Economic Data is more a bit light this week, with Oct CPI and Housing Starts the top numbers scheduled for a Tuesday/Wednesday double punch. You know expiry weeks often see a mirror reversal of trading Tues/Wed, with Wednesday, lately, the stronger day, but they could mix it up this week and rise, instead, on CPI Wednesday, fall on Housing Starts on Wednesday. Further supporting some hesitation Wednesday might be nervousness in advance of Hewlett's and Intuit's earnings, scheduled for release after the bell on Wednesday. If Hewlett really misses and disappoints, as it has the last few quarters, Thursday could turn out the worst day of the week but before you bet that way, take a look at HPQ's chart going back many years: The November report is the one most likely to surprise to the upside. Since both DELL and LXK reported strong consumer sales, and DELL specified it's decision to avoid competing on price to the sacrifice of margins, giving up some of the lower end sales, it's possible HPQ's consumer sales could, once again, deliver the magic it's lacked for a number of years. Of course, it'll take a strong SEMI book to bill on the 19^th to justify tech buyers but that may, in fact, arrive, since Sept component sales often rise in anticipation of a strong holiday season and to offset some inventory drawdowns from Back to School shipments.

Thursday, Walt Disney provides the headline report but I'd be remiss if I didn't point out the abundance of retailers reporting this week. Home Depot and Lowe's, Toys 'R Us, Staples, Gamestop, Gap, Nordstrom, Williams-Sonoma, and Limited are some of the higher profile names, with this week the lead up to Limited brand Victoria Secret's holiday fashion show on CBS, scheduled for Wednesday night, the day before LTD releases it's report. Long time readers might recall the spring fashion show in Cannes, for which I thought it would be wise to own Victoria's Secret on an anticipated pop, which delivered. Now, as part of the much larger Limited, I don't see the fashion show play. In fact, the show has often brought howls of protests, embarrassing LTD for it's crass presentation--a frequent complaint that lights up CBS' switchboards.

A number of Fed Presidents speak this week. Two on Tuesday, with Atlanta's Jack Guynn on Friday speaking on the outlook for the U.S. Economy. Meanwhile, Alan Greenspan, speaking often on the economy and, even, oil, speaks Thursday, to the Cato Institute, on the Euro, which the bond market will tune into as if he were speaking on rates, since many believe the only solution to the still sliding dollar is higher rates--which Greenspan and company have insisted won't happen soon. Should Greenspan offer some credible rationale for his reasoning, the bond market could be assuaged. Otherwise, Sir Alan could do more harm than good, another reason Thursday looks like it holds potential for the worst day of the week.

As for trade shows and conferences, CNBC talked much about Comdex, Friday, as if it were 1995 all over again. It ain't. But there are Investment House bus tours to both fabs and electronic manufacturers this week, which should help contain the tech sell off started Friday. As Barron's pointed out this weekend, the accelerated deprecation on equipment purchased by companies has a year left to go before it expires and could spur stepped up corporate purchases next year. Tech investors likely read that this weekend, and decided Barron's was issuing another clarion call to buy tech but, quite honestly, the tax advantages could be seen in factory purchases, too, so it's not strictly a tech boost. Since the depreciation ends at the end of 2004, an early Monday flurry won't necessarily hold. There's plenty of time for companies to pull the trigger--13.5 months by my math.

Neither OracleWorld in Paris, nor MacExpo in London roll my sox up and down. Rather, I think Deutsche Bank's Hospitality & Gaming Conference gives a boost to those groups, while the FDA is almost certain to approve Mederax's Restylane on Friday, since it's been sold safely overseas for quite some time. Problem is, MRX may have already built expectations into it's stock price and it's not a good options play. Not only is it likely the stock be halted Friday but the options have gotten extremely pricey, thanks to a rocket-shot from 55 in a short time.

In sum, while I see the potential for a little deeper pullback than we've seen--especially since some taking all of Thanksgiving week off could decide to simply book profits and return fresh, in December. That means some will be treating this week as end of month--getting a jump on thinner trading next week. However, I don't think we've seen the last of the rally for the year, and hold open the potential for a marginal new high--at least a test of last week's high's--on either the Wednesday before or Friday after Thanksgiving, with my gut vote going to Wednesday. I believe the annual high will arrive the first week in December, which means anyone who's desperate to ride the last 2% of the rally has to position during this week's sell off or early next week but that doesn't mean I think a high December 5^th, should it come that day, will be the high for the rally begun 13 months ago. It's be this year's high, with a strong likelihood of some higher prices next year. With only a full month left in the year, and many planning to be away at the end of the year, it's hard to see how we don't peak weeks before the year ends. Given the President and treasury's determination to keep the economic revival going straight through to a rebound in employment, it isn't hard to imagine higher prices next year--a Presidential election year, no less. But for the rest of this year, we're largely done, and any additional gains to be posted won't be worth the risk of staying long to some portfolio managers, who have to be looking at the calendar, eyeing their vacation days next week and the last two weeks of the year and thinking, "Maybe I need to take some profits before everyone else does." That doesn't leave many weeks before the last two vacation weeks of the year in which to do that. My guess is it starts next week, with a retest of last week's hi's or marginal new highs Thanksgiving week and/or the first week in December bringing out some really serious profit lock-ins, with December representing a month of portfolio protection more than gunslinger heroics.  

© Sandi Lynne 2003 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.

November 10--14, 2003      MARKET WAS TOO PREPARED FOR FRIDAY'S DATA    The market reacts to surprises. Friday's lower Employment Rate wasn't much of a surprise, after Bernanke and Greenspan both sounded so convinced, last week, that employment would soon recover. Likewise, once everyone and hie uncle started looking for a top on Friday, the market could NOT provide the set up the bears were looking for. The biggest day of the week for data will be Friday, when Retail Sales won't be as good as some have been in the past, thanks to lower gas pump prices and slower auto sales. Friday will also deliver both Producer Prices, as well as Industrial Production and Capacity Utilization for October, as well as the preliminary Nov. Consumer Sentiment numbers from the University of Michigan. Overall, the economy should get a mixed picture--nothing moves in a straight line. Still, the first rate rise will clearly be on everyone's mind, from now on, holding the markets back.

Speaking of holding the markets back, if all the states and pension funds that announced plans to pull billions out of Putnam and other truant funds make good on their state intentions, there'll be billions tied up in transfer for at least 30 days. Move administration or management from one fund to another isn't the same as buying and selling a stock with your online broker. Positions have to be close, plan participants have to be notified and, where applicable, notified of their new investment options. If you've ever transferred a big account from one broker to another, you know your account was tied up for at least two weeks, a month if you followed a broker who was sued by the firm he was leaving. Well trust me, my father used to be involved in setting up pension funds and, not only will Putnam and the other funds need to sell stocks to meet the redemptions but the money won't be put back to work at the replacement funds for 30 days or so. Since the billions in announced leavings total more than recent monthly fund flows, that could stall any rally attempt while the funds selling to meet the redemptions should pressure the markets.

