EXCERPTS FROM PRIOR WEEKS BELOW   
EDITOR'S UPDATE 6/30/10: With the Quarter over, Portfolio Managers starting fresh and freed from communicating their new quarter results to shareholders for another 3 months, I expect a healthy rally on July 1, albeit one that won't last. With Friday's Unemployment Report largely feared after ADP's punk private payrolls report (+13K)--despite a lousy track record--those fearing a double dip worry their greatest fears will be confirmed Friday.Therfore, a rally Thursday could start big but should peter out before the close, as the street literally braces for Friday's BLS report. Still, some of the stocks that outperformed Wednesday despite the late day sell off should see more inflows Thursday and retain a good percent of their early day gains. Sandi                                                                                   

June 28—July 02, 2010   MORE DOWNSIDE INTO JULY EARNINGS  Some might argue equities have held up well in the face of negative news, starting with the last Unemployment Report, peaking with May Housing Sales. I suspect the failure to break strongly to the downsiide--apparent resilience—is simply related to end of month/quarter/ first half of the year. Clearly, Treasuries and stocks are telling two different stories, the former confirmed by commodities, ex-gold, the latter first starting to build in a worse than expected economy.. Early July often suffers from earnings warnings, since companies are more likely to prepare the street for a miss than they are to tout a penny or two beat, which is written into their guidance, anyway. Ex-communication--both consumer handsets and the buildout of LTE & 4G networks--businesses are experiencing a softer quarter, and exercising abundant caution, given European credit problems, the looming passage of FinReg in the U.S, the waning of stimulus programs, the growing grumbles about sovereign deficits, and tightening credit conditions.

But next week should yield some relative "winners," including telco’s Verizon & AT&T, both introducing new smartphones and nearing their July 7th dividend record dates, with markets closed July 3, 4, & 5^th, pulling purchases into next week. "Relative winners" doesn’t mean they can’t fall, only that they should outperform worse action in other sectors. In real estate, shopping mall REIT’s don’t seem to be acknowledging the slower activity retailers are seeing but should, in coming weeks. REITs, after all, as part of lease terms, get a portion of retailers’ gross. Granted, bad news for retailers won’t be out until July 8^th but, clearly, comments from Investment Conferences, and the scattered earnings reports being released bear out a softening in comps over the past couple of months. The reasons don’t matter--lackluster fashion styles, for one, less money spent on food outside the home, for another--the results do, and sooner or later mall REITs will get hit on their tenants’ woes—no matter the improvement in their capital after secondaries galore. Vornado should outperform the group because of the coming Toys ‘R Us IPO, in which VNO owns 33.3%. But, again, "outperform" doesn’t mean it won’t fall, merely that it should fall less than peers unless, of course, the TOY IPO is postponed, which would put a target on those shares. A warning for traders looking for shorts.

I’d be very cautious about Nike’s shares. While it’s report and futures might have pleased, those futures are nearly meaningless. As someone who used to be in that business, I know first hand that retailers who ordered extra merchandise to capitalize on FIFA’s World Cup and, even, Wimbledon (RL dresses officials and ball boys), will assess their ending inventory in the coming weeks, and can cancel or trim future orders without repercussions. Those retailers who do, will either be offered better deals or cancel futures after some arm twisting from their Nike sales person. If you look back 4 years ago, to the last World Cup, Nike, and to a greater degree Adidas, both suffered afterwards.

As I’ve said previously, food and beverages are the most popular items during big sporting events, and June in general, when weddings, graduations, and Father’s Day, as well as Memorial Day & July 4^th lend themselves to food and beer, rather than apparel. Historically, that’s benefited warehouse stores, where even electronics that sometimes form Father’s Day and graduation gifts are priced lower than at other stores. Swim Suits are also popular but were deeply discounted as early as Memorial Day, as retailers work to clear out summer to get ready to set Back to School & Fall. Those deep discounts are a major problem, as retailers appear desperate, rather than entertaining, the latter the raison d’etre for most discretionary shopping. While it’s not as bad as the 80% off seen in 2008, signs touting 70% or 75% discounts are all over the mall, making 70--75% off the new half price, whether it’s expressed in those numbers or by an additional 40% off already reduced merchandise. Even Abercrombie & Fitch, which continues to insist it doesn’t discount, has been offering an extra 50% off all redlines (clearance), extra 30% off in its kids stores, as it continues to struggle to restore relevance. Teen retailing remains the worst niche, department stores the best, with missy retailers continuing to fill demand that had built up over almost 4 years of woman steering clear of non-essential purchases. But again, both those niches are using aggressive discounts to attract shoppers, whether it’s Coldwater Creek’s up to 75%, Chico’s up to 70% off, or Ann Taylor’s extra 40% off every item in the store, and Macy*s offering an extra 40% off all purchases plus another 15 or 20% with newspaper coupons plus another 10 or 15% with the house credit card (ex-cosmetics and a limited number of designer names that never allow discounts). American Eagle’s up to 60% off seems tame by comparison but no match for Aeropostale, which recently opened here, successfully, with prices that undercut, even, the GAP stores’ Old Navy. Graphic tees $5, anyone? Again, teen retailers could improve their sales, immediately, if they’d ownly crank up hiring of teens. When teens are working, they usually spend most of their paycheck before they leave the mall. Plus, working teens attract other teens to the mall, even if it’s for a brief visit or for lunch in the food court. The biggest mistake teen retailers have made is trimming the very workers critical to their success—their customers. Athletic shoes have, also, been strong in June, and should remain so for Back to School, but discounts are tempering margins and, some would argue, athletic shoes aren’t solely discretionary, especially for growing kids.

The coming June Unemployment report scares me. While I know, first hand, companies here, in southern Florida, and in New York City have resumed hiring, the BLS rarely captures the early stages of improvement. The fly in the ointment, though, is the Census Bureau, which by June had already begun trimming employees. A weak private sector job market, combined with a shrink in government hires, spells bad news for equity markets, which should break down to 1040 on the S&P, and probably below, for a spell, until we’re well into July’ earnings reports, towards the end of that month.

Have I cancelled my outlook for an Earnings relief rally, near the end of July into August? Not yet but I’ll admit to lower conviction, and suspect it will be from lower levels than I initially expected. How stocks fare during the heart of earnings season may depend on the July Employment Report, a month in which there’s a flood of new job seekers, whether teens looking for summer work, or college and professional school graduates, seeking full time employment. Ballooning seekers could send the Unemployment Rate back into double digits. The question is whether the Street will have already discounted it prior to release of that report. The rising chorus of analysts and economists convinced of a coming double dip is the only factor helping stocks adjust to a grimmer reality than expected prior to Greece firing the new, sovereign credit focus. But will be it enough?

In sum, the path of least resistent appears lower, for the near term. Only a BIG surprise in the number of private sector employees added in June, revealed in the Unemployment Report, Friday, July 2^nd, could reverse the growing certainty that the economy has taken a big step back into recession. I judge the likelihood of strong hiring showing up in the report at near zero—no matter how much the BLS fiddles with the birth/death model, which won’t fool anyone. Therefore, puts and contra-ETF’s should be the best investments through July Expiration. However, there’d be a savior should equities build in a far worse scenario than reality, based on coming Economic data and earnings. (We'll update this week's Outlook , if necessary, upon my return from an out of town wedding, Tuesday.)

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© Sandi Lynne 2010 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author’s, alone, and should be just one factor in more complete due diligence.          

June 21—24, 2010 A STUMBLE BEFORE END OF 1H BOOST STOCKS First an announcement: I have an out of town wedding next weekend, and am not returning until Monday, the 28^th. Therefore, I’ll post the cheat sheet with few comments before I leave and add to them upon my return if anything has changed in my absence. Also, while we’re cleaning up non-markets business, if you’ve looked ahead, online, at the July schedule, you’ll note it’s short. Most Investment Banks avoid hosting conferences during July and August, while they don’t schedule many any month that’s heavy with earnings. Biotech/pharmacy meetings are busiest in May & November and were never heavily scheduled during the summer. Meanwhile, industry consolidation has eliminated some of the hosts of the past, even as some industries have curtailed the number of events at which they expect corporations to spend heavily for exhibitions. The net result? A smaller calendar for July and, for that matter, August, which we’re updating as I type. Smaller number can’t be said about this week’s calendar, as so many firms and industries try to squeeze in as much as they can before the official summer escape in July. I’ve not only listed the highlights but, as usualy, emboldened the ones that are likely to get the most analyst attention. Having said that, there are NONE I’d be interested in "playing" though I’m sure the "gold to $10K" crowd will be very interested in the Deutsche Bank South African Conference, while the Emerging Markets crowd will revel in BAC/MER’s Brazilian Agro Trip, both Tuesday. For that matter, I can imagine Intuitive Surgical being gamed for Computer Aided Surgery, Wednesday, but you won’t find me there because that’s one expensive stock about which little is unknown. It might well turn out that Marine Money, Tuesday, of the National Apartment Association provide the most bang for the buck in terms of revealing information less well known, even to those investing in those groups. .

Equity indices are staring down the barrel of resistance even as post-quadruple expiration should cause some manipulations that often lead to the downside. Admittedly, the recent rally, which I prepared you for with 24 hour notice, has come on lousy volume and been lead, mostly, by futures trading rather than stock specific high volume individual moves. Exceptions are Apple, VMWare, Netflix, Akamai, and Deckers Outdoors, all of which could surprise to the upside into quarter/1H’s end, even if they flounder Monday. And I suspect the rally will pick up some volume as the month draws to a close, the two week rally meeting some stiff skepticism, setting up a strong case of performance anxiety, if it continues towards the end of this week.

Challenges this week include May New Home Sales which Toll Brothers has already spoken about. Because New Home Sales are recorded on contract, while Existing Home Sales are recorded on closings, the lack of New Home Sales predicts future weakness, while Existing Home Sales still benefited from the Federal Tax Credit, which can be captured by any sale that closes by June 30, as long as the contact was signed by April 30^th. (Congress is already talking about extending the closing date past June 30, realtors and builders complaining about lags in appraisals and mortgage approvals.) May Durable Goods Orders & Shipments could disappoint after the enthusiasm stirred by Caterpillar’s comments last week. Wednesday’s FOMC statement, after a two-day meeting, should not be a big deal or, even, much of a change. While equity investors haven’t been watching or, at least, heeding the bond market’s conflicting message, during the rally in stocks, Europe’s troubles are still weighing heavily on the credit markets. China’s decision to, finally, resuming allowing its currency to float in a wider band, could boost its market for the same reason such a big change in our currency would boost ours: the removal of the timing uncertainty. Russell Indices rebalance semi-annually, so that will be an influence on markets.

The earnings calendar is relatively sparse but filled with power punches like Walgreen, CarMax, Nike, ConAgra, Darden, Discover Financial Services, Lennar, Accenture, Oracle, Research in Motion, and KB Home. Had an analyst not already taken Bed, Bath & Beyond down a notch, last week, I would have done so today. Instead, I now believe the street’s been prepared for the worst and it won’t be quite that bad. June Retailers’ Comp Sales aren’t out until the 8^th of July, which means they will include part of Memorial Day weekend and part of July 4^th weekend, a good omen for food stores and the warehouse stores that sell lots of meat and b-b-q supplies. Perhaps even a boost to the propane businesses of LOW & HD but I wouldn’t touch the latter two—at least not based on my numerous visits over the past month, anyway, when I was about the only shopper in the stores, and at Home Depot the nearest help was anchored to the register at the exit.

I’d expect a rally to open, Monday, that immediately gets sold in typical post-expiration trade. How long those afraid of missing an end of the first half rally will wait before buying seems the question for me, and that may be before Monday ends or, possibly, not until the after the gyations that follow the FOMC statement release, at the latest. But I say that with one eye on credit, which is signaling a story quite opposed to the rally stocks have seen in the past two weeks. Does China’s revaluation change the landscape? That remains to be seen, because China’s rally may not carry the world and, especially, not the US, with so many other cross currents this week, not the least of which is an S&P reweighting as of the open Monday, and positioning for the Russell rebalance by week’s end.

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© Sandi Lynne 2010 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author’s alone, and should be just one factor in more complete due diligence.
                                      
June 14—18, 2010 LOOKING FOR THE BOUNCE FEW EXPECT IS Bill Gross, the head of PIMCO, the new contrarian indicator? Shortly before stocks peaked, this year, Gross announced PIMCO was starting its first stock fund, and recommended selling US Treasuries which, he said, were in a bubble. Now, with Treasuries heading towards their 2008—2009 credit crisis highs, Gross has changed his mind about Treasuries, and taken them from underweight to neutral, announced last Wednesday. With quarter’s end coming, and stocks severely depressed, perhaps it’s time to heed the PIMCO indicator and get long TBT (Short TLT) and long stocks again for a tradable bounce.

