referred to as an unconfirmed Hindenburg Omen. A confirmed Hindenburg Omen occurs if a second (or more) Hindenburg Omen signals occur during a 36-day period from the first signal.

[edit] Conclusions
The probability of a move greater than 5% to the downside after a confirmed Hindenburg Omen within the next 41 days after its occurrence is 77%, the probability of a panic sellout is 41% and the probability of a real big stock market crash is 25%. The occurrence of a confirmed Hindenburg Omen does not necessarily mean that the stock market will go down. On the other hand there has never been a significant stock market decline in history, that was not preceded by a confirmed Hindenburg Omen.

More

http://www.fxstreet.com/futures/market-review/financial-markets-forecast-and-analysis/

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Headline Charts Blog Update:

http://headlinecharts.blog.com/

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Wennerstrom, SOX and some additional Stocks in 6 month daily, Weekly Charts and Long Term Monthly:

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Wennerstrom, SOX and some additional Stocks in 6 month daily, Weekly Charts and Long Term Monthly:

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CMOS bought 5000 shares@1.85 - CMOS has been good to me as a trading vehicle. After yesterday's news I can hardly recommend it for anyone else. Please do your own due diligence.