While CNBC and other media will be talking about Applied Materials, Dell and Wal-Mart's coming earnings, many will be watching the various retailers set to step to the confessional. Pacific Sunwear, Abercrombie & Fitch, TJX, AnnTaylor, Federated, TOO, American Eagle Outfitters, Kohl's, Starbucks, Target and Tiffany are a mouthful of names set to report this week. Because their post-release conference calls will be the most contemporary view of consumer spending, and the east coast has been a jumble of contradictory weather--78 degrees two Saturdays ago, in the 40's this past Saturday--even the economists will be trying to figure out what retailers' comments mean to consumers, now that the tax rebates are spent and the holidays only 6 weeks away. In fact, one could argue, Dell and AMAT will provide a window into corporate spending, while all the retailers will open another into consumer patterns, where the consumer has been the sole engine of the economy throughout the just ended recession. As a former retailer I can attest to the fact that one week's or month's spending doesn't foretell squat about spending 6 weeks from now but economists and even analysts will tell the markets differently. Of course, the past 3 holiday seasons were written off, only to have retailers report stronger earnings, thanks to better management and inventory control but that won't seem to matter this week.

The weekend's bombing in Saudi Arabia, even after the U.S. Embassy was closed due to "credible threats" should put event risk back on someone's radar screen. If you can't protect a totalitarian country when it was warned and told to prepare for attacks, what can you protect? A spike in volatility has been long overdue: the combination of event risk and some selling should finally provide the fuel.

As for events, Entertainment marketing and Electronic House both put the consumer front and center, though EHX is a shadow of it's former self, as often happens once leading edge technology becomes common place. Do not expect EHX to make the waves it has in the past. Ditto for Comdex which starts at the end of the week, with a foreign delegates reception and disk drive association members meeting the night before the official start. Comdex hasn't been much of a factor for years--so little a factor that there wasn't even a spring show this year.

BusinessWeek led with a rousing endorsement of Toyota Motors on the cover, this week, so expect to hear more about it out of Hybrid Vehicles, in Troy, Michigan, starting Monday. I'll grant the Prius is looking more like a conventional car but Americans aren't soon going to abandon their love affair with speed, on one end, big gas guzzling SUV's on the other end.

The stock market will remain open Tuesday, for Veteran's Day, while the bond market will close but the treasury market won't take it's usual half day the Monday afternoon prior to the holiday because the US treasury plans an auction of $57b worth of notes and bonds, which the bond market association claims it needs time to prepare for. That issuance should be another weight on the market, with bids to cover the key metric Chicago will talk about, between 2 and 3pm every day during the auction. It's hard to imagine great demand without rates ticking up--not in advance of what's widely believed, now, to be the FOMC's next move on rates--a rise, just as Australia and Great Britain have already done.

Biotechs should get their share of press, as well, as the fall conference season kicks into gear--a little later this year than normal.

If you read the November Outlook, which I suggest you do for other key dates this month, you know I believe Friday will be a key date this month. For now, I think profit-taking and some fund selling is in order, with Tuesday a free pass for equities, while the bond market is closed. With the Northeast finally getting a whiff of more seasonal weather, energy stocks should start catching a bid, while homebuilders will remain under suspicion, as everyone prepares for higher--yet historically still low rates, a fact that will be lost in the first adjustment.

Tech looks extended by any measure, tho some of the Asian internets could try to recover recent losses, thanks to overseas events that relate to the group. Jim Grant and his bear cubs hold their annual meeting starting Thursday, so expect some gloating from that quarter if the market sees some long overdue profit-taking. Also, Thursday, SunTrust Robinson Humphrey holds it's annual Business and Technology Services meeting, in New York. I was floored to see Gtech as a scheduled presenter since I see it more in the gaming sector than business services but, evidently, STI takes a looser view of lotteries than I do. Of course, Computer Sciences reports this week, and EDS has it troubles, while IBM got the weekend's Barrons thumbs up (and isn't an STI presenter, which tends to smaller companies), so the group will be heard from before STI meets. Perhaps the stocks most likely to rock thanks to STI is the education sector, will represented at the conference.

Last on the conference list is Bear Stearns bus tour in San Francisco, where the Outsourced manufacturers will be stops along the way. Trust me when I say, AMAT and DELL's earnings mean more than the Bear tour--especially since it starts on Friday, a day the markets will drown in data, and just maybe recover from earlier in the week agida. Of course, should the markets firm Friday, there should be more downside until the week before Thanksgiving but that may be the healthiest thing the markets could do right now, cause it's hard to see how stocks will attract new money with valuations sitting near the highs.

© Sandi Lynne 2003 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.

It's possible won't see the surge this week we usually do, after Octobers that saw lots of profit-taking and tax loss selling, which created high levels of sidelined money by the end of last month that was traditionally put to work the first week of November. And, it's possible we'll see some of the stocks or sectors that lagged last month find some fans this month--the kind of rotation that typically signifies institutionally money managers rebalancing their portfolios--trimming stakes in their biggest winners for some potential upside or multiple expansion in others--energy especially. After all, the heating season is surely coming and OPEC promised to cut production on November 1. We'll also see some index rebalance gaming, with PM's trying to guess which stocks will wind up where, with some positioning in those likely to be added to either the S&P 500 or NAZ 100. The total return funds, and Dogs of the DOW crowd must already be watching Merck and Johnson & Johnson--though neither chart are tempting me. Likewise, there must be some value guy sitting somewhere, looking at Microsoft and thinking it's got to recover if tech is so strong. Sunday the semi organization said chip sales rose 6.5% in September, 17% last quarter, the best since 1990. So what if it's still well under levels seen in 1999? From the looks of recent market action, it's like Bobby Ewing is back from the dead, his death just a bad dream cause no one seems to remember the lessons learned since 1999. Heck, even Greenspan seems to have forgotten: instead of cautioning against irrational exuberance, he's still promising to keep rates low--nevermind the deficit, weak dollar, or some frothy action in the markets--the $9.5 rise in one of the Palm spin-offs a perfect example.

And what a week we have ahead, with October data coming like machine gun fire: Sept. Construction Expenditures, October Vehicle Sales, the ISM Manufacturers' and Service report, Q3 Productivity and Costs--the latter Thursday, when we'll also get Chain Store Sales, even though some of those will be out earlier in the week, especially from companies with good news to report. By Friday, the October Unemployment Report will be the perfect set-up for a peak--question is, do we ramp as we have the past two, or is Thursday going to be a near term peak? That's the hardest to guess because the Unemployment Rate is derived from two surveys. The first polls businesses, to see if they've hired. Part Two polls households, and asks if jobs are hard to find. Obviously, if you have a job, or aren't looking for a job, they're not hard to find. If you've been unemployed since the recession started and still haven't found a job, you might answer that they're hard to find or you might have given up--in which case you're counted in the "NOT" hard to find group. Suppose Greenspan wants a basis upon which to raise rates before it becomes politically incorrect to do so, closer to the Presidential Election next year. How many ways can you jig a survey? Exactly. Since liquidity has been falling behind the scenes, even as Greenspan & Co. have been on hold, you sure could find a way to lower the unemployment rate within the household survey. Certainly, if you're George W., and you want the economy to look better, already, you might remind Condaleeza her job is only as good as your Presidency. Ya think that doesn't happen? Ever hear of a self-fulfilling prophecy? That'd be the justification, if ya thought ya had to have one. Of course, claims for unemployment tracked below 400K for the entire month of October, so an itty bitty fall in the unemployment rate isn't impossible. Retailers are hiring for their big season. Of course, they're not hiring as many as they did a few years ago, and that'll be a problem in either November or December's report but, maybe, that won't be a problem if you could get enough other employers to hire, to make up for fewer retail hirees.