As I’ve pointed out for nearly 18 years, Treasuries usualy reverse their direction (whichever direction they’ve been in, in the weeks prior) in late June, often coincident with June equity options’ expiration, and too many times to ignore, by or on June 23--25^th. From China’s just released export numbers, to Japan’s recently released revision higher to GDP (5% from 4.9%), to both Altera (ALTR) and Texas Instruments (TXN) raising the bottom of their guidance range for the current quarter in their mid-quarter updates, there’s evidence building that the EU troubles haven’t, yet, impacted business activity. Granted, the moratorium on deep water drilling will have lasting effects, if not lifted sooner than 6 months but, even there, fishermen who can’t fish are working for more reliable day rates for BP.

Have stock investors gotten too glum? Is it time for shorts to cover? Time for sidellined longs to tip toe back into equities for a bounce that may, indeed, be uneven but, then again, may not peak until early August? I’m not forgetting that May Retail Sales disappointed but as a long time retailer and loinger time retail observer binges and busts are par for the course—no more than ever when stock market activity is so volatile and jobs are still harder to come by than usual. Instead of bemoaning the payback in May for earlier strong Retail Sales it might be time to comend consumers for using some restraint—waiting for the steepest discounts before plunging again. And with some of Memorial Day weekend’s buying pulled into June by the calendar, all’s not lost. If you’ve looked at prices of fruit, vegetables, and meat at your local supermarket you might have noticed how much more expensive everything is than it was in years past. Since when were nectarines $2.99 a pound in the summer? Lettuce $2.49 a head? The longer consumers hold out, the more likely they are to see prices lowered, and that’s when they’re likely to be back consuming. Father’s Day shopping? Not happening. It’s not only a greeting card made up holiday but for many years it’s been the excuse for sales that draw at male shoppers. I expect to see more of that next week, FIFA’s World Cup scheduling the USA on Saturday a deterent to shoppers this past weekend.

Tread lightly, of course, since Options Expiration this week, and end of month/quarter/half could cause pressures in either direction. Retail investors might be looking to break even and get out, as stocks rise but, still, there are some phenomenal values, now, for which buying could build momentum, as portfolio managers start to position for 2H. Expect analyst to start talking about the S&P rebalance, as well as Russell rebalancing, later in the month. One stock I have my eye on is Mr Softee (MSFT) which has been crushed since Robbie Bach left, calls for Ballmer’s replacement growing. Still, its decline in the last month exceeds the losses by other firms even near its market cap, which makes selling pressure in the rebalancing assured. With Office out this week, and a demonstration of Natal at E3, too, one wonders why Steve Gates, on behalf of his foundation, isn’t pressuring Ballmer to do something—like declare another special dividend, split off the consumer games/TV division, or announce a massive buyback. But even without that, analysts are likely to line up in favor of the shares even as value investors start loading up.

The noisiest events of the week are likely to be EEI—the Edison Electric Institute, a mass analyst meeting for power companies. You’ve probably already heard more about E3 than you care to but, given it’s a mass analyst meeting for the gaming industry, I’ve taken the liberty of reproducing 2 of the pre-meeting press releases on the calendar, as a reminder of the breath of the industry, and the competition for consumer attention out there.

BAC/MER's Transporation Conference is likely to take a back seat to Fedex’s earnings Wednesday. While the rails may move the big stuff, like cars and coal, its FDX and UPS that move most of Business to business and consumer’s purchases ordered online or from catalogs. Should Best Buy’s earnings confirm what FDX has to say about consumers, that would be icing on the cake. Between those two, the Street will learn everything it needs to know, for now, about the economy.

Longbow Research is not one of Wall Street’s heavy weights but its Construction Materials Investor Conference in New York bears passing interest, after last week’s Retail Sales, in which the stuff Home Depot and Lowe sell posted the worst performance, down 9.3%. The odds favor lots of items out of of the Int’l Society for Stem Cell Research meeting in San Francisco. Ditto the Great West Trucking Show aka ITS, again another indicator for the economy. As always, the items listed below are only the week’s highlights. For more, including links to the URL and presenters, log into the Premium Calendar, as only those who read this in real-time can.

After meeting with BP’s Chairman, President Obama has scheduled a televised speech for Tuesday. No matter where you live and how unaffected you might feel you are by the BP deep ocean gusher, the sight of wild life covered in oil and sullied beaches are simply not easy to ignore or remain indifferent to. Tuesday’s House hearing at which all the heavy weights of the oil industry are expected is likely to prove telling: There but the grace of G-d, any of them could have been BP. Sure, there are reports that suggest BP may have gotten careless in its rush to finish up and be done paying extra day rates for the Deepwater Horizon but who hasn’t looked for short cuts? And if any of its competitors had a solutionto stop the sludge gushing from the ocean’s floor, surely they would have offered it to BP, to spare themselves the moratorium and to save the Gulf coast beaches. Competitors, yes, but not to the sacrifice of the coast line which many enjoy.

I don’t expect big surprises out of PPI Wednesday or CPI Thursday but that’s only because of the way the latter is calculated. Anyone who eats fresh food and cooks at home has certainly noticed how much more expensive food stuffs have gotten and, even with oil down from earlier in the year highs, we’re still paying, here in Southern Florida, above $3 a gallon, partly as punishment fo the seasonals who’ve fled.

It’s said that the Thursday the week before Options Expiration, which was a big up day, is the misdirection day for expiration. This expiration will be complicated by S&P reweightings, even as the Street starts to look ahead to the Russell indices being rebalanced at the end of the month. June is a notoriously weak month for equities, and early July has often been equally weak, as earnings warnings drown out the seilence of companies that have no reason to warn or upside. Still, I think we see 1100 on the S&P again, this week. About the only thing the Street doesn’t expect, right now, is for the bulls to get any traction but that’s exactly what I believe will happen. If you read Barron’s Roundtable’s comments this weekend, you probably came away feeling downright glum about the prospects for the global economy. Cure yourself of that negativity by taking a gander at the records those "experts" posted with their January picks. Reknowned investor Scott Black didn'’ manage a single winner other than Ross Stores. Abby Joseph Cohen? One winner out of her 6 picks. About the only one who did really well was Marc Faber but you’d be hardpressed to duplicate his returns unless you’re used to buying stocks denominated in baht or Singapore dollars. And, then, again, there’s the PIMCO indicator which, currently, suggests you should be selling your US Treasuries and buying stocks, for a trade, no matter how brief. All you need is a couple to few days long to capture the best a relief rally has to offer. Better yet if it’s a rally no one expects, no one trusts, and no one believes in.

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© Sandi Lynne 2010 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author’s, alone, and should be just one factor in more complete due diligence.                                                                             
June 07—11, 2010  NO SIGNS OF CAPITULATION YET   My vote for the nonsense headline of the year appeared Friday, 6/04: "Dollar extends gains on weak payroll rise." When has the dollar EVER strengthened on weak payrolls? Especially foolish in light of a nearby headline, "US Stocks lower on Concerns of US & Europe Economies." One wonders, though, how big an adjustment the BLS will make to its May Jobs release given the Monday holiday, prior to release and the fact that the Thursday weekly report did not include California and a few other states because of the holiday. Was BP a significant factor in the lackluster jobs data, given how many beach area hotels along the Gulf Coast have seen cancellations since the spill, impacting, too, restaurants and all manner of retail shops, convenience stores and gas stations? Don’t misunderstand, there’s no doubt that the EU problems launched with Greece could have weighed on hiring but the actual release probably can’t be trusted—perhaps sets up for bigger gains in June because of those new hires undercounted. If the BLS were to game results with a honeypot, similar to the ones tech firms were forced to stop using, holding some job gains until June would go a long way to offsetting the seasonal spike in new seekers after high school, college and graduate school degree grants.

One of last week’s big surprises was the relatively tame volume—the kind of volume that suggests equities are nowhere near any kind of capitulation. However, retailers did look like they were being dumped indiscriminately, with usually resilient companies like Ralph Lauren thrown over the side like other retailers. The malls, here, were very quiet of the weekend, the heat index so much above 100 degrees that it wasn’t a day to even venture into the garage to start a car, let alone travel to the mall. And restaurants are hurting, too, because of the severe late day thunder and lightening storms caused by air that can’t hold another drop of moisture.

Treasuries, that do little more than return principal on the short end, have been a favorite investment, of late, but bear in mind a turn in direction of long term Treasuries usually arrives anywhere from now through the 25^th of the month. The consistency of a mid-to late June turn is too frequent to ignore and a near requirement for a stock turn. After mentioning regularity of the turn in March & June for 18 years, I only just, recently, saw a Bond Mutual Fund Manager mention it on CNBC last week. That means a lot of traders may be watching for it, this year, making TBT the flip side trade some will be ready to trigger. For those who relentlessly complain about the US’ high deficit, fhegheddaboudit! Because rates are so low in the US, the added debt issuance has not, yet, impacted Treasury’s debt service costs. In fact, in 2009, debt service costs declined by $60B. Agreed, no one really knows how much the new Healthcare Reform Act will cost, and the added expense is ill timed, given that entitlements of that nature are easier to pass than cost control or (not in my lifetime) repeal. Still, debt service is not, yet, a major issue in the US, and the debt, overall, is nothing a strong expansion shouldn’t, one day, reduce significantly. Expect the Beige Book to sound a lot sunnier than the stock indices look at the moment. Then watch the 10-yr Auction Wednesday, and the 30-year Thursday, though there’s little doubt both will go off well. A better question may be how sunny Bernanke can sound, Wednesday, when he discusses the State of the Economy in front of the House Budget Committee. In the same vein, look out for the Federation of Tax Administrators, who started meeting today, Sunday.

The strength of the recovery is the struggle markets are wrestling with, at the moment. Just as stocks had built in a better recovery than we’ve got, they’re currently discounting a worse case than exists. There’s some real hiring going on—whether it showed up in the BLS stats or now. Some of the people I know who’ve been unemployed for 16 months and more, are suddenly getting not just multiple job interviews but concrete offers. And banks are amongst the group hiring the most. I know one woman who, after 18 months of unemployment and an inability to land an interview, suddenly was offered tempting options. She turned down a job offer from American Express, to take a more better one at BankAtlantic, only to be offered twice as much money by BB&T. All the bank mergers, including FDIC assisted ones, are causing a need for specialists that range from tech experts who can help convert and transition computer systems to a single one, as well as lending officers, loan work-out specialists, and managers. At the mall, better business for a few months has revived signs requesting associates. Of course, teen retailers have to reverse the mistake they made last year, and hire students to work this summer and fall or they will remain the worst performing group in the space. Teen workers not only spend the majority of their paychecks before they ever leave the mall but, also, bring in their friends for visits and lunch or dinner meets. The sooner teen retailers understand that, the quicker their businesses will catch up to the missy and department stores that have been slaughtering them on monthly comps.

I included a lot more information on this week’s Economic Calendar about the doings on Capital Hill, with Congress returning from a vacation. The fact that BP spill hearings will occupy so many committees, simultaneously, perhaps fairly expresses the bedlum that exposed the Gulf to such a disaster to begin with: So many Federal departments had supervision, none were the ultimate supervisor, allowing short cuts to be taken, and mistakes to be made. The NYTimes has an article about all the "exceptions" BP was allowed, because regulations were not updated since 1979, when they didn’t account for drilling a mile below the sea’s surface. And just as BP was looking to speed up the work since it was paying TransOcean by the day, RIG had every incentive to extend drilling, even though the Horizon was already promised to another site. thE states, MMS, and the EPA had the power to regulate but didn’t use it, relying on the industry to police itself the way Greenspan admitted he expected the banking industry to control its own risk. We’re quickly learning how inadequate our Capitalist system is at keeping up with technology, greed, and some of the other deadly sins. This is far from our finest moment. Again.

Once, again, the Events Calendar is stacked with investment conferences, as the pressure is on to get them in before they all but evaporate for July and August. Some of the events, like Apple’s WWDC, keynoted by Steve Jobs are well known to the markets but others aren’t likely to appear elsewhere. The NYU Hospitality Conference has been an exceptional market mover in past years. You’ll want to log into the Premium Calendar fo the link to the URL, and speakers. Other particularly noisy conferences should include Goldman’s Lodging, Gaming, Retaurant & Leisure, as well as the Am. Ass’n of Health Insurance Plans Institute (Note both S&P and OpCo are focusing on insurance, Tuesday, also). The Am. Orthopaedic Ass’n meeting, starting the same day, is often the equivalent of a mass analyst meeting, with many of the healthcare companies who make devices hosting analysts to discuss only that division of their companies. This week's Healthcare/Life Sciences meetings might be a few too many for the season, so it’s the Career College Convention & Expo, Wednesday, Credit Suisse’s Homebuilding & Building Conference, as well as the BMO’s Annual Advertising & Marketing Services Conference, coincident with the Am. Advertising Nat’l Conference, that could stand out, even as RBC will host some media at its conference, also. (Anyone else notice that Shrek has proved it has legs, despite its "disappointing" opening weekend?)