So let's just say the Unemployment Rate prints at no worse than unched at 6.1%, with a slim possibility if prints at 6.0%, and euphoria reins, just as it did for the last two reports.

Earnings? Some brand names, to be sure, but nothing compared to the weekend's good news about chip sales 'cause, after all, it's tech that's leadership. Kellog, Clear Channel, Gillette, International Game Technology, Qualcomm, Clorox---oh year, we'll get earnings. But wanna make a bet all the media really talks about is Cisco on Wednesday? So what if Cisco misses, you might ask: how's the market gonna go up after that? Remember the sector rotation I mentioned, as PM's rebalance their portfolios? "Healthy rotation," you'll hear it said. And maybe it will be cause I sure as heck can't justify Amazon being one of the "most valuable" retailers in the world--not at it's profit level. And the investment banking industry is on fire, with no fewer than 5 megadeals announced last week--RJR and BAT the capper to a hectic week that started with merger Monday, the day two healthcare companies announced mergers, and Bank of America announced it would swallow FleetBoston. Look for more of that ahead--especially with rates so low--as competitors decide they have to beef up to compete. Yeah, you can see the banks really catching a second wind, after last week.

Trade Shows and Conferences, you ask? Merrill Lynch's TechFest out in California will generate many a Reg FD--and some mid-quarter updates. Based on the chip industries September release, we can assume there'll be some good news. After all, chips are pretty far back in the food chain, and get ordered in advance to be incorporated in other products, so those orders are prelude to finished products which Just in Time inventory controls suggest were shipped last month. Whether those chips went into computer, handsets in advance of number portability, routers, flat and plasma screen TV's or automobiles, chips sales are like factory utilization, harbingers of sales.

Carriers World meets in Japan, @dTech, an internet advertising event meets in New York, Fuel Cells have a conference, as does Satcon--for Satellite Applications, while the Automotive Aftermarket meets in Las Vegas, in conjunction with a Gabelli & Co conference for the sector, as well as SEMA, which includes RV's and marine vehicles. Speaking of marine, the Ft. Lauderdale Boat Show was held this past weekend, and the preview day, Thursday, already saw committed orders for boats that surpassed last year's show weekend. Broadcom, OpenText and InVision hold analyst meetings but I'd rather attend the Harris Nesbitt Gerard Playtime Conference, featuring toys, video gaming and the like--the very group that will dominate earnings reports in the coming weeks.

Last week I said you shouldn't listen to anyone who said we'd seen the top in the markets. I'm saying it again. Only two things will derail current market momentum: a terrorist event or higher rates. In the absence of either, trust the inflows, trust the charts, many of which are newly broken out on weekly charts, and trust the massive infusion of stimulus. Just be careful about paying up as the week wears on. While an unchanged unemployment rate may be good enough to hold the market together, it isn't likely to be good enough to encourage the smart money to keep paying up. And be sure and read the November Monthly Outlook cause I've identified three periods for likely high tide, between which I think we see some "profit-taking." You just don't want to be buying shares from smart money taking profits. On the contrary, you want to be trading not positioning, because the valleys we get this month could be a little bit steeper than those we got last month, as PM's strive to do everything possible to avoid lousing up their bonuses between now and the end of the year. In other words, we could see more volatility even as we move to new recovery highs.   

So, with a strong reversal on Friday, an FOMC meeting on Tuesday, Advance GDP Friday, along with many other datapoints to make up for last week's drought, the end of the month/fiscal year for funds should rule. Given Friday's recovery from a triple digit loss, the first move Monday morning may be up. That's the fake out cause it should be down from there, until, possibility Thursday, when GDP is released. Quite honestly, with everyone and his uncle expecting GDP to be strong, you wouldn't expect there to be reason for the markets to react: the markets react to surprise--to the unexpected--not to in-line. Nonetheless, if there's a rush to trade this week on Monday through Wednesday, the indices could be ready for a lift by Thursday. Traditionally, the best days to buy for the end of the year have been anytime from the 25^th--31^st of October. Given recent strength, there's been little reason to pay up, and stocks could trade down right through the end of month.

Come next week, it could be a different story. Portfolio managers will be looking to position for the fourth quarter, and they'll likely reach for the same stocks they always do, with tech at the top of the list. Before you reach for techs at the end of the week, it may pay to remember OPEC plans to cut production November 1st. With energy service stocks one of the weakest sectors, and heating season about to get into full swing, OPEC's cuts might be just what the group needs to turn around. Next week--the first week in November--should see a rally. Just know that I believe a good part of the third quarter's strength came from a rebound after unnaturally slow activity because of the Iraqi War and SARS, and that the fourth qurater may very well prove weaker than many of the most optimistic expect. Since mid-quarter updates start in early November, we'll know soon enough if 3^rd quarter strength had the momentum to sustain. What's surprised me recently is how litlte inventories have changed despite the gangbuster Q3. You'd have expected some industries to have drawn down inventories significantly, while others would have built them dramatically because of strong orders but that's not something by the data released. Given that, I'd temper my enthusiasm and not just throw darts at a board papered over with the financial pages. The easy money has been made in 2003. The coming months may very well be tougher than most expect--tougher than the bulls would have you believe.

© Sandi Lynne 2003 Nothing contained in this commentary should be cosntrued as a recommendation to buy or sell any security. The opinions expressed are the author's alone.

So keep your eyes on rates, again. And keep your eyes on chart levels. While it's often been wise to buy around the 25^th of October, after a sell-off, the FOMC meeting 3 days later weigh against that. In fact, truth be known, instead of a new hi on November 5/6/7, we may in fact first see the bottom of the coming retrenchment one of those days, depending on the FOMC's exact wording of it's post-meeting statement. But his rally over? I think not: where I'm selling it's because I want to buy back at lower prices--or swap for other investments, like energy services, which I've been out of since March but where I expect November to prove a good month to be. And, as always, I say look at options, especially LEAPs, because volatility has rarely been lower, making LEAPs the cheapest they've been since 1994--a way to leverage cash without incurring margin costs to buy stock: a way to replace stocks you still believe in with options that take most of your cash off the table. And for heavens sake don't listen to the Cassandras who've been calling absolute tops the whole way up--who thought they'd finally gotten it right last month, when se saw a stiff sell-off after the mid-month hi. Unless you think BinLaden's weekend tapes have more beef than the last few: unless you think I'm wrong. I could be: Everyone can be. But I'm sticking to the plan as long as the banks hold up as well as they've been doing because it was the banks that signaled back in September that the Cassandras were wrong, and that was despite Grasso, Spitzer and Canary Capital. The banks collapse and the year long rally is over but, as long as they hold, so too will the markets, S's over Naz, in particular, big cap pharmaceuticals excluded, cause that's something else I don't want you listening to: People who'd have you believe pharma is about to play catch up. Johnson & Johnson just reported a 20% rise in earnings and is about to resume it's downtrend. If JNJ can't do it, neither will Pfizer, Merck or the others. The political climate weighs again big pharma. Remember what I said about the trade show schedule? A medicare meeting? Congress still weighing the Medicare Prescription bill? Remember how, as far back as Hillary Clinton leading a push for Nationalized Health Insurance, back in Bill Clinton's administration, the drugs started selling off? Ya want big drugs, buy generics but listen to those "value" players that would have you throw your money away. This ain't a value players market. Never is when earnings are rising, when growth stocks, again, are in vogue.   

© Sandi Lynne 2003 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author's along.

October 13-17, 2003  EARNINGS SECOND TO OUTLOOKS   Poor Brooklyn: first it lost the Dodgers to L.A., and now, the Dodgers have been sold by News Corp to a Boston businessman, just as the Yankees are in such a heated play-off contest against the Red Sox, a hockey-like brawl broke out on Saturday night, Where's Rodney Dangerfield to demand some respect when ya need him?

And that wasn't all: that Texas redistricting vote still hasn't been held. Legislators were so busy watching the Texas/Oklahoma game on Saturday, enough voters didn't show up to form a quorum. Ya think they'd ever get away with that if AHHHHRNOLD were the Governor of Texas?

Ah, yes. AHHHRNOLD. Doesn't it just make the juices flow for the next Presidential election? Candidates George Clooney and Catherine Zeta-Jones (Douglas) anyone?

But I digress cause there isn't much to say about the coming week. Earnings will so dominate, even options expiry will play second fiddle. You know the expiry drill, Tuesday up, Wednesday down, or vice versa. Could happen. But that's a tough road to walk, with Intel's earnings after the bell on Tuesday, and all the surprise and angst removed after the company twice upped expectations. The outlook? In the usually seasonally strong Q4? You're Kidding, aren't you? When companies can still accelerate deductions and the millennium PC's going on 4 and 5 years old?

The bond market's closed Monday for Columbus Day and some equity traders are taking long weekends, so the big boys could play with the futures and take some off the table but I wouldn't count on anything serious Monday, either. The dip buyers will be waiting if the market pulls back, except in energy services, big cap pharma, and retail. The latter will suffer from hot money moving to the next big story, which retailers won't be until next month, when the bulk of 'em report. Meantime, it's all tech and financials--market leadership taking center stage this week.

While I'm on the subject, Sears will both report and hold an analyst meeting this week, so don't be surprised if it's recent gusto has more to go. Give it credit, at least, for some significant changes, this year, with the credit card portfolio sold off, and Land's End boutiques now in every store. Shame about that credit card portfolio. I can remember back in college, when we were all told to start building our credit rating by opening an account at Sears. They wouldn't give more than $250 credit to start but if you bought and paid, you'd be well on your way. Never had a Sears card, myself. I started building my credit when I was 14, when the First National City Bank sent me an "Everything" card based on my phone book listing. Oddly, that same bank morphed into what's now Citigroup which, it happens, now owns the Sears portfolio. What goes around comes around.

And that's exactly how traders will feel this week: As if they're heads are spinning round and round. All the post-bubble cost cutting, plant closures, outsourcing, and lay-offs set the stage for a surge in earnings this quarter. Theoretically, that's supposed to lead to expansion--to increased investment and employment, though we haven't seen Part II, yet. Which is why your head will spin trying to keep track of all the earnings and outlooks, who's raising numbers and raising capex. Without that, this rally won't have much more to run before it makes another round trip. Luckily, many companies are likely to raise their numbers and start spending again. Why not? Companies have replaced costly debt with converts that pay close to nothing, and Congress just gave 'em all a free pass to delay bringing their debit laden pensions up to snuff. Where's Bobby McFerrin to re-release his classic when ya need him?

So who else reports this week, you might rightly ask? The two largest temporary employment companies, Robert Half and ManPower. If this recovery has legs, they should be seeing it first, since companies don't commit to permanent employees until they're sure business is growing. Elsewhere, in techland, there's IBM, eBAY, Advanced Micro Devices, and EMC. Microsoft isn't reporting on the eve of expiry as it usually does: It's scheduled for the 23^rd. Other retailers reporting include Ethan Allen and Safeway but there'll be plenty of companies with word on consumer spending, including Coca-Cola, Kraft, Hershey, Timberland, Harley-Davidson, Mattel, Northwest and Delta Air Lines. In fact, this week is so big, even before Intel steps to the plate, Tuesday promises Johnson & Johnson, Bank of America, Merrill Lynch, Gannett and Dow Jones. Big, I tell ya--big big week!

Data out includes September Retail Sales on Wednesday, and both CPI, as well as Industrial Production and Capacity Utilization on Thursday. Funny thing, though, I don't think many will care about September numbers so long as company post-earnings conference calls preserve the image of an economy rebounding from it's recent trough.

As for trade shows and investment conferences--the latter go on hiatus during earnings season. There are a few big meetings this week, including the Microprocessor Forum in San Jose, starting Monday, the same day the Consumer Electronics Association holds a forum, while Hong Kong will host an Electronics Fair with 1,500 exhibitors, and Biometric companies will meet in Las Vegas. Will any of these trump earnings? Doubtful, though the Citrix iForum could help that software company make some news even though it isn't reporting, while the International Furniture and Accessory Market, more commonly known as High Point, will lead to some newspaper articles and pictures of furniture most can't afford. But then, most can't afford a Maybach but everyone likes to look at 'em.

Now, like every other sane trader, I'm concerned about the markets--concerned about the froth, and the mojo in four-letter land, where recently sub-$2 stocks are trading heavily and up 400%. I know as well as anyone that most funds that haven't already closed their fiscal years will do so before this month is out. But, aside from some expiry ripples, possibly Monday and Tuesday, that may cause some gyrations and, even, some big gains cut in half or less by the close, I'm looking ahead and, quite honestly, I can make a case for more upside straight into the first week of November. I see the dollar collapsing. I worry about it--worry more than most equity traders do. But the truth is, it won't matter until it does, and I'm hardpressed to make a case for it mattering this week. This is the week a weak dollar will add to earnings and, if Nike is any example, traders and analysts are prepared to celebrate an extra 8 out of 10c of earnings derived from forex.