A light Earnings Calendar is likely to be eclipsed by tech mid-quarter updates, this week, even as it’ll be too soon to draw any definite conclusions about the rest of the quarter, barely mid-way through the quarter. Still, if the chip firms hosting updates this week talk about any push-outs in orders, the equity decline could worsen, still. Barring such talk, it’s possible stocks will try and crawl, tentatively, out of the hole they dug Friday/ Now that the weekend has passed without the Koreas shooting at each other, in the absence of any other country on the continent threatening to default or announcing the need for a hand out, and with BP claiming some success with its latest attempt to cap the Gulf gusher, some post-weekend relief could arrive. But no rally is going to get far. Too much damage has been done to the charts—too many will be looking to get out on any rally. The bears are in control, and should dominate until there’s definitive evidence of capitulation. There was none of that Friday, which gives the downside the edge, Asia playing catch up Monday, in the early going (Nikkei losses at 380 points as I write but it’s hard to know if that’s follow-on to US losses or related to the new Prime Minister {Kan} so soon after the new government was installed, boosting the popularity of the Democratic Party of Japan.). While 1060 on the S&P has held, to date, it’s likely to be tested and undercut this week. If that happens, all eyes will turn to 1040, where a lot of buy programs used to be set. Still, aside from technical levels, the bulls will have almost nothing in their arsenal until Q2 earnings start rolling in. There could be another month of pain for the bulls, with no assurances that Q2 earnings will offer any relief until late in July, if at all.

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© Sandi Lynne 2010 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author’s, alone, and should be just one factor in more complete due diligence.              

May 17—21, 2010 MARKETS NEED CONVINCING Bulls Have Lost the Upper Hand   For a while, there, the markets bought into a strong recovery. Bought into it enough to discuss how soon rates in the US would start to rise. Even dyed in the wool skeptics were finally converted but, now, market participants need convncing all over again. The higher dollar not only hurts exports but tourism, just as the summer tourist season is about to get underway. Even assuming the ECB’s $1T plan works to avoid a disaster in Europe, austerity measures and higher taxes will crimp both corporate and consumer spending, there, which can’t be good for American companies, even if Canada, Mexico, and Asia are bigger markets for the US.

The Greek affair was said to have kept FOMC members dovish even back when they were meeting 04/27—28, the minutes of which will be released Wednesday. At best and at worst, we find out how big an influence the EU’s troubles were. At worst we hear more about how surprised members are by the strength of the US rebound. Whether the discount rate was poised to rise or not, in late April, the turmoil in Europe forced a delay—additional information on the CD-type longer term deposits the Federal Reserve will offer to banks to withdraw some liquidity, not withstanding. PPI could show the effects of higher oil prices but those evaporated fast since April ended. Ditto CPI while the outlook for the 2, 5, and 7-year Note Auctions, Thursday, are better given doubts about potential default by the EU’s Mediterranean countries. Probably the biggest event on the calendar is the Options Expiration, with Memorial Day weekend and summer vacations quickly approaching. No matter how you look at the charts, stocks have confirmed the downtrend off the late April high—retests of the 5/06 spike low inevitable, ex-those outlier lows that were cancelled trades.The idea of replacing stocks with options might be a viable alternative for many PM’s, in coming days.

Tuesday could be an especially big day for earnings with Abercrombie, Home Depot, TJ Maxx, and Walmart, in the morning, then Hewlett Packard in the afternoon. Reports, Wednesday, from Deere, Ralph Lauren and Target in the morning, and Applied Materials in the afternoon are equally important but not nearly as heavy a schedule. I don’t mean to slight Lowe’s, on Monday, or Dell, GAP, and Intuit in the afternoon Thursday but, by then, activity will be captive to expiration, and what the summer could hold, even as 2013 LEAPs will start opening for trade.

Then, again, there’s an awful lot on the Events Calendar, this week, from numerous DevCons cum analyst meetings, from CA, SAP, SkillSoft, and JDA Software Group,    Potash Corp, and others, along with the Upfront for Fall’s TV schedule, hundreds of shareholder meetings, and notable conferences like AGA Financial Forum, JP Morgan’s TMT, the World Mining Investment Congress, Electric Power, Credit Suisse’s Basic Materials Conference, and Barclays Capital’s Chemical "ROC Stars" Conference, along with R.W. Baird’s Growth Stock Conference, the latter not just small companies but names like Cisco, across a mishmosh of sectors. Google is hosting I/O, a Developer/OS conference that’s rarely favorable for Apple or Microsoft, even as the abstracts for ASCO’s presentations are poised for release, and both Boeing and Travelers plan on hosting their analyst meetings.

It’s almost ironic that so many big events will take place during a week when market levels will supercede everything else. The real star of the week will be global markets: stocks, commodities, and currencies, here, in particular, whether the S&P can hold 1120 which, unquestionably, will be tested, this week. Look for some buying Monday that fades, again into mid-week. During any given Expiration, there’s always a risk that stocks get out of hand to the upside, forcing buyers in at ever higher prices but I seriously doubt that will be a factor this week. Of course, I’ve been surprised by the bulls’ tenacity before, and it might not take much futures manipulation to cause a scramble but I seriously doubt the upside wins the week. The ECB’s flip flop on QE, the very size of its proposed bail out package, and the hiccup in trading May 06th have put the fear of both falling markets and a recovery run aground into even the most stalwart bull. Furthermore, bears, sidelined for months, finally smell blood, providing the confidence bulls no longer can boast. Still, there will be stocks that get far too cheap to pass up. TransOcean is getting there; Amgen will at $52, especially with ASCO straight ahead, and Denosumab’s biologics license appication submitted to the FDA for reduction of skeletal events in cancer patients. Celgene is another name that should be strong during ASCO. Still, I’d rather buy LEAPs than stock to gain leverage without deploying too much capital sooner than necessary. Likewise, as weak as commodities have been while the dollar's been rising, that run looks stretched and due for consolidation if not a pullback, which gets me interested in USO for Memorial Day Weekend, one of the most reliable trades--like TLT topping around June 25th, fairly regularly (Consider that a warning well in advance). There should be plentiful bargains before the current sell-off has run its course. And that could be weeks away, depending on how fast stocks fall, and where and when they choose to base. Hopefully, the sell off will be a lot more orderly than it was on May 6th, since vacuums like the one seen that day seem inevitable in a market so skewed by futures and a couple  of handfuls of hyper trading computers that control billions of dollars and, often, seem to share the same logirithms.

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© Sandi Lynne 2010 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author’s, alone, and should be just one factor in more complete due dligence. 
                                                                    
May 03—07, 2010 TOO SOON TO CALL FRIDAY’S ACTION THE TURN  As someone who’s been sounding the alarm on the rally since February’s lows for a couple of weeks, I suppose most expect me to declare the more than year long rally off the March ’09 bottom complete. However, it’s really too soon to say that, given that Friday’s significantly negative trading on high volume didn’t drag many stocks below even last week’s low. On the contrary, many stocks merely gave up Thursday’s big gains. Others gavbe up more than that but didn’t set new weekly lows.

Admittedly, I’m handicapped, today, Sunday. The end of day charting software I’ve used for decades was built on top of off the shelf software but what was built on top of it was programming my dad created, set to my preferred signals, so I’d able to see change stirring early on, rather than late, when it’s too late to spare myself pain. Consulting an alternate system, which I refer to intraday day, is OK ocassionally but not nearly within my comfort zone for offering guidance to readers who’ve, hopefully, come to respect my judgment. It helped me see that a variety of stocks, from DHI, to WMT, to tiny SHFL outperformed most of the market Friday but, alas, I wouldn’t dare make my recommendations based on such limited information. What I can and have said, in the context of my bearish calls of late, is that the higher volume seen in contra-ETF’s starting two weeks ago presaged a change in volatility if not direction. The evidence of a trend change has been building for weeks, to my eyes, despite the high level of call buying through Thursday last week, and both analysts and talking heads touting the bull case—one talking head, who formerly headed up Neuberger Berman insisting as late as last Thursday evening that stocks, in his experience, never unravel when so many new highs are being made. Perhaps, but I doubt what happened Friday represents a single day event. Risk has been rammed down Portolio Managers throat, again, for the first time since late January. That occurred at the outset of a notorious weaker period for stocks—from May to November. Therefore, it’s only natural to expect a certain, apprehension group of portfolio managers to start using rallies to lighten up, reversing a long period of using "dips" to load up. In fact, I thought a good part of last Thursday’s stunning run up to new highs was one of the most engineered rallies in a long time—a last ditch effort to convince retail investors to send money into stock mutual funds, again, after a year of preferring bond funds.

It’s fair to assume the Economic Calendar will be more influential than Earnings, this week, given all the big data coming that normally kicks off the week, and how many major companies have already reported. The utilities reporting, and media companies like Time Warner (Wednesday) nwill get their share of press but pale in constrast to the monthly Treasury Funding Announcement, April Vehicle and Chain Store Sales, and, especially, Friday’s Unemployment Report and Consumer Credit (Really debt, so why don’t they just call it that?). Then, again, some of the biggest pending reports are not yet confirmed but assumed for this week, namely AIG and Fannie Mae. Furthermore, the Street should still be digesting the Fed’s two major press releases after the FOMC Meeting statement, another warning on risk management, the other announcing a CD-type program at the Federal Reserve Banks, to lock up some bank liquidity for longer periods than over night—the latter to be tested soon, rather than launched, officially. Whether the Fed’s warning on risk was related to Greece’s problems and the spreading downgrades of its neighbors, or another prelminary hint of a hike in the discount rate ahead, is hard to know. About the only thing we can conclude is that the Greece saga won’t really be resolved until the 7^th, when the EU is scheduled to vote on its portion of the Greek bail-out package that, also, involves the IMF.

Since I spent so much of my day preparing a Comp Store Preview for Institutional Clients, which delayed my learning of Interactive Data’s missing information until late this evening, I’ll mention in passing how surprised I’ve been by the continuing strength of traffic in the mall. One of the biggest shockers has been the enduring struggle at teen retailers, even as missy shoppers have returned determined to shop. Since missy retailers suffered earliest—as far back as fall 2006, their return has caught some retailers by surprise and benefited even department stores, some of whom have seen their home departments crawling with eager shoppers scooping up all the pillows, linens, and comforters they can put out. Naturally, some kids stores paid for the earlier Easter by seeing some sales shifted into March but, with summer weather and camp on the horizon, they won’t sit out May twiddling their thumbs. Likewise, the avarice for shoes spread out from department stores like Saks & Nordstrom to the manufacturer owned stores and athletic shoe shops—the segment place teens have sourced with some of their pre-recession gusto. Spring planting is taking place, and stores that sell major appliances have benefited from the Federal Energy Star rebate program, which each state designed and set their dates for, with Federal approval planned to allow appliance makers to meet demand without building unnecessary inventory. Having said that, the only retailers that doesn’t strike me as overvalued—ahead of itself, if you will—is Chico’s, which has been a big beneficiary of the senior crowd’s resumption of shopping, in May. It should report quarterly sales and comps Thursday, in advance of its earnings release in mid-month. In fact, most of the retailers who’ve stopped reporting monthly comps will weigh in with quarterly sales Thursday. Therefore, more will adjust earnings expectations, many of them up thanks to the pleasing traffic in malls, this month, as well as trimmed staffs and lease re-negotations in the throes of the recession’s worst days. Last year’s easy comps are a plus, also, though the lack of square footage growth, for many of them in the past year, will come back to haunt them when comps get tougher exceed later this year.

The Trade Show and Investment Conference schedule is packed, the Events on the Cheat Sheet below only a fraction of the events on our Premium Calendar. If you’ve been relying, mostly, on the Cheat Sheet for each week’s event listings, this is the one week you really have to consult the Premium Calendar online. The hijacking of one of our PC’s, set back completion of the May calendar. Therefore, the elves were working furiously, this weekend, after the Cheat Sheet was prepared.In many cases, to speed up the process, multiple Analyst Meetings on any given day in May, were consolidated into a single listing. What we can say with absolute certainty is that Biotech/Pharma still has a large portion of its scientific meetings scheduled in May—a fact that has often allowed biotech to outperform the market this month. Additionally, since so many biotechs are early stage, with no P/E to speak of, it’s a metric rarely used to decide whether any of them are over valued. The ultimate success of Dendreon’s long struggle to see Provenge to approval, provides a reason for some PM’s to look for other potential winners.

In sum, I write this week with one hand tied behind my back because end-of-day data provided by Interactive Data went AWOL for Friday and a good part of last Thursday, meaning I didn’t get a chance to study stock and index charts using my custom software. Nonetheless, the long awaited correction has probably started. The most stubborn bulls had their eyes opened by Friday’s swatting but won’t join the bear camp without confirmation, which won’t come until the S&P closes below 1180. The odds of equities closing below there will rise considerably if stocks trade below 1177 intraday. That level could prompt a flood of newly converted bears looking to protect their year long gains. Fresh money that often floods the markets early in a new month might provide a bounce early this week but the smart money will be selling that rally. Last Friday’s high volume decline, and the return of volatility after months of a steadily declining VIX, are evidence of, at least, a less predictable market if not an outright trend change, for which evidence is building but not, yet, conclusive.