Do I worry about stocks having priced in such high expectations there could be selling on the news, the way Goldman Sachs traded after it didn't beat expectations by as much as Morgan Stanley or Bear Stearns? I WORRY ABOUT EVERYTHING. But the market hasn't been worrrying--and it's the market's vote that counts. And other than momentum players moving from stocks that finish reporting to the next scheduled to report, I don't really see much danger ahead for the rally--and that in itself worries me; will worry me more if the analysts suddenly start upping Q4 expectations to a point where the bar could be set too high. But make no mistake, just because I'm neurotic, doesn't mean you have to be. Problems are not what the market is pricing in, for now. Central Casting: Get me Bobby McFerrin.  Monthly Outlooks are here 

© Sandi Lynne 2003 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.

October 6--10, 2003   SEPTEMBER HIGHS ARE THE CHALLENGE   The surprise steep end of September sell-off burst into an October 1 rally that built on Friday, when news hit that 57K jobs were added in September. I'm not quite as enthused as the market was, and can't really understand the reaction in a month that often seems jobs added, as school resumes and teachers return to the payrolls while students withdraw from "unemployed" status. After all, Ford, alone, just announced another 12,000 lay-offs and, it seems, Sun Microsystems, along, could contribute another 6--7,000, at least if Chairman Scott McNeally heeds the advise of analysts. And, in the scheme of things, 57K adds versus 3M jobs loss is, at best, a rounding error.

La Shona Tova to all you observe the holiday. Next week's outlook may be posted late, as I'm flying to New York to see Dad, who's been ill. Depends on the weather, and airline on-time schedules. 

© Sandi Lynne 2003 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

September 29--October 3, 2003    HUMPTY DUMPTY       OPEC's surprise cut in production starting November 1^st was exactly the kind of nasty shock the market hates so traders grabbed the most convenient excuse to take profits. There'd been signs for three days before that it wouldn't take much for sell orders to come in but the combo of a G-7 that seemed to suggest Japan would no longer prop up the dollar and OPEC production cuts was more weight than the market could bear.

Now, quite honestly, within days, Japan had a new finance minister who distanced himself from any thoughts of the Bank of Japan holding back it's dollar purchases, something easily done since he had no connection to the people who talked the talk at the G-7 meeting but, by then, short-term trend lines were breaking all over the place and a mini-rush to the exits ensued. Are we headed to another October crash? That's doubtful but not impossible. Evidence of a mending economy remains strong, despite weak employment. The number of companies that have raised guidance still leads those who've lowered guidance. However, there's a big difference between mending and getting back into the game, so I'm not exactly sounding an all clear sign on the economy--only commenting on the upcoming earnings period, which faces particularly depressed comps.

Over the weekend, another Al Qaida tape surfaced at Al Jazeera while it was announced that Manulife will buy John Hancock Financial, which was rumored late last week. Ya know how Wall Street loves mergers and acquisitions, so it's possible the two are a wash. And, of course, the biggest items on the agenda are the end of the month, on Tuesday, as well as Friday's September Unemployment Report. The Unemployment Rate is derived from a household survey, so it has little correlation with the number of unemployment applications filed at states' offices but that's the report traders zero in on, for better and, often, for worse. Nevermind that the weekly apps fell below the psychologically important 400K level for 3 out of 4 weeks--it's a survey, that gets all the attention.

Elsewhere on the calendar, the usual end of month data is released, including the Conference Board's September Consumer Confidence Index, the Chicago PMI, and, perhaps, more crucial to a key leadership group that took a deep cut, last week, the Semiconductor Billings--chip shipments in plain English. Vehicle Sales could be weak, since, for as much as a week, floods knocked out part of the mid-Atlantic states during the month and, if local history is any guide, there was likely damage to many cars on dealer lots. Last Saturday was Rosh Hashana (La Shona Tova to those who observe), which also might have crimped sales during the last weekend of the month--the weekend when dealers often put on a full court press to make their quotas. Since we all know how much the market frets about any slow down in consumer spending, less than pleasing Vehicle Sales, Wednesday, could reverse any bounce stocks might attempt for the end of the month.

Earnings won't come from any market leaders--nothing to compare to last week's 4 brokers or next week, when GE reports. Still, Roadway, which is merging with Yellow, is a big name in the Transport index. Pepsi Bottling is a brand name, while Constellation Brands owns many famous alcoholic names from Corona and St Pauli Girl beers, to Simi and Almaden wines. Again, just as package delivery is strongest season, so too is Constellation Brands, thanks to beer sales which often go hand in hand with football, while holidays for strong for wine. The one top tech company set to report is ATI Technology, which has grabbed the graphic/gaming chips leadership mantle from nVidia. On the consumer side, Topps, Walgreen, Family Dollar, and Helen of Troy will report but, as I said, nothing close to market leadership All could be dwarfed by Wal-Mart's weekly comment, Monday, on the past week's comparable store sales.

As for trade shows and investment conferences, one of the biggest, in size, will be SpeechTEK while World Vaccine Congress, in Lyons, France, probably makes more news. You might remember last year's conference, when MRK announced an early stage cancer vaccine and the stock took off like a rocket despite the fact that the actual vaccine, if it works, is probably still 3--4 years away. A couple of semiconductor events in Asia could make headlines but the most recent book2bill should have made traders skeptical. Contrary to analysts' claims that semi equip companies were lowballing when giving restrained outlooks during their mid-quarter updates, the most recent SEMI data suggested July's spike in orders didn't carry into August, as witness the 0.91 released last week. Ironically, there's an HBA (Health & Beauty Aids) trade show in NY, coincident to Walgreen's earnings, while there's also a GATS Trucking show in Dallas, coincident with Roadway's earnings report.

A couple of smaller events could move sectors. One is the East Coast Video Show, at which both Hollywood Entertainment and Movie Gallery have occasionally released earnings outlooks in the past--upsides, in recent memory. VOD Summit--Video on Demand--could very well be the killer web app of the future, with the entire Video industry focused on how not to allow free services like Kazaa steal the golden goose. NetFlix, which is one stock that's soared by mailing rental DVD's to customer could suffer if subscription services that deliver video as easily as music over the web gain traction.

The National Association of Broadcasters hosts it's Radio Show this week, coincident with Emmis Communications' earnings release. After Viacom's warning last week, which caused a bit hit to the group, a little good news could go a long way for some of VIA's competitors. In another coincidence, the Dollar Store Expo meets coincident to Family Dollars earnings release. However, Wednesday's big news ought to come from Medicare since October 1^st is, traditionally, when the Agency for Healthcare releases the coming year's reimbursement schedules for all manner of healthcare services and medical products.

Other stock specific events this week include Wal-Mart's national rollout of Medimune's Flu-Mist flu vaccines, and Adobe's Photoshop Devcon, while Coach splits it's stock at the close, on 10/1. The Big Kahuna in that department will be 3M, which not only splits, on Monday, but holds a two-day analyst meeting on Tuesday and Wednesday.