The really smart money has been selling for a couple a weeks—my rare mid-week e-mails testament to how certain I was that a short term top, or worse, was imminent. Long time readers know how rare it is for me to stick my my head that far out on a limb. While I don’t need any more convincing, and won’t look to get long until the S&P is under 1160, probably under 1140, as I did in March through June 2009, if I start getting tempted to go long, I’ll sell naked puts, rather than make outright buys, unless the selling is strong and relentless right out of the gate, and most of the bulls are converted to vocal, scared bears.

For now, I’m not altering my outlook for another leg up for stocks from lower levels than we’ve got now. The next rally should be related to Q2 earnings reports but that presumes that the sell off I expect this month doesn’t get so deep that companies and consumers crawl back into their caves to wait out the storm—assumes the correction, pullback or whatever your preferred label for lower stocks prices doesn’t again, freeze the credit markets. IF the EU and IMF fail to agree or actually succed in propping up Greece, or US stocks again spiral down, hitting levels below February’s lows, then all bets are off on guesstimating what the future is going to look like. When all is said and done, the FOMC’s caution about raising or hinting at raising rates in anything short of an "extended period of time" will prove to have been the wise tactic. Investors are about to learn just how fragile the recovery and markets really are, and how quickly business perceptions can turn back to less confident levels. Many on Wall Street diss technical analysis but they all turn to charts and "levels" when corrections get underway. The fact that the bulls threw out charts on the way up, getting ever more bullish the higher stocks climbed, will come back to haunt them—assuming the S&P closes below 1180 this week, an assumption it’s hard to avoid after Friday’s selling.

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© Sandi Lynne 2010. Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author’s, alone, and should be just one factor in more complete due diligene.

April 26—30, 2010  LAST BEAR STANDING, SHUT THE LIGHTS  It appears stocks will keep on rallying until the last bear throws in the towel. In another time, with a different Fed Chair, one might expect the FOMC to alter its language in Wednesday’s post meeting statement but that’s unlikely to happen this week. The Fed would have prepared markets for tailored language. It hasn’t. It’s also hard to imagine Bernanke anything but pleased with himself. If markets get a bit frothy, all to the good. Frothy markets beget confidence, a necessary ingredient for hiring which still, might not, avoid a "jobless recovery" like the one seen in the 90’s and 2-naughts. And even a bear who becomes more negative the higher markets go, like me, will concede it would be rare for a correction to materialize in the face of so many stocks making new recovery or all time highs. That doesn’t bar an exogenous event from shaking markets to their core but such events have been plentiful, from Greece to volcanos and markets have been unshakable. Admittedly, the bulls will remain in control until they aren’t, and it’s for when they aren’t that I’m preparing.

The coming Earnings reports are the most voluminous of the season. Many of this week’s reporters have already surged to recovery highs on the back of peers’ reports. One of the reports I’m focused on this week will come from VF Corp. Wicked winter weather with more snow than the east coast has seen in decades should have significantly benefited sell through of all inventories at retailers & its own warehouses, North Face especially. Plus, Macy*s seems to have loosened its purse strings to stock its handbag department with Kiplinger’s and JanSport, new brands to the chain. Both VFC brands are popular with college students whose parents often indulge them. Add in a market that LOVES consumer- related names, and it wouldn’t take much for it to make new highs.

On the Events Calendar, I’m focused on Barclays Capital Consumer Retail & Restaurant Conference for the sheer number of presenters who’ve yet to report, and the number of caps included that remain relatively overlooked. Not only that but the vast majority of its participants won’t report until next month, won’t talk about sales until after the "month" of April ends next Saturday. On the flip side, I’m not sure what Research in Motion can say at its Capital Market Day that would persuade the doubters who fear Apple is slaughtering the competition. As mentioned last week, healthcare—medical society—meetings are most plentiful in November and May. Given the number of pharma and biotech stocks that have been beaten down, I’d start looking for bargains in those groups.

I’m also focused on Thursday’s 7-year Treasury Auction. That series is somewhat new and has not especially well received to date. Coming, as it does, one-day prior to the first look at 1Q10 GDP, trade after the 7-yr auction’s reception is announced, at 1pm EDT Thursday, could evince a little less jubilance. Having said that, I wouldn’t be surprised if GDP comes in even better than economists think, thanks to strong consumer sales, higher energy and related prices, and strong corporate activity seen in recent earnings reports. All that adds up to the bulls remaining in control. At least until they’re not.

Monday could see a little profit taking. The charts are filled with stocks at recovery highs whose internals are signaling a warning. But just as every dip has proved wise to buy, Pavlov's conditioning makes it likely that any money gained from profit taking will seek the most relatively undervalued story to buy. That will work until it doesn’t, and it’s hard to see when it won’t, at the moment but assuredly it won’t work one day. And the higher stocks reach, the more likely it is that they are reaching that point—whenever it comes. It’s scary to realize that all those who’d fingered 1220 on the S&P as a selling trigger have suddenly gone silent. Being bearish is so out of fashion it’s practically outre. I’ll wear that badge proudly while admitting I am 72% long, 22% in cash, the rest in puts. If the rally will continue until the last bear throws in the towel, it has a long way to go before I’ll do so. I’ve seen this movie too many times before—seen so many indicators line up for a correction just as they’re doing now. The movie always ends badly—usually in a horror show double header. Historically, it’s been wise to buy protection when it feels most like a waste of money, just as it’s wise to buy just when the pain of a correction hurts the most. Right now is the former.

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©Sandi Lynne Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author’s alone, and should be just one factor in more complete due diligence.

April 19—24, 2010 DID OPTIONS HELP SUPPORT STOCKS?  The bears got their first good opportunity to exert some influence, last week, after the SEC announced an indictment of fraud against Goldman Sachs. By Friday’s close, the damage inflicted was contained, mostly to financials. Overall index losses wound up far from egregious losses. But the 2 stocks the bears got to--Goldman Sachs & Google –were hurt badly. But there are no assurances that there’ll be follow-through to the downside, this week. Bulls can point to the rebound off Friday’s lows as proof that they remain in control until proven otherwise. How much of a role Options played is unknown but surely, there was some.

More than anything else on this week’s Calendars, Earnings will determine the continuing success of the bulls. It would be nuts to call an outcome, today, despite my well established bearish inclinations. Still, it seems fair to assume the financials will be handicapped by suspicion and the potential for more suits against institutions, certainly more against Goldman Sachs, particularly from buyers of the Abacus instrument cited by the SEC. How well GS’ earnings overcome last week’s break down will explain a lot about the rally’s short term viability. The bounce off Friday’s lows, alone, should give those waiting for a correction pause but, then,Options Expirations can cause distortions. It remains to be seen, this week, whether that, alone, explains Friday’s bounce back from the low.

As I’ve communicated, in this space, and with a rare mid-week update, a lot of stars are aligning for a pullback, the most recent BusinessWeek cover and the reverse split of PowerShares inverse ETF’s more anecdotal than the St. Louis Fed’s M2 chart, put/call ratios, and sentiment surveys. But, since Markets can remain irrational far longer than anyone expects, it seems wise to keep an open mind. I’ve personally pulled some money off the table—booked profits in some big winners—and either replaced the positions with ridiculously cheap options or decided to sit on the sidelines, in cash. I don’t think it will take long for the markets to reveal whether Friday’s indictment of Goldman Sachs has, indeed, restored the notion of risk to what’s been one of the longest running one-sided trades in history. Should the rally pick up where it left off, before the SEC news, I’ll strategically play the long side, first replacing all the stocks I sold that are, currently, lower than they were when I sold them last week.

Evidence from those US companies that have already reported earnings supports the view that the US economy might be in better shape than the most dour doubters imagined. This week and next will be the true test—each of the next two weeks packed with many more reports than the handful seen last week. By the end of the next two weeks, two-thirds of the S&P will have reported, including most sector bellweathers. Given the reaction across the banking sector Friday, it’s hard to imagine the group off and running, again, no matter what their reports look like. Furthermore, despite the statement from 41 Republican Senators opposing the Dem’s financial regulation bill, a statement that arrived after the SEC announced GS’ indictment, Friday, it’s hard to imagine a scenario in which all 41 will retain their opposition in the face of a roll call vote. The flashback from Main Street would be swift and severe, costing Republicans their shot at victory in November’s mid-term elections. I’d view the financials through the lens of financial regulation passing—sooner rather than later. Carpe Diem, and perhaps an easier sell, now, than it was pre-SEC announcement.

Unfortunately, Iceland’s erupting volcano could do more to damage the global rally than all the typical indicators that are warning of correction. Clearly, Europe’s economy will be handicapped. It’s not just the airlines who’ve had to cancel flights: Fedex and UPS planes are grounded, too. The disaster has been good for rail and bus travel, and truckers in Europe will pick up some of the slack. Repositioning cruises should be packed with trans-atlantic travelers if the ash cloud remains over Europe much longer. But it’s hard to envision a scenario in which the volcano helps Europe’s economy. It hurts tourism on both sides of the Atlantic and impacts Asia, as well, which has canceled many flights, too. Of course, for many months, what’s been bad for Europe and the Euro has been good for the dollar (think Greece) and the US but the volcano could be an exception. And the timing couldn’t be worse. With Earth Day celebrations on the 22^nd, the damage Mother Nature’s doing makes a mockery of all the worry about carbon emissions. What’s the point of cleaning up man-made emissions if Mother Nature can undo all the clean air gains in hours? The volcano hurts, too, solar cells, which are unlikely to do much good while a dark cloud of ash turns the continent’s skies gray. So much for Clean Tech saving Earth, no matter how expensiv oil gets.

The Earnings Calendar below presents only the barest highlights of the actual schedule. For a more complete list, use the recommended link in that section, which appeared last week, as well. Only highlights of the Economic Calendar have been reproduced, a link to a more complete listing also below. For a more extensive list of Trade Shows & Events, log into the Premium Side of our website. Still, the highlights of each calendar provide a good overview of what’s ahead--Events the financial press is likely to zero in on are emboldened. Of course, some of the events the financial press swarms have more to do with access than news, as the NYSE’s Earth Day Summit will prove, on 4/22—see the Premium Calendar.

Be VERY careful out there. There’s a good possibility the bulls will succeed by merely keeping stocks from taking a serious tumble. Additional big gains, however, seem a remote but not impossible potential, for the next two weeks, while the Street digests all the information it will receive in the next two weeks. As long as stocks stay above S&P 1180, the rally remains viable and will, in all likelihood, regain its footing once Q1 earnings are celebrated through the rearview mirror.

ECONOMIC: (see www.wallstreetinadvance.com/10stats4April.htm Monday for complete calendar)

AHEAD: 04/27—28 FOMC Meeting

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© Sandi Lynne 2010 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author’s, alone, and should be just one part of more complete due diligence.  

April 12—16, 2010 BEIGE BOOK and OPTIONS EXPIRATION  It’s said the news is always best at the top, so it was quite unsettling to read the first pages of Barron’s saturated with an optimistic view. Given that Alan Abelson hasn’t been bullish in—well perhaps in my lifetime—the enthusiasm for stocks was jarring, until I double back to see Abelson was replaced, this week, by another writer. However, it seems I am the only persons alive at all hesitant about the levels of major indices, on the even of Q1 Earnings season. I’ve stated my reasons for hesitation, based on the two charts at these links but said it’s not often an immediate signal. (http://research.stlouisfed.org/fred2/graph/?chart_type=line&s[1][id]=M2&s[1][range]=1yr   and http://research.stlouisfed.org/fred2/series/MULT/ ). Instead, it could be 7—14 days before the signal is optimized by struggle for the bulls. Additionally, with quantitative easing all but ending 3/31, it seems obvious to me the liquidity line will continue falling, which stocks should soon feel. Financial talking heads are back to buy, buy, buy, no one worried about the Yuan re-valuation, still contracting credit, or the lack of analysts getting more cautious on valuations. Still, when retailers reported blow out March comps, many of their stocks had nothing less to give the upside. So, perhaps, stocks can keep elevating through expiration. The $NDX seems determined to nail 2K. SPX wants to close above 1200, the DJIA above 11K but where will fresh buying come from now? On the contrary, those who owe the IRS a final payment are likely to be draining their accounts this week when they file their taxes. Furthermore, anyone who’d postponed funding their retirement accounts for 2009 will finish doing so by the 15^th. Therefore, it would seem, either retail investors come flooding back to stocks, or there won’t be a lot of inflows late this week.

It’s worth noting the number of Fed speakers, including at least one who’s a multiple offender, including 2 separate speeches and cities in a day, Wednesday & Thursday, for Lacker. Bernanke speaks Wednesday, delivering his economic outlook to Congress, plus March CPI and Retail Sales arrive the same day, the latter rarely a number that meshes with the evidence from Chain Store Comps or Vehicle Sales, though that should be a good portion of the number. Any change in the party line delivered recently could upset the apple cart and earnings, though good, could fail to match the whisper numbers which are, once again, well above the stated consensus. Furthermore, with JPMorgan reporting Wednesday, Bank of America Friday, assumptions about write downs and firming credit could get cloudy. BAC, under a new CEO Moynihan, could find fewer silver linings than CEO Lewis did—perhaps even flush the drain in the first full quarter outing for Brian Moynihan. Other notable earnings this week include Intel Tuesday, after hours, AMD and Google, Thursday after hours, and GE and Mattel Friday morning. Financial TV loves to make much of Alcoa being the first stock out of the gate to report the quarter but I fail to see how that will influence the market--rarely see how it influences the market.

Of all the many Events, this week, only highlights of which are below, Storage Networking World is one to watch since analysts have started downgrading storage companies—downgrades rare, as I’ve stated. Also note the number of healthcare related events because, if you’re looking ahead, you might keep in mind that May is a big month for biotechs, pharmaceuticals, and medical society meetings. That’s usually made biotechs a better group than the retailers who mostly report in May. PLUS, May is a big month for both shareholder and analyst meetings, Wal-Mart getting a head-start with its U.K. ASDA tour Thursday, Intel & IBM hosting DevCons. And if looking ahead for you is closer in than next month, take note, especially, of the AACR, HIghpoint Furniture Market, and NAB events starting next Saturday. Furniture is about the only group which hasn’t, yet, been overtaken with enthusiasm while, on the other end of the spectrum, Broadcasters have returned from the dead and are quickly becoming as frothy as any group well in advance of Fall TV’s upfront ad selling season.

Options can support stocks on the downside or cause heavy buying if stocks get through strikes on the upside. Given how little put buying has been taking place, the end of April Expiration could leave stocks exceptionally vulnerable, in coming weeks, just as the heaviest schedule of earnings reports arrive. A week ago, traders were worried that the twice monthly FOMC meeting (sometimes by conference call) on the discount rate would lead to another rise in that rate but that fear came and passed without another line of ink devoted to it. A week ago, Greece was the looming problem stocks managed to simply ignore. With the EU quantifying its available support for Greece, at a rate of 5%, should Greece ask for the aid, the 7.5% at which Greek bonds have been trading will evaporate, causing lots of covering. The EU package may, also, strengthen the Euro, at the expense of the dollar, which could cause crude and other commodity prices to go even higher. Gasoline prices rising well over $3 per gallon, at the pump, would dampen the consumers’ renewed enthusiasm for shopping—perhaps even cause credit conditions to worsen, again, though probably not until after tax refunds are depleted. Furthermore, retailers have tougher comps coming up, especially in the back half of the year. The better the economy looks—the better the data, including earnings--the sooner the reality of higher rates will arrive. Then, again, the home buying tax credits expire at the end of this month (though closings can take place through June). While the US—including manufacturers—have yearned for revaluation of the yuan, now that that moment seems almost guaranteed—imminent--there are bound to be some consequences, perhaps even higher expenses for retailers who worked so hard to trim costs and the prices on their schmatas, shoes, and furniture. And while earnings may satisfy even the loftiest expectations in Q1, will the Q2 outlooks be enough? These are just a few of the spoilers the markets will soon be facing which haven’t crept into the ebullient conversation. There’s a reason the news is always so good at the top—the only question is whether that top is here, now, or coming around the corner, perhaps as soon as Expiration has past. Trading since the 70’s, it’s quite hard for me to believe there’s no consolidation, if not a correction waiting to trap all those yelling buy, buy, buy. In fact, I’m suspicious of all the floor traders appearing on financial talk TV claiming they and their clients are buying, buying, buying. The louder and more often they say buy, the surer I am that they’re either selling to the fools who take their advice or fully protected against the downside, something I whole heartedly recommend.

April 05--09. 2010 NIRVANA?  It’s Nirvana—Goldilocks returned with an Employment Report that was no too hot and not too cold. Neither strong enough to suggest the economy is entirely out of the woods nor weak enough to question the rise in stock price levels of the past year. Granted, the rising tide should no longer lift all boats—traders should start distinguishing between the real winners, from here on out, and those that have simply plateaued in their rebound.

One of the victims, first Qtr was MSFT. It’s stock is not only flat since November, while NDX rose 7.1% in March, alone, but it has been hurt by RIMM’s miss on top of PALM’s, and the enthusiasm for Apple’s iPad, even as the iPhone continues to surprise to the upside. It’s looking more and more like an AAPL world, and MSFT stockholders have been suffering as a result, despite Win7’s successful release, last Oct. It doesn’t help, either, that tiny software company 14i won big damages against MSFT for Word patent infringement, just weeks before a new OFFICE suite is expected to debut. Should the iPad format take off, there’s the potential for more and more to be released running Linux or Android, cutting MSFT’s treasury out of the loop. Interestingly enough, I think the ideal iPad type device would be a fully functional laptop, with a removable screen (the iPad part), that communicates completely wirelessly with the base computer. And I don’t mean just feet away, like a wireless mouse but wireless from bedroom or home office to a downstairs living room. THAT’s an invention I’d love to see and think I probably will in my lifetime. There’ll be room for Android, since there are many who gravitate to anything BUT MSFT, and developers like not having to pay for an OS. But I think a lot of stock traders are wondering what’s left for MSFT which, instead of basking in the glow of Win7 and the coming new revisions of Office & server software is looking more and more like old technology starting to peter out.

     
EDITOR'S NOTE 03/25/10: A stock spoken favorably about, MELA blew up 3/24 when it announced the FDA had sent a non-approvable letter to the company, along with about 30 questions. This will delay MelaFind's approval by up to 180 days. In the conference call about the situtation, the CEO expressed distress and confusion that such a letter had been sent PRIOR to a panel review, disrupting the FDA's own rules and the laws governing device approvals. (An analyst on the call termed the situation insane, and said the FDA broke its own protocols and the laws that govern it, with a non-approvable letter prior to panel review.) MELA had heard nothing from the FDA since last October, when it submitted an amendment to the original filing, which had been granted priority review in June 09. He blamed the FDA's step out of bounds by its own rethinking of the entire device approval process, and the vacuum at the top of the agency for months, last year, before the interim chairman was named Chair in February. Additionally, the FDA has questioned the amount of radiation consumers endure during their lifetimes, how that effects their health--especially those instances (mostly in cancer treatment--when errors have been made through the use of much higher than recommended radiation doses that harm or, even, kill, patients. MELA thinks it can answer all the questions the FDA asked with its data on hand. Nonetheless, the stock was killed on the news, and will remain in the penalty box until the company meets with the FDA. IF the new submission satisfies the FDA it's possible it will be reviewed by its panel which meets in August but it seems unlikely that MELA will be put on the April panel, the only one for its device prior to the August panel meeting. APOLOGIES to anyone who's hurt by this blow up. I'm sticking with it because the 9K person trial proved MelaFind can spot the earliets stage skin cancer, which will, prospectively, save millions of lives once approved. Expect the stock to rebound when the answers to the FDA inquiries are submitted and still look for it to approved in time.

March 22—25, 2010  WILL the HEALTHCARE BILL TRIGGER SHORT-TERM TOP? There’s no question hospitals win if the Obama White House succeeds in ramming his Healthcare Bill through the House. Fewer uninsured means fewer services rendered without reimbursement. Insurers should, also, come up winners, since more of the uninsured will be forced to buy insurance. But otherwise, the bill is a tax on citizens and businesses that, so far, only one major company has quantified, at $100K annually. But the dangerous portion of the bill is plans to assess a new tax on passive income—investment income, to help pay the cost of all the subsidies the bill promises to the poor and smallest businesses. SHOULD the House pass the bill, it would then go to the Senate for some housekeeping and another vote so even a "success" in the House isn’t the last word. But passage by the House may be all it takes to trigger a sell off in the markets. I do not subscribe to those who say but look at all the winners. Instead, I agree with Representative Mike Pence of Indiana, chair of the Republican conference who said, "Only in Washington D.C. could you say you are going to spend a trillion dollars and save the taxpayers money," as quoted in the NYTimes blog live from the House. http://prescriptions.blogs.nytimes.com/2010/03/21/live-blogging-the-house-vote/?hp. Had the President and Congress had set out to do nothing more important than forcing insurers to accept ALL comers regardless of pre-existing conditions, and banned them from dropping insured for any reason, it would have been historic and sufficient to improve healthcare in this country. Had half the energy that’s gone into passing this divisive healthcare bill had, instead, gone into creating jobs, Congress would have done more for the country than it does in passing such a flawed and wide-sweeping bill that so many don’t want. Barclays Capital will be host to many of the names impacted by the Healthcare bill on Tuesday, so it’s an event likely to be very popular on the Street.

 
March 15—19, 2010 TOO MANY PREDICTING A REVERSAL  Earnings and Events shouldn’t bear much of a an impact on stocks, this week. Instead, Senator Dodd’s Financial Regulation Bill due Monday, Tuesday’s FOMC meeting statement, PPI & CPI, Wednesday & Thursday respectively, as well as the Quadrulple Options Expiration that heralds the S&P Indices’ rebalancing will rule. After nearly two weeks of higher closes, rough times should be expected. Volatility is typically higher around the FOMC meeting, Quad Expiration, index rebalances, and CPI and PPI but all of them in a single week should crank up the dial. Furthermore, with first quarter’s end fast approaching, there’s reason for traders to do whatever’s necessary to protect recent gains—including fast trigger selling, if necessary. Throw in St. Patrick’s Day, one of the most reliable up days of the year, and a meeting of OPEC that day, and stocks should flip flop around in a wider range before the week’s over.

March.08—12, 2010 EVEN BEARS TALKING POTENTIAL MELT-UP  I love the talking heads on financial TV. Late last week, Gary Kaminsky on CNBC’s Fast Money said traders should worry about the one-year anniversary of the market bottom because Retail investors will be looking to sell, knowing lowest capital gains tax obligations are rewarded those who wait to sell until one year and a day after buying a security. He said, at the time, institutional investors will be selling in advance. By Friday, he said the market is at risk of a melt-up, of institutions buying in fear of underperformance if they don’t. First, to assume retail investors were smart enough to buy at the bottom is absurd. Retail investors are known for riding stocks up and down, and back up again. If he’d spoken to retail investors, he’d have learned they were the ones claiming "the market always comes back," one year ago, and refusing to sell even when their advisors told them to in September 2008. The risk, as stocks approach their November (housing) or January (tech) or February highs is that retail investors might, this time, take break even and get out. Or the risk of mutual fund managers getting out at the double top—creating a double top. But to discuss "retail" investors who bought a year ago is ridiculous: even some of the best institutional investors didn’t realize early March 2009 was the perfect time to get back in They, largely, swooped in July, creating the second leg of the rally.

The question is what, if anything, will derail stocks this week? The Economic Calendar is filled with Treasury auctions, including10-year Notes on Wednesday, and 30-year Bonds on Thursday, both reopenings. While some may worry about money leaving Treasuries, which happened Friday, the reality is some money fleeing Treasuries might find its way into stocks. Clearly, retail investors have ploughed money into bonds but have been stingy with their stock flows, except in emerging market funds.

February 21—26, 2010 PUZZLING the FED DISCOUNT RATE HIKE POST-EXPIRATION One can’t help but wonder if the discount rate hike would have been as big a surprise if Bernanke’s testimony on withdrawing liquidity (www.federalreserve.gov/newsevents/testimony/bernanke20100210a.htm) hadn’t been postponed by snow. Still, upon reflection, the stage was set as early as January 7^th, when the Fed warned depository institutions to manage their interest rate risk (www.federalreserve.gov/newsevents/press/bcreg/20100107a.htm). A bolder statement has rarely, ever, been circulated and that, too seemed to come out of the blue. The February 7^th warning about risk mitigation made us wonder, then, whether the Fed was extremely concerned about the carry trade, and worried whether its discount rate was responsible for rising commodity prices, including gold and oil. Further, the Fed and Treasury have said, at every turn, that they support a strong dollar even as they watched—perhaps facilitated--the dollar’s continued slide against other currencies—at least until Greece’s sovereign debt problems reminded traders of the risks outside the US. The switch to lending only overnight is not much of a switch at all. In recent months, little more than a few million dollars have been taken at the recent 28 day auctions, with fewer and fewer institutions bidding, altogether. Still, you wonder what’s really going on at the banks—what the Fed knows and isn’t saying, which it might not want to have shoved in its examiners’ faces when it conducts this year’s SCARP (stress) tests. Of course, despite himself, Bernanke might reveal more when he testifies at Congress this week—his semi-annual testimony

© Sandi Lynne 2010 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author’s, alone, and should be just one factor in more complete due diligence.

February 08—12, 2010  REBOUND MONDAY IS THE ONLY CERTAINTY In ending last week’s Outlook, I said I’d be ready to buy if the S&P went straight down to 1040. As it turns out, it stopped just shy of that level, at 1044.50 before stocks were bought, Friday, with the same vigor they’d been sold off with earlier that day and Thursday. Anyone who watched trade in real time, Thursday & Friday, would be amazed to realize the DJIA finished the week down only 56, the S&P down only 8, and the NAZ down only 6. The latter part of the week looked a lot uglier than that, even with Friday’s rebound off the lows.

© Sandi Lynne 2010 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author’s, alone, and should be just one factor in more complete due diligence.