So given such a jammed calendar, what's next for the markets, after they gave back September's gains in three trading days last week? That depends on your time frame: the intermediate outlook is still strong but the short term bull market was broken last week--decisively and indisputably. However, many stocks got very oversold in last week's sell-off, while financials did a stand up job of holding steadier than the broader markets. Food stocks also stood out for resilience. By Friday, despite more selling, selected tech not only held but managed minute gains. The fact that the financials weren't drawn into the deep sell-off, while buyers emerged to nibble at some tech that had been whacked earlier in the week, suggests there could very well be a month-end rally. It isn't likely to come anywhere near reclaiming the ground lost last week but would relieve some of the many oversold charts. However, that relief from the selling should be temporary--and may not even last the week. For now, fear of missing out on the next rally has been replaced by fear of losing this year's gains, so rallies will be met by selling--probably for at least the next two--three weeks. By that time, Options Expiry and earnings will be controlling influences.

Meantime, as the quarter ends, some of the best performers could roar back by last week's steep sell-offs, while the quarter's losers could see even more downside pressure, as they're banished from the books by Tuesday. Window dressing has always ruled end of month and there's no reason to expect this one to differ. And, of course, despite the many companies that have reported better activity, this week and next promise more earnings warnings. How deep the October sell-off cuts could very well depend on which companies warn. Mortgage originators have already spoken out to the downside, while the brokers that reported have delivered upside surprises. Intel twice said business is strong, so it's some of the internet stocks--including the Chinese internet-related stocks--that have run the highest and remain at greatest risk for more selling if just one sector leader warns. Meantime, former market leaders--the semi-equip stocks--have already taken their lumps and are now priced closer to where they should be based on their mid-quarters, not up where they were based on analysts' enthusiasm despite the companies' comments.

Watch that new VIX cause it's bound to continue reflecting the increased volatility we saw in stocks last week. I've often recommended covered call writing as a way to protect against some of the downside when the interemediate outlook remains bullish but premiums are so low, right now, it would be wiser to sell or use puts for protection. And keep your eye on rates, cause a continuation in last week's dip in yields may very well help slow the selling we saw last week. October has always been a dangerous month. Before last week, it was looking like a cakewalk. Now that the short-term technical pattern has broken, long is the more dangerous side. Use rallies to lighten up and respect the oversold charts by waiting for a relief rally before initiating any shorts.

© Sandi Lynne 2003 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.

September 22--26, 2003   GO WITH HISTORY OR MOVE AGAINST THE CONSENSUS?      Last week I thought the stocks would mark time but that didn't happen at all, with all the major indices breaking out, thanks to a big break-out in the banks and brokers, even after a few mortgage originators warned of lower earnings. This week is tougher to get my arms around.

The charts are overextended and in need of a pullback but over bought markets often get even more overbought in a bull phase. Furthermore, the groups that were most overcooked, like semi's, didn't notch gains. Energy services reversed as Isabel hit land and it became obvious that some ports and refiners would take protective action and shut down but the major producers basically did nothing. Laggards Microsoft and GE finally got jiggy but both look about to stall. And, of course, the historically worst month of the year is shaping up as anything but--adding to the gains since March.

Now, if I were to go by the schedule alone, I'd be saying the odds are the indices gain more this week, since it's nearing the end of the month and the old axiom, "Buy Rosh Hashana, sell Yom Kippur" would apply, since Rosh Hashana starts at sundown Friday, which should thin out the street after noon.

So what's the problem? Top of the list is analysts, who are suddenly upgrading stocks and raising price targets simply because stocks have already achieved prior targets. Second, nearly everyone on the street expects stocks to ramp into quarter's close, at the end of the month, and we all know it rarely pays to trade with the crowd. However, given the fact that greed, in the form of performance anxiety, often trumps fear, why wouldn't some want to pile on, in the hopes that every dip will continue to get bought as stocks rise to ever higher levels?

In years past, mutual funds used this time of year to do some tax loss selling but there are few stocks showing losses for the year, while most funds have tax loss carry forwards against which to write off any gains taken this year. There's no reason for funds to sell to book profits--they're returns are based on N.A.V (net Asset Value), calculated every night--the reason Canary Capital wasn't supposed to trade after 4pm or so. Bond funds might be holding some losers, since that sector turned so sharply since June 13^th, but bond funds don't usually dump bonds to buy equities. Institutions, like pension funds, sometimes do, but the impact of funds selling bonds and rushing into equities--an asset allocation--would send equities and rates higher, initially, but then cause reallocation into bonds, as attractive rates present a better choice than risky equities, made more risky after another ramp.

The week's data shouldn't surprise: OPEC meets and isn't likely to change production quotas, even if it seeks less cheating. August Durable Goods should be fine, based on some other related data and momentum following October's factory orders. Existing and New Homes often close in August, before most of the nation resumes school but New Homes are counted when the initial contract is signed, so we could get a split decision, with existing strong and new home sales off earlier in the year records. Revisions to Corporate Profits and GDP are a non-event after the preliminary and first revisions, which arrived earlier. So that leaves the Sept U. of Michigan Consumer Confidence which has, lately, diaappointed to the downside. We're talking 500 people here so we're talking more excuse than reason. Witness the fall of 2001, when confidence hit lows and consumer spending kept right on trucking.

How about Investment Conferences? Nothing to match last week's schedule which included two media and Bank of America's big Investor Conference. A couple for oil and gas, another couple for healthcare or, as many prefer these days, "Life Sciences." Kodak holds an analyst meeting, preceded by a board meeting at which the dividend is likely to be discussed. Flextronics holds a mid-quarter update but Jabil's recent earnings already gave traders a preview into the sector which nearly roused nor disturbed. SAP holds what seems like it's third Devcon of the year but some here won't hold overseas stocks--not even ADR's, and a still falling dollar could hurt it's negotiating power.

AMD releases the Athlon 64, though that's been so well accounted for in the shares most are forgetting there aren't many 64bit programs designed for the chip and, last week, Dell said it had no intention to offer the chip. As soon as AMD unveils it's chip, Intel will blitz the media to get word out about it's Unwired World Day, the 25^th, which will see WiFi hotspots offered for free, to boost sales of the already successful Centrino line of it's chips, and falls during Internet World Emerging Technologies meets at M.I.T. Problem with the event is the overwhelming presence of older world tech names--Microsoft, Spring, AOL, American Telephone & Telegraph, and Computer associates. If that crew rolls your sox up and down--go for it. I don't see it as news worthy or market moving.

Other than that, the most notable events scheduled deal with the consumer and advertising, Fall VON (Voice on the Net), Satellite Broadcasting & Communications, and a National Newspaper Association meeting--a group that already weighed in with it's mid-quarter updates.

There are a couple of Fed Governor's scheduled to speak but the bond market is done letting itself be swayed by those merry minions--even if Greenspan himself is one of the speakers at the end of the week. Earnings from Lehman, Goldman Sachs and Morgan Stanley, all out Thursday, will mean more to traders with Bear Stearns having already set the gold standard with a huge beat.

Of course, there are always earnings warnings that could arrive as the month and quarter move to a close but, with some of the biggest names already affirming, and one of the biggest not known to warn unless it misses by a mile (IBM), it seems likely the bears and shorts will be thwarted once, again, this week. For months, selling has been the wrong thing to do--whether it was a sale of shares hold or sale of shares short. With so many sitting with large gains, and dip buyers waiting in the wings on every shallow pullback, I see nothing on the immediate horizon to trigger a wave of selling as long as the charts are so strong, and the indices remain on uptrends. I'm not comfortable saying that mouthful but I tell it like I sees it and, much as I'd like to lean the other way and play contrary to consensus, I have to have good reason to do that. Right now I don't.

So, expect the usual Monday post-expiry dip to get bought. And expect thin trading on Friday, as Jews leave early to celebrate Rosh Hashana, the Hebrew New Year. In between, don't be surprised if the trio of big broker earnings cause some sector rotation out of the group, or if insurers rebound after the pre-Isabel sell-off now that the damage is done. Energy services had a pop during last week's storm, so I wouldn't be surprised if they resume the downtrend, despite a couple of investment conferences and an OPEC meeting. The new VIX set to debut is something traders have wanted for a long time--an S&P 500 based vehicle that will allow for options trading on an index that's much broader than the OEX, which is limited to the 100. But it's too soon to make much of that debut--and it's something that must yet be synthesized backward, so traders will know where it stands when it debuts, vs. where it would have stood had it been in existence as long as current VIX. The Eurex introduction could put some pressure on CME--the Commodities Exchange which is publicly traded. But otherwise, greed should trump fear--until there's a catalyst to raise the level of fear, and higher prices won't do it alone. Rates and the dollar might: but not price alone.   

© Sandi Lynne 2003 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.

Last quarter, you might remember, BSC, LEH, & GS all ran up in anticipation of their earnings, all beat, then all sold off on the news. Since it's obvious all three will have gained by their trading desks taking advantage of the sharp move in bonds since June 13, I can hear the criticism now, even before the reports are out. "Those kinds of profits can't be sustained: the bond market volatility aren't to be repeated." True, true, and true but there were any number of "converts" also offered this quarter, assuring bankers plenty of other opportunities to make some viggerish.

As for earnings, two of the expected reports, from Nike and Carnival Cruises, aren't likely to do anything to instill confidence in the consumer. Carnival suffered engine problems that led to cancelled sailings, during the quarter, while offering berths at rock bottom prices. Nike has long been disappointing, as futures fail to ramp, and ladies apparel still hasn't caught fire--for good reason, if you saw any samples on women playing in the recent U.S. Open tennis championships. HOWEVER, Nike should have benefited, with other consumer companies, from the post-SARS summer rebound in Asia, so all might not be lost, especially this quarter, when back to school merchandise was shipped. Call me lukewarm. As for the two homebuilders set to report--Lennar and KB Home--a slug of mortgage-related warnings from banks, and one mortgage company slash of it's dividend, leaves even homebuilders with huge backlogs under suspicion. The fate of homebuilders rest in Chicago, in the bond pits, and there, at least, rates eased a bit last week, allowing the group to recovery a smidge last week. But it's way to late in this recovery for homebuilders to outperform unless employment picks up--which it doesn't seem likely to do.

The post-FOMC statement should make for some interesting reading: on the one hand, corporate profits seem poised to continue recovering, while the first evidence of improved demand has come from various quarters. But the FED's stated position is price stability and optimum employment and the jury's still out on that since prices of so-called "core" goods have remained tame, while healthcare, insurance, and education have soared, even as employment doesn't seem to have stabilized, yet. After weeks of new claims under 400K, claims recently popped above for two weeks in a row, weeks that usually see declines as kids head back to school and teachers return for the school year. The FED knows evidence of a recovery hasn't, yet, proven sustainable, and may very well be response to both the end of major conflicts in Iraq and the way SARS has subsided, just as tax credits and refunds hit consumers' mailboxes. In fact, the FED is hard pressed to deem the recovery sustainable in the absence of an uptick in hiring because hiring signals business confidence. So the FED needs to convince the markets that it's on hold indefinitely, yet reassure the markets of it's confidence in nascent signs of a recovery--something it's hardpressed to do since the markets have lost confidence in the FED's judgment.

Meanwhile, there's a quadruple witch acoming, thanks to single stock futures, while a new VIX is planned to debut on September 22, after this expiry, which means some positions that might usually get rolled may await the new options on the new VIX, a yardstick no one will be able to measure for months or years to come. However, while I'm usually a calendar bear on this expiry, I see it as neutral, with the real bang likely to come NEXT week, when institutions will position for the last quarter of the year. For now, puts on the most volatile stocks and indices far outnumber calls, which weighs against an imminent collapse--at least not for the September expiry.

Speaking of VIX, there's been much talk of how low VIX is but that was the norm until the great bull run of the late 90's. Should the VIX suddenly rise significantly, I'd take notice but, meantime, it's done nothing more than trend,. There's also been much talk of hi levels of bullishness, that's also seen as a negative for the markets. But I'd recommend taking a look at some charts posted by Bernie Schaeffer that negate that assumption. In fact, during strongly trending bull runs, like 1994-1998, hi levels of bullishness were the norm, and peaks led to nothing more than the kind of running corrections we've seen since the markets took off in march. It was only during the last three bear years, and other bear market intervals that peaks in bullishness led to significant pullbacks. Which isn't to say we won't see significant pullbacks again: We will someday but it will because of something OTHER than hi levels of bullishness like we see now, when fundamentals have followed prices, to a large extent. If you think about it, Intel raising revenue expectations twice within ten days eliminates at least one of the fears that usually overhangs both earnings and the warning season. You'll note, if you care to, that the financials led Friday's gains--led the markets out of the earlier in the day whole, Friday--despite a number of institutions warning because of slower mortgage activity.

As for the trade shows and investment conferences, this week, Bank of America is likely the star, with a four-day annual confab that's set, this year, to feature at least as much biotech as digital tech, departing from the digital heavy schedule of past years, when it began as the Montgomery Securities Conference. Still, some big, familiar tech names will appear, Novellus, for instance, fresh off it's lackluster mid-quarter update, on the 16^th. BofA isn't alone, just the biggest, with CFSB getting a yen for the monarchy, holding Global Capital Goods and a separate TMT conference in London, where it will also host Pan European Healthcare Services and Medical Devices. CIBC is holding it's annual Frontenac conference, for all things Canadian, while Deutsche Bank promises European Technology, also in London. Back home, ThinkEquity, a house that concentrates on microcaps, hosts a conference in San Francisco, the guest list available at (URL available only to Premium Subscribers)

The sudden thing for London isn't restricted to investment houses, and probably no coincidence: Carriers World Europe meets in London, this week, while Paris hosts an Apple Expo, the company just sued over it's Apple iTunes website, by Apple Corp, LLC, the British Company that holds the rights to Beatles Music that alleges it has an trademark agreement with Apple that restricts use of the Apple name to computers.

You might have noticed TechxNY on the schedule, the former PC Expo and find yourself surprised that I didn't lead with that. How many multifunction and wireless devices must we hear about? The news is out--was out when Intel attributed strength in it's business to Centrino chips. The generation of products introduced at this is evolutionary, not revolutionary, unless there's something coming I haven't heard about. Fashion Week might get more press. Meantime, keep your eyes on gambling companies, which were threatening a recovery as last week ended. G2E, the Global Gaming event meets in Vegas, starting Tuesday, and it's often proved a lift for the sector.