February 01--05, 2010 THE "MARKET HATES UNCERTAINTY" INDICATOR  Instead of the Magazine Cover Market Indicator, there should be one for the number of times talking heads on financial TV say "uncertainty." The more they say it, the more they’re either long and hoping they’re correct against the evidence, or selling but hope you’re the schnook who’ll absorb all the shares they need to unload before they get their seats clocked. For some, it simply substitutes for "I haven’t got a clue." And don’t be fooled by those who try to get original and creative by saying, instead, "the market hates ambiguity." It means the same thing.

There was an insidious, unrelenting flood of sell orders no matter how tentative the attempted rebound—the big money flows were exiting the market, last week. Usually, the kind of sudden, sharp, and deep reversals we’ve seen are followed by news of some fund blowing up. This time, it appears, the immediate precipitating event was Obama’s announcement of the Volcker Rule suggesting a ban on depository institutions’ ability to invest their own money in proprietary trading, hedge funds, or Private Equity. Having weighed in with my opinion of the rule, last week, I’ll say nothing more this week except to point out plans for Volcker to testify about his proposal before the Senate Banking Committee Tuesday. That should mean the pain for financials continues this week—at least through mid-week, despite some attractive levels already reached, and the disconnect between major money center banks regionals, last week, the latter outperforming most of the market despite still growing write downs and write offs.

Unfortunately for retailers, one struggling most is first up to report Friday, BEBE. January Comp Sales out Thursday, which will include many a retailer’s quarterly sales, will be a rare ray of genuine sunshine for the group. None of that easy comp business: Consumers were back shopping, in January, having waited to break the ice until after Christmas, then bitten with the spending bug that didn’t leave them all month. Valentine’s Day, which had become nothing more than a card and flowers event—perhaps dinner out—is suddenly, this year, a gift giving holiday. When so many men are shopping alone, carrying Victoria’s Secret, Sephora, and World of Charms bags, the intent is exposed. It’s unclear how retailers to retain the momentum through the rest of the dark winter until Easter, in early April but in the meantime, the group should celebrate January, and having survived the worst spending pullback in modern times.

It might be far to ask, How will the market react to less news and market cues from China as the country winds down factory activities in favor of New Year celebrations? It was a period marked by wicked snow storms, the past two years, that hampered peasants’ ability to travel to their rural homes after trains stopped functioning. In effect, the clamp down on lending, in late January, is over now that February’s here but the New Year will keep companies and workers distracted, until after the 16^th, when celebrations end. Of course, like Chanukah gelt, Chinese exchange red packages of money, much of which was spent on electronics in recent years. It is one reason why tech companies were somewhat confident about Q1—the inventory builds in China in advance of the New Year.

Earnings and Events are mostly a yawn, this week, compared to the Economic Calendar. Not only will Volcker testify on the ways he wants to rein in risk at banks—for which Morgan Stanley and Goldman Sachs suffered the most last week—but the week ends with the January Unemployment Report as well as Consumer Debt—perhaps the first sequential expansion in months.

ECONOMIC: For More, Please See www.wallstreetinadvance.com/10stats4jan.htm

EARNINGS: (For Subscribers onlyl.) 

EVENTS: (for Subscribers Only)    

© Sandi Lynne 2010 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author’s, alone, and should be just one factor in more complete due diligence.

January 25—29, 2010   OBAMA KEEPS PICKING OUT THE NASCENT SCAB: Latest Proposed Bank Regulations a Boon Only to Bank Lobbyists  Been a long time since I’ve felt as big a fire in my belly over any of the flaptrap that comes out of Washington. Let’s set aside the fact that, way back to Long Term Capital, it wasn’t institutions that misused depository funds to send the financial system array. On the contrary, it was a nearly unregulated subprime mortgage company, American Century Financial that started the ball rolling down hill in 2007. I simply don’t see how a Goldman Sachs or JPMorgan can separate investments in companies like Microsoft of Google from "investing for the benefit of clients?" Where’s the line? Surely, no one would argue about whether GS benefited shareowners--back then partners-- when it invested early in MSFT.

About the only ones who’ll come out on top in this street fight will be the bank the lobbiests, who’ll have to explain to legislators how stifling to entrepreneurship the proposed ban on private equity investments could be—even as big corporate investors like Intel will wind up having to invest LESS, without the competitive presence of the Investment Banks. Really, what, exactly does Obama believe "investment bank" means? Seriously wrongheaded regulation fighting the wrong battle, to take the heat off failed regulation at the same time Bernanke is fighting for 60 votes for his second term, and it’s revealed Giethner and the NY Fed thought about claiming "national security" in keeping details of the AIG bail-out under wraps.

And speaking of Bernanke’s second term, was talk of trouble getting him reconfirmed anything more than b.s. in the wake of Brown’s win in Massachussetts? Was there ANYONE other than big mouth Larry Kudlow proposing an alternative? Kudlow has only one agenda, getting Republicans back into power so he can return to a former position in such an administration. It’s quite surprising that the DEMs haven’t sued CNBC for equal time because there’s not a minute of Kudlow on CNBC that isn’t devoted to bashing the Dems—the actual appearances of Dems to counteract his Republican enthusiasm rarely more than 10 minutes of his two 60 minute slots, that 10 minutes, in the morning, unwatchable because Kudlow talks over even people he agrees with. Anyone else looking forward to the day the Roberts will be in a position to shake up staff at CNBC?

While I see no reason for banks to protest a ban on investing in hedge funds I could argue, equally, that their investments alongside clients in hedge funds is a seal of approval—no matter how badly some performed in the market collapse—perhaps none worse than those at Bear Stearns and Goldman Sachs. Still, where is the line between supporting clients and prop trading? Far as I know from friends in the business, the line is where profits diverge from losses—all the losses were a trade the bank should have never made.

If Obama would spend half the time on employment he does bashing banks, or trying to ram through an expensive national health insurance plan, perhaps fewer people would be as worried about what the economy will look like as support programs end. If there was ever a President who disappointed more people in such a short time, I don’t know who he was. Fanning the flames of blame on the banks will serve no good, and the legislators who break away from that program are the ones who’ll get re-elected. Those like, Dodd, who serve the President’s most misguided policies will be voted out, if they don’t withdraw first.

All of which brings us to this week’s Calendar’s, and the likelihood that there won’t be a significant turning point until Thursday—depending when Bernanke’s reconfirmation vote actually takes place. Still, with T-3 for End of Month Tuesday, the FOMC Meeting statement AND Obama’s State of the Union Address to a joint session of Congress Wednesday, any bounce after last week’s drubbing is likely to be at risk and suspect, until Thursday. And even then, with the first guesstimate of 4Q09 GDP coming Friday, celebrations will be reserved even if Thursday’s 7-year note Auction goes well, Dec Durable Goods pleases, and weekly jobless claims are more subdued.

Likewise, the earnings calendar is particularly busy Wednesday and Thursday, which will keep a lid on any attempted rallies. Given that even strong reports have resulted in sell-offs, the tone and tenor of markets have shifted from all news is good news to even good news is a selling trigger. Nonetheless, I haven’t given up on the suspicion (conviction) that stocks will mount a relief rally in early February, as the bulk of earnings reports are behind the markets.

If you get as far as the Conference & Trade Show Calendar, I’ve taken the liberty of emboldening some events the media and/or street are most likely to cover with the most ink, or events likely to prompt big moves in individual stocks. With Apple both reporting and unveiling its worst kept secret in years, this week, which I guarantee won’t be called the Newton, there’s a set up for disappointment—no matter what it says. Apple is not invincible—as it proved when it troughed at $7 a share not so long ago. And not getting much press is AT&T wireless’ promoting the iPhone 3G for all of $99 with a 2-year contract on Friday. If that pricing doesn’t seal AT&T’s fate—assure traders that AT&T will lose its exclusivity, perhaps as soon as the tablet to be introduced this week, than I don’t know what will.

Also, I’d like to point out that Jefferies 3-day Healthcare Services contract really concentrates on the providers—rather than pharmaceutical companies, so think ATHN, MHS, PSYS, CHDX, ESRX, MDRX, PRXL. Oddly, Molina (MOH) is hosting a separate Investor Day. The Soap & Detergent Association’s 83^rd Annual Convention is never as loud as the CAGNY Conference next month. AHLA—the America’s Lodging Investment Summit has usually been a BIG deal for hotel chains—Marriott already announcing a new brand in advance—the Autograph Collection—independently owned high end hotels that will pay only 5—6% rather than the 10-12% of its norm—according to Sunday’s NYTimes article. Last, BAC/MER’s Gaming Conference focuses on some of the smallest names in the group, like Full House and Churchill Downs, a complete departure from its usual fare.

In sum, there should continue to be a lot more volatility than markets have seen for months, and until the Economic Calendar gets past Wednesday, to Thursday’s reaction to the FOMC and Obama’s SOU, markets should not run away to the upside—no matter how strong a nascent rebound from last week’s drubbing appears at first glance—should one develop. Markets have had a history of weakness into month’s end, that’s reversed strongly once the new month opens. That has a lot to do with 401K’s and other retirement plans that see automatic inflows in a new month. Earnings and Conferences will take a back seat, though it might be worth adding some risk at the end of the week.

ECONOMIC: (See www.WallStreetInAdvance.com Economic Calendar linked from left Frame)

EARNINGS HIGHLIGHTS: (For Subscribers, only)

EVENTS:(For Subscribers Only) 

© Sandi Lynne 2010 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author’s, alone, and should be just one factor in more complete due diligence.

January 18—22, 2010  UNCERTAINTY SHOULD CHARACTERIZE THE NEXT TWO WEEKS As stated in an update, last week, the first few weeks of Earnings season are, generally, characterized by weakness that resolves to the upside, in a relief rally, as the reports run down late in this month or early next month. While the media is citing worry about the possibility that Intel’s outstanding report represented peak earnings, and how JPMorgan’s revenues missed, even as it signaled continuing weakness in consumer credit, I’d posit both of those were excuses, rather than reasons, for Friday’s big sell off.

First, the Dept of Commerce released disappointing December Retail Sales, last week, which spoke volumes about how faulty “sampling” is, as well as the hole left by WalMart’s decision to no longer provide sales data except when it reports. Given how large WMT’s sales are, its retinence left a big hole for the DOC to fill, and it played it to the downside. Clearly, the DOC numbers didn’t jibe, well, with either auto sales or the comp sales reported by those retailers that supplied numbers. In the small print on the government site, the margin for error is so large, Retail Sales could be revised as high as +2.7%, when the final numbers are released next month.

Second, for all but the financials, analysts’ estimates had been consistently rising. Intel did even better than the headline numbers belie, the settlement costs for its lawsuit with AMD costing shareholders another 15c of earnings, 55c the correct earnings if not for that, vs the 40c reported.

I won’t argue with the revenue disappointment at JPM, or the cold water it threw on hopes for a quick recovery in consumer debt but besides the obvious, Expiration, Friday, there was a 3-day weekend to increase risk aversion, as well as any number of Elliott Wavists and other technicians, pointing out the symmetry of time for the most recent leg of the rally, as well as a much followed astrologist’s call for a planetary alignment pointing to a top over the weekend. Put it all together, along with a slug of equally big reports coming, this week, in even greater quantity, and the stage was set for some profit-taking. That’s something that, typically, happens shortly after the first few days of the New Year, anyway. And just watch how popular healthcare stocks will be if the Dems lose the late Senator Kennedy’s seat on Tuesday.

The Economic Calendar will, truly, take a back seat to Earnings, this week, Wednesday’s PPI probably the most important datapoint, of the week. For a more complete look at the Economic Calendar, hop over to www.wallstreetinadvance.com/10stats3jan.htm, which will be updated by Tuesday. Also important to remember is the delayed release of the EIA’s oil stats, which won’t be out until Thursday, because of Monday’s holiday.   Also bear in mind, the FOMC meets from the 26—27^th though there should be little change in the post meeting statement language. We know that because plenty of members of the Fed have been active speakers, since the year began, and each and every one of them stuck to the “low rates for extended period of time” mantra, even though the Fed could raise the bottom of that range to 0.25% from zero without violating that pledge. The fact that not a single Fed speaker alluded to such a maneuver means they’re not close to taking that step.

Which brings us to the Earnings Calendar, dominated by large cap banks, including Citigroup Tuesday; Bank of America, Bank of NY Mellon, Morgan Stanley, Northern Trust, State STreet, US Bank and Wells Fargo Wednesday; Thursday promises Comerica, Goldman Sachs, American Express, and Capital One Financial, KeyCorp, Legg Mason and PNC Financial. Friday promises BB&T, GE, and Huntington Bancshares, as well as SunTrust.  A big week, by any stretch of the imagination, even if it wasn’t for reports, as well, from IBM Tuesday, Brinker LG Display, eBay, Storage Tech, Starbucks, and Xlinx Wednesday, followed Thursday by AMR and Continental, ITT Educational, Southwest Airlines, Union Pacific, United Health, AMD, Burlington Northern, Google, Western Digital, and Xerox. Friday, for a look at consumers, there’s Harley Davidson and Kimberly Clark, as well as the Sony/Ericsson Mobile Communications JV, and McDonald’s, which will likely report its December comps Thursday, and earnings Friday, though its own investor relations site claims the dates are “tentative.”

EARNINGS: Large Cap Bank Analysts will be VERY busy this week. Ditto transport analysts.  (This is a completely subjective list of highlights of expected reports, the criteria for inclusion based on whether they’re newsworthy, market moving, analysts have talked about them often, a client or family member has an interest, or if they lead their sector. Therefore, it is comprehensive but, admittedly, NOT complete—something we strive for in retail/apparel only. Having said that, companies occasionally change their earnings dates or, as with the “tentative” date for MCD {MCD could report comps Thurs, then eps Fri}, remain vague, in case there are interruptions closing their qtrly or annual books. Underlined means confirmed by WSIA, otherwise, speculated by the market but WSIA was unable to confirm the date on the company’s investor relations site. When a release of the report is not specified separate from the conf. call, it’s presumed to be coincident. If a MAJOR company is not on this list at all, that’s because WSIA confirmed its report another week. LMT is such a company. On many lists for this week, WSIA confirmed it for 1/27)

EARNINGS (For Subscribers, only)
01/18 MONDAY

Which takes us to Events, a big calendar it’s very hard to get too excited about, given the Earnings Reports scheduled, the conference calls after most of which will include full year outlooks. Still, even with only the highlights presented below, some of the events stood out enough for them to be emboldened. For example, aother the Economic Calendar includes both the NAHB Housing Market Index, Tuesday, and Dec. Housing Starts & Building Permits, Wednesday, anlysts will actually have the opportunity to mingle with the builders at NAHB’s Int’l Show, starting Tuesday. Likewise, though Coach is one of the few retailers to report, this early in the season, plenty of retailers will be speaking at ALEx, which started today, Sunday, which will allow for more off the cuff, contemporary remarks.

EVENTS: (For Subscribers Only)
In sum, the week is fraught with potential potholes. It is not out of the ordinary for stocks to stumble early in the earnings cycle. With stocks having made new highs, last week, and the dollar suddenly a wild card and frequently strong into March, there’s room for commodities to back off, and take the their equities with them. That, alone will pressure stock indices, and could make the headlines look worse than the underlying shares within the indices. Use low priced options to hedge into February but don’t take too seriously, yet, those who’d convince you that stocks have topped and are ready for a third wave down. It’s way too early to make that assumption, despite low volume as stocks made new highs, recently, and VIX that dipped below 20—a reason for caution and attentiveness but not, necessarily, wholesale selling, yet. Given easy comparisons and a strong rebound in sales, there’s still room for stocks to prove they actually deserve the multiples they attained—no matter the doubts about the economy’s prospects in second half of the year. It is more than likely that stocks will again test recent highs in February, which might be a more opportune time for cleaning out longs. In the meantime, hedge, protect gains, keep plenty of buying power handy, and take advantage of opportunities to dart in and out of the market. And if there is anything to fear, perhaps, as stated in the updates last week, it's the shot across the bow from Google. There are just so many ways China could retaliate--including going on strike against US Treasuries, though that seem unlikely. Anything that hurts the US hurts Chinese interests, as well.  

© 2010 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author’s, alone, and should be only one factor in more complete due diligence.

EDITOR;S NOTE 01/14/10: The biggest risk today is a reaction associated w/options expiration. Stocks are poised to blow through heavily bet strikes Should they succeed to the upside, taking out those levels, buying activity could cause a surging spike in prices, forcing those short, with covered calls, or other positions around the strike prices to scramble INTO the market, taking the indices to new recovery highs. Many would argue that would set up a tempting short opportunity but, with good earnings likely to outweigh bad, this earings cycle, and corporate managers a bit more optimistic, the bears will  have their work cut out for them until the tipping point. That could occur if long rates become too tempting for Institutional Portfolio managers to risk, and/or commodities prices, particularly oil as well as rates getting so high that they trigger worry about prices and, possibly, inflation, strangling the nascent recovery.

EDITOR'S NOTE 01/12/10: IS today's GOOG blog the shot heard round the world? Has the world been fooling itself about China ever seeking a symbiotic relationship with anyone who isn't chinese, and under it's control?    See it here: http://googleblog.blogspot.com

Before getting too excited about retailers whose comps were mainly better than expected, last Thursday, understand that lots of purchases made in December are returned in January. Plus, when those late December and early January credit card bills arrive, buyers remorse sets in, and consumers are likely to go on a shopping diet again, until closer to Easter. As it is, November consumer credit shrunk by $17.5B, and that could be the effect of the unemployed reaching their limits, even as banks are cutting those credit lines that worked so hard to generate in the credit bubble.

The biggest events are the Economic Calendar are the Beige Book Wednesday, preamble to the next FOMC meeting towards the end of the month; Thursday’s 30-yr Bond Auction—really a reopening of existing debt, Friday’s CPI, U.M. Preliminary Consumer Sentiment—though Lord only knows why when it’s based on all of 250 consumers; and Options Expiration Friday, which should influence trade as soon as Monday—right after another Mutual Fund Monday of gains that shouldn’t match last Monday’s. About that—we actually had a week that was the mirror image of my expectations: All the gains came on Monday, before stocks merely chopped around the rest of the week.

Also notable, Thursday, is the first full week of First Time Unemployment Claims that not only isn’t distorted by holidays—prior to next week’s additional Holiday, MLK Day—but the week most seasonal retail workers will show up in the numbers. Since Expirations are notorious for volatility, and Thursday afternoon is, also, when Intel will report, it seems likely to expect pressure on Thursday, earlier if claims spike from the recent 455K territory its been in.

ECONOMIC: (Link from left frame of the homepage: www.WallStreetInAdvance.com)

The Earnings Calendar is slight but remarkable for KBHomes on Tuesday, Intel after hours Thursday, and JPMorgan Friday morning. How anyone can make assumptions about the rest of the sector from either Intel or JPMorgan is beyond me but they’ll still try—especially if there’s anything unusual in JPM’s report, a disappointment in any of its credit stats that analysts didn’t expect. With JPM’s bonds reviving as strongly as its stock, that’s one datapoint that added to its earnings last year but will subtract this year. Most interesting will be the marks it takes—any mark-UPS in particularly.

EARNINGS: (For Subscribers, only)

As for Events, I took the liberty of not just extracting some of the highlights from the Premium Calendar but, further, used a colander to squeeze out highlighted  events that could hold the most interest and/or provide the most tradable news.

EVENTS:(For Subscribers, only)

In sum, as lousy as volume was on last week’s fresh gains, and as overconfident as traders are, vis a vis the VIX, it’s too soon to expect the bullishness to give way to selling. Conversely, it would pay to remember that a lot of the options expiring in January were sold as LEAPs as long ago as June 2007. Therefore, open interest might be distorted by retail investors who were buying the first dips after American Century Financial suffered the first seizure of the credit crisis. And smaller open interest in out months are not necessarily worrisome. You might recall that stocks didn’t top until almost November 2007, and wound up running up a lot higher than the realists and bears expected. I suspect that could happen again on this rebound (it already has run up higher than many expected)—unless there’s something in the Beige Book and/or the earliest earnings to suggest the Fed should move sooner rather than later.

I’ve long said the Fed could move rates to 0.25%--0.50% without violating its pledge to keep rates unusually low for an “extended period of time.” And the most pessimistic are saying, already, the Fed’s warning, late last week, for risk managers at depository institutions to examine their rate risk, should rates start to rise. (www.federalreserve.gov/newsevents/press/bcreg/20100107a.htm). As Barron’s pointed out, this weekend, the more good news earnings, employment or other data bring, the sooner the Fed starts to take away the punch bowl. Given this week’s slim Earnings Calendar, though, it seems way too early to worry too much about that—no matter what Intel & JPM report. But it’s not too early to start looking ahead to protective puts in out months, given the gift low VIX presents.

© Sandi Lynne 2010 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author’s alone, and should just one factor in more complete due diligence.

EDITOR'S NOTE 01/07/10: Expect a Pop and Drop on the Unemployment Numbers Friday, with no relief prior to INTC's report next week, possibly until JPM's report on Friday, next week

January 4—08, 2010  HAPPY NEW YEAR!  SELLERS WILL OPEN THE YEAR,  BERNANKE & NEW TAX YEAR ASSISTED  Happy New Year to everyone! As the calendar got ready to turn, profit taking hit stocks. The selling should continue as the New Year opens, especially after Ben Bernanke’s speech to the American Economic Association, Sunday, which can be read here: www.federalreserve.gov/newsevents/speech/bernanke20100103a.htm. In it Bernanke discussed Monetary Policy and the Housing Bubble. He didn’t fault too low rates for the housing bubble but, instead, a failure of regulatory supervision, leaving Alan Greenspan’s reputation intact but, perhaps, opening the door to criticism of the former head of the New York Fed, currently Treasury Secretary, to whom supervision of many of the biggest banks would have fallen. Also in Sunday’s speech, Bernanke admits he would use monetary policy to prick another housing bubble—something unlikely currently, since banks are still tightening loan standards, and indebted potential buyers are still paring debt.

The Economic Calendar holds the usual month-opening data: Vehicle sales, which may please, thanks to low rates and promotional activity; Chain Store Sales which were saved by post-Christmas shopping and long weekends following that holiday and New Year’s Day; and the December Unemployment Report which could, also, please, given how many unemployment offices are closed Fridays and closed early on 2 Thursdays, on the eve of the holidays, as well as recently laid off workers who simply waited until the New Year to apply. At Bloomingdale’s, Saturday, I ran into a friend’s girlfriend who’d been working as a perfume pusher since Thanksgiving, who told me it was her last day employed by the retail chain owned by Macy*s. Lots of laid off seasonal workers won’t get around to being laid off or applying for benefits until sometime this week, or next. Still, holiday sales not nearly as bad as the worst fears, and an Unemployment Report likely to show improvement for another consecutive month, are all it will take to reverse early week selling into buying. And don’t forget, while retailers and resorts did hire seasonal workers this year, it was at lower levels that leaves fewer to be laid off. Furthermore, some of the seasonal workers, if they weren’t working before being hired for the holidays, may not have put in enough weeks to qualify for benefits, anyway.

Honestly, the crowds in malls were much larger after Christmas than before, helped by sales and unseasonably cool weather, along with pent up demand. However, it’s the peculiarity of Regulation Z that will, also, aid December Comps. Under Regulation Z, goods ordered cannot be billed until shipped. So catalog or online sales that occurred Black Friday and that weekend wouldn’t be shipped and billed until the NRF calendar had turned the page into December and, therefore, will be credited to December comps. JCPenney was the chain that called out bill upon ship for its expectation for Black Friday weekend sales to flow into December but the same will apply to other chains that made no adjustment to December comps. Despite big crowds at malls, a lack of clearance merchandise and light discounts relative to last year’s fire sales will hamper the top line, Ross Stores, in particular, light of all inventory the weekend before Christmas. On the flip side, little Cache seemed to find its groove after Thanksgiving—albeit at promotional prices. Teen retailers suffered from a lack of staffing at the stores where they’d normally earn their own money to spend before leaving the mall, while missy chains are still struggling to even get shoppers in the door. GameStop, which has been heavy for months, saw steady lines. Its stock is probably worse than its business, as future downloaded games worry investors. Still, with trade-ins so much a part of its business, and announced competitors not making a dent, yet, it also could surprise to the upside.d

Wednesday’s release of the Minutes of December’s FOMC meeting should coincide with the last of the profit taking,as a good part of the conversation concentrates on exit strategies..  

ECONOMIC: (Link from homepage www.WallStreetInAdvance.com)

Q4 earnings will be reported all month, including a slender list of scheduled companies expected, this week. Earnings will be accompanied by outlooks for ’10.  Not only are coming Q4 reports contrasting with weak year ago reports but, for the first half, anyway, outlooks will compare to some of the weakest sequential earnings in modern times, at a time when GDP collapsed by 6.4%. In tech, it’s hard to be bearish with netbooks selling like hotdogs at a stand in Times Square, Win7 under consideration by corporations who last upgraded desktop PC’s when XP was released, and with the rumored Apple tablet coming—probably to be beat to introduction at the coming week’s Consumer Electronics Show. What may actually be most important in the outlooks provided with earnings reports is the degree of optimism—whether companies are, finally, ready to throw caution to the wind. After all, what characterized the most recent quarterly earnings were beats on cost cuts but lower revenues and extremely cautious outlooks. SO forget the numbers, pay attention to the depth to which caution has been trimmed and the degree to which optimism infuses the outlook. I’ve left my reminders on the Earnings Calendar, exactly as they occurred to me.

The Street is likely to pay the most attention to Mosaic (MOS), Family Dollar, Bed Bath & Beyond, Constellation Brands, after Diageo dissed spirits sales, Lennar, Apollo, Global Payments—a bead on casino activity, and PriceSmart for clues to how the Caribbean is recovering from the recession. Because Monsanto recently hosted analysts and provided an R&D and sales update, it’s actual report should be anticlimactic. Although I included the report from Canadian drug store chain, Jean Coutu Group, Walgreen will report December Comps, Thursday, saving the street from making sweeping generalizations.

EARNINGS: (Selected earnings reports for Subscribers, only.)

Which brings us to Events, the highlights of which are below. If you want to see whose speaking or link to an event, log into the Premium Calendar, where there’s all that, and many more events.

It’s ironic that MacWorld Magazine chose to schedule the MacWorld Expo so close to CES—the Consumer Electronics Show, even after Steve Jobs said Apple would no longer participate, directly. Perhaps there was no way to reschedule or switch the event from San Francisco to Las Vegas, where the rest of the Consumer electronics world will be. Google, on the other hand, probably knew exactly what it was doing when it scheduled an “Android Press Gathering” at its Mountainview CA headquarters, despite a twice monthly “fireside chat” scheduled the following day. While the rumors haven’t reached the fevered pitch of Apple Tablet rumors, it is widely expected that GOOG will introduce, Tuesday, the Nexus One, its own Android phone, which employees have been testing for weeks. It’s a bit of irony that GOOG has chosen this route to unveil its own smartphone because it was at MacWorld in 2007 that Apple introduced the first iPhone. Given how expensive GOOG’s stock is, perhaps it’s the disk drive industry’s pre-CES meeting that should be the focus for most investors.

Given convergence, with smartphones the center of some consumer’s world, it’s odd that Citigroup scheduled its Entertainment, Media & Communications Conference in San Francisco, overlapping CES in Las Vegas. Seems Vikrim Pandit has a lot of waking up to do. Do note how many pre-conferences there are in the days leading up to CES, including an AT&T Developers Conference, as well as how many investment bank divisions will be hosting clients and/or companies at CES. Seems to me Intel is one of the least loved tech companies around, despite the prospects for a refresh cycle, while Qualcomm has faded from center stage, despite the prospects for smartphones, 3 & 4G broadband. Hmmm.

While half the analyst world will be in Las Vegas, trolling the booths, hosting clients and companies, a quarter of them will be at thee Javits Center,  and in the garment district, seeing Back to School lines from manufacturers, trying to divine how good earnings will be from their group in February. The freeze that’s going to extend as far south as Florida should be a boon to VF Corp, which owns North Face, and Deckers Outdoor, which owns UGG of Australia, a line of boots Nordstrom didn’t mark down during its semi-annual sale which started this past weekend.

EVENTS:(For Subscribers only. A link to the Free Calendar is available from the homepage @www.wallstreetinadvance.com)

Pritchard Capital’s Energize is an event that shouldn’t be overlooked. Though crude soared in recent weeks, pump prices have fallen, here in South Florida, as snowbirds and visitors boosted demand and raised competition. High test is less than $3 per gallon for the first time in months. Also notable, Raymond James’ 9^th Annual Government Services & Technology Summit, and the Forest Labs Analyst Meeting. This week’s Barron’s believes the entire technology space is moving to the “cloud.” After reading the article, I realized Dell’s buy of Perot makes more sense, in combination with PER’s government contracts, especially in healthcare, just as Obama is determined to support doctors and hospitals switching to electronic health records. Similarly, IBM has been a cloud provider for years, while Hewlett-Packard’s buy of EDS will facilitate its cloud credentials. Affiliated Computer, a one-time take over candidate looks tastier too, as do all the credit card processors who operated clouds, long before anyone named them that.

Early New Year trading volume has rarely resumed typical levels, immediately, as traders took their time returning from vacation. But this time is different: Friday holidays, two weeks in a row, should return more traders to their desks to start the year right, Monday—except where snow has delayed flights. Expect more profit taking Monday & Tuesday, now that the year has turned the page and profits can be booked without fear of immediate tax consequences. But, also, expect buying at the end of the week—especially if Monday & Tuesday’s selling match or exceeds last Thursday’s. As stated above, Q4 earnings should be better than last year’s, and top line revenues should rebound in tech and retail. Sure, as the meat of Q4 earnings season approaches, there’ll be warnings—some from retailers reporting December or quarterly comps Thursday. But, also bear in mind, the Chinese New Year is February 14^th, this year, the Olympics opening night that weekend too, and it’s easy to make the jump to a busier January than usual—especially since the Chinese New Year often falls in January, which pulls orders into December but that won’t happen this year.

While buy in anticipation and sell on the news is an old and valid maxim on Wall Street, that may be true for Apple’s unconfirmed tablet but can’t be true for companies like Intel, for which there’s zippo anticipation despite the upcoming CES Expo, strong sales of products with “Intel inside,” and technology, generally, a bright spot for shoppers’ lust, in recent months. Olympics even spur flat screen TV sales, 40” Samsung 1080’s advertised, today, for $798, about as cheap as I’ve ever seen them—price, alone, reason for interest. It’s ironic that financials, which had been flat to weak for 6 weeks managed gains Thursday, when stocks, generally, sold off hard. For all those that have sounded alarms about stocks not being able to advance without financials, there’s reason to wonder if the last minute 2009 buying of the group is the first salvo in the next leg of the rally. We’ll see.

Which isn’t to say I’m upbeat about the economy: On the contrary, I think there’ll be a price to pay for what remains an ongoing credit contraction but I also don’t think it becomes a major factor until, possibly, Q3 2010. While consumers had been nearly 70% of GDP, much of their spending was for gasoline, heating oil, insurance, groceries, school books, telephone and electricity, and similar non-discretionary necessities. The percentage of consumer spending on discretionary purchases was distorted by the credit binge, which isn’t about to happen anytime soon. BUT, for the first time, after Christmas, the consumer emerged from hibernation and splurged. That, alone, should encourage retailers to express more optimism for spring, even as their restrained inventory eliminated the need to kill margins in an effort to clear their stockrooms (Macy*s excepted, since it doesn’t know how to compete on anything but a pyramid of discounts.) For the first time, the balance of power seemed to shift to sellers. Having gone off their frugal wagon, consumers might just surprise to the upside this week. In fact, if Dec. comps are better than feared, and one chain, say Ross Stores, does claim comps were hampered by too little inventory, as it looked to me, here, enthusiasm for stocks could be unleashed, taking the recovery rally to the next level. Bears will have to be very patient.

Finally, on the subject of consumers, if you haven’t yet seen Avatar, you’re in the minority. As of December 28^th, movie theaters that sell tickets in advance and online, here, were sold out until January 4^th. The movie is already on pace to crack the top 5 all time box office hits, aided, in small part, by the 3-D showings, which cost more than regular tickets. It’s long, and visually well imagined but the story is too predictable. I walked out thinking Cocoon was better. At this point, however, anyone who hasn’t yet seen it and/or was turned away when they tried, will be more determined than before to get in to see it. Movie theater operators had a boffo season, the biggest winners in the consumer spending sweep stakes. While the group is known for going private only to come public again, Entertainment is still experiencing strong demand. Consumers aren’t dead, they’re only more discriminating.

And since I was early in my call for the dollar to rally into year end, I’ll follow up with expectations of more gains for the dollar which will hurt commodities and materials but not the rest of the market. Therefore, it might make sense to expect a period of Goldilocks, stronger dollar but not too strong, stronger stocks but weaker commodities, which will help both consumers and companies. And if the dollar continues its gains, no matter how slowly, expect more cross border M&A, as overseas companies quicken the pace before their buying power is damaged by a strengthening dollar, even as other companies use their revived shares to expand.

© 2010 Sandi Lynne Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author’s, alone, and should be just one factor in more complete due diligence.

BULLS & BEARS FACE OFF FOR MORE OF THE SAME
UPDATE 12/27/09 Bulls remain in control that some selling for tax loss purposes seems inevitable, in those shares that lost 30--60% this year. Apple, it's stock so strong, was one of the least impressive retailers at the mall, after Christmas. The post-Christmas shopping started out with a bang, as shoppers packed the lots and stores, many carrying returns but most others looking for 70--80% off bargains like last year, were disappointed.  Still, with BOGO 50% off enhanced to BOGO Free (AEO) and plenty of stores offering 40% entire purchase (incl. ANN's two divisions, GPS, PSUN in jeans), shoppers unhunkered down to find the best bargains and, alargely exceeded.

Surprisingly, JWN offered the most restrained markdowns its Semi Annual sales restricted to a mere 33 1/3 off original prices yet was packed with shoppers, especially male clothing and ladies shoe buyers. JWN, which has had trouble enticing women up stairs succeeded with women and teens who flooded BP, where only selected racks were reduced

SKS held its post Christmas additional 50% off already redced prices until noon Saturday, after which it switched to only an extra 40% off aleady reduced prices. There wer hundreds of women lined up before the store opened at 8am, who cleared out the discount handbg racks grabbing bargains like a Gucci leather handbag, origicinally $1995, for only $375. Men were prominent shoppers too but there was a heck of a lot more NOT marked down, including cruise, spring preivew, and a complete swimswear department.

Neiman was a lot more restrained with only an extra 25% off the lowest price on clearance products but there was only a very limited supply of that, and most of the store was full priec.

Teen stores AEO, GES, and even GPS, the latter at 60% off, saw increased traffic and sales though it was impossible to learn if some of that was gift card redemptions.

Old Navy was steady with merchandise reduced to $5, $7, and $10 but for most of its units, you need to be abut 7' 11" tall because vee neck seaters are nearly dresses--sleeves and lengths built for giants not the average shopper.

Stores like Justice (DBRN), saw a near feeding frenzy of merchandise from 30--60% off. Banana Republic (40% entire purchase, including clearance) attracted a lot of bargain hunters. Hollister picked up with jeans & fleece 40%--and plenty else too, which it wasn't advertising to anyone who didn't walk into the store. At Abercrombie & Fitch, there were some exchanges and redemption of gift  cards but still at a fraction of even year ago's lousy levels. The redeeming unit at ANF was kids, where grandparents and parents were pretty easily sucked into 40% off clearance dales--the same started 12/24 after 6 weeks of $25 gift card for redemtion in January with every $100 purchase ($25 gift cards with $75 purchases)  In fact, any sale seen 12/26 was kicked off at the mall on 12/24, as merchants tried to attract shoppers to spend money with them.

TIF was a real bright spot, the silver counter busy the week before & 2 days since Xmas, though not Xmas eve.

CACH flipped flopped all week betwe4en 30% off entire purchase and 40% entire purchase but finally settled on the 40% level after Xmas. I am, again, namin it the most improved retailer for the past 7 weeks, using promotions successfully to get shoppers in its stores and buying.

WetSeal's Arden B did a bang up job, relative to recent history, offering up to 75%, flip flopping from BOGO $5, BOGO $1o the last few days before Xmas before returning to a straight 40% off store wide.

To my surprise, I found a couple of coupon sites that had one for 10% off any signel APP purchase. It helped but it's still suffering badly from a precipitous drop in traffic and sales this season--despite being the stadard bearer for skinny jeans.

GameStop (GME) sported an unending line of up customers except for a short dip after Black Friday weekend. For the last 4 days before Xmas, and the two since GME did retailing proud and put WMT to shame, entertaining no fewer than 12 customers on the check out line at any moment. Some straight out buying, others trading in to spend the credit on a newer game. I did see a few WiiFit kits being carried out of the mall, MacBooks, though, the electronic device most likely o be sported, frequently

Yankee Candle (YCC) is doing great job clearing out candles at 75% off which dented Bath & Body (LTD) works mere 15% off. Victoria's secret was strong on panties, and bras at BOGO 50% off, while pink offere deals like tanks 2 for $25 when they used to be $32. That's a factor of the need to pess for stronger sales as well as in answer to competiors like YCC and Forever 21 which was blowing out merchandise at a mindboggling pace and at an equally mindbogging set of prces. Crinkled leather bomber jackets for $34.50 while faux leather was $79 in both BEBE and ARden.

All in all, the luck of the calendar--Satuday & Sunday the two days after Xmas--added a tremendous boost to traffic and sales--even a Bloomdale's (M) white sale for linents & furniture.

What retailers didn't book in the days sneaking up towards Christmas, they more than made up for in the two days  after Christmas with more to come as women fill in the pieces they need for New Year's Eve and en check in for bargain ties, shirts, jeans, or sweaters. Denim, supposedly a core category has been the loss leading advetised garent, offen at the stiffest of all price reductionsm despite all the men, women, and teens heard to complain that they liked it better last year, when prices were reduced even more.

The key takeawys? Traffic surged after Christman, and browsers were shoppers--and actually enjoying spending money, again. That's just the kind of facts that sets uprecoveries in retail stock and causes analysts to start softening the new degree of frugality consumer had seemed to adopt for a year. .

The weekend's open question is what the latest attempted terror act does to airlines, secruity companies, and fliers. Though prepared to be put through the wringer, the passenger I picked up from NYC noticed no increased security before boarding. Warned that cars coming into airports were being seearched, I expected the worst but suffered not one bit of new security. I'd expected the early post 9/11 mirror examination under the car and for the trunk to be opened but absolutely none of that happened. Where I did see extra Boca Raton city black & whites was all over the parking lot at the mall--a presence so large I wondered where all the new police sedans had suddenly appeared from

Bulls in charge--don't fight it even as I'd recommend some cheap index puts for Jan and Marcc.

Regards for a Happy New Year! Sandi  EARLIER OUTLOOKS HERE

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