Datawise, the Semi Equip Book 2 Bill may ripple but the analysts have done a great job dismissing lukewarm outlooks as lowballing, so I'm not sure the noise of the release will even break through the noise of the FOMC meeting and BofA's conference.

On the other hand, Hurricane Isabel is working herself into one humdinger, with lumber shortages already reported. I expect another rush on bottled water, batteries and flashlights--exactly what some of the country saw after the August 15^th black-out, which should be another shot in the arm for supermarkets and home improvement stores, while I wouldn't want to be long a property casualty insurer going into the week, since the mid-Atlantic area the hurricane is now on track to hit is some of the most populated areas of the country.

In advance of FOMC meetings, we've often seen a bias to the upside, right into the 2:10 post-meeting statement, with a sell off afterwards, while expiry weeks often see Tuesday up, and Wednesday a mirror image--or vice versa--with the professional action largely over by Thursday morning. Either way, the markets are left with the potential for some saw-toothed activity, and extraordinary early and late in the day volume, with nothing much in between. If that sounds a lot like last week, it should. Like last week, when all was said and done, billions of shares traded to leave the markets all but unchanged on the week--less than 1% moves by the close. There's a very good possibility this week will look similar--a condition that may very well continue for weeks to come--just as the summer saw a multi-week consolidation before stocks broke out to the upside. While that's a tougher market to invest in, it suits traders very well, so keep your eye out for strong moves in one direction to be reversed the next day, be alert to fake out break outs both up and down, and keep your eyes on sectors, since rotation ruled last week, with big pharma catching a bid while retailers sold off, and old tech outperforming new tech. Just don't be surprised if, after all is said and done, there's a lot of movement that gets nowhere. And on Isabel getting the most press of all, if she hits land. Otherwise, I think the pause that started last week is likely to continue until last October, when earnings provide the catalyst for stocks to break in one direction or another.

©Sandi Lynne 2003 Nothing contined in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author's alone.

Thursday will see far more abbreviated and muted recognition of the terror attacks tha last year but, for those on Wall Street, closest geographically and, in some ways, to the lives lost, old wounds will be reopened. That may give some pause, as they reflect on how far the averages have come the last months and, perhaps, stay, some taste for stocks. There'll be little on the economic of earnings calendar to force anyone's hand until the end of the week. In fact, the economic calendar offers little until Thursday, when the July Trade Deficit is released, though most assume it will be large. The only question is whether exports have finally started to accelerate, which seems unlikely, to Europe, since the continent practically closes in August for holiday. Asia would seem a perfect place for a rebound, since SARS had largely capped activity earlier in the year, and July was the month the bad news stopped coming. However, with so many American companies able to satisfy Asian demand with goods produced at overseas facilities, the very global nature of some many US companies suggests imports from low wage countries will forever swamp US exports.

Friday's Retail Sales should be fairly robust, based on both the sales reported by retailers, and the spike in gasoline prices during the month--particularly at the end of the month, where pump prices spiked above $2 a gallon as crude rose to $32 a barrel in advance of Labor Day weekend. However, aside from petroleum based raw materials, there's little reason to expect a big jump in Producer Prices--and certainly not in finished goods, since consumers are still keeping companies from raising prices. As for Friday's University of Michigan preliminary September sentiment, it's only an excuse laid on market action by the media, since the prelim surveys all of 250 people and, I wouldn't be surprised if it popped, a bit, since it often does when kids are back at school. Draw your own inference--I'm not Joan Rivers.

As for earnings, there are some name brands, like Adobe, Quicksilver, Campbell Soup, Cracker Barrel and Oracle, but none of these names are market leaders, while Oracle is in the news more for it's efforts to takeover a reluctant Peoplesoft, and the company began it's OpenWorld Devcon, this weekend, so it's safe to assume it's products Oracle wants the street talking about most of the week.

Institutional Gold Conference meets in New York, which is ironic, if you think about it, since Gold's fortunes were drastically changed two years ago this week, which the exchanges will pause to remember Thursday morning. Otherwise, the Investment Conference schedule cools after last week's flurry, with Bear Stearns hosting Healthcare Companies, Merrill Lynch hosting Media, Deutsche Bank a top sponsor of the Frankfurt Auto Show and Roth Capital, a left coast boutique, is holding a two-day East Coast conference devoted to small cap growth companies (URL available to Premium Members only). Companies like AVID, IMAX, SeaChange, Sanchez computer, Iomega, Shuffle Master, NeoWare and Taser Internation are on the schedule. Nothing here to deep-six the markets. Healthcare I've already said looks poised for a little rebound but might be more influenced by this weekend's Barron's article featuring the group, as well as a special on JNJ, while Gannett and XOMA will be before the FDA on Tuesday, which might make bigger waves. As for Media, I always expect a rebound during September, as football season returns and the fall broadcast schedules start rolling out. But for bated breath, my vote has to go tothe treo of mid-quarter updates on Tuesday (XLNX, TXN & NOK), with the real shebang first next week, when Bank of America hosts what used to be called the Montgomery Securities Conference which, this year, is weighted more to biotech than digital tech.

I won't dismiss, out of hand, the big trade shows this week, Like ITCom, in Orlando, co-located with GEC (Gigabit Ethernet) and NFOEC (Optical Fiber) but let's not kid ourselves, the driving force has been improving earnings, economic data and some upside comments, from retailers, Cisco and Intel and those indicators have certainly trounced the few warnings while upsides from companies like Intel, far back in the food chain, means customers--across the globe--must be seeing better demand, exactly what Cisco claimed it saw in October. With demand the single ingredient missing from the mix, and August chain store comps suggesting the consumer is still chugging along, there's reason for optimism and a basis upon which recent gains can rest--even if it's too soon for gains to compound.

The one fly in the ointment, as I said, is Spitzer, who could finally spur fund investors to get serious about switching to Exchange Traded Trusts but, net net, if you pull your money out in one place, and put it into another, it's a swap not a stampede and, if history is any guide, not only won't fund investors exit--there'll be quick restitution made to funds that engaged in unsavory activity. If years of relative underperformance didn't kill the fund business, a few tens of millions of favoritism isn't going to do it either.

So, a week of pause, capped by a Friday flurry is on tap, with some sector rotation likely, but I wouldn't expect too serious a pause for recently hot groups. On the other hand, that doesn't mean I see smooth sailing the rest of the year. When the news flow turns more negative, as it's likely to early in October, when warnings are inevitable, it will be just the right time for funds to do their year end rebalancing--since over 67% close their years at the end of that month. A 5% correction on tap? 10%? That depends where the dip buyers step in and, right now, funds are more afraid too miss the next rally than they are of a deeper correction. 

In the U.S. many will use the mid-west floods and east coast mid-month black out as excuses for sales or orders lost, which is why I'd like to draw attention to Starbux, which announced August comps up 9%, even before the month was completely over AND despite many of it's stores being hit by the east coast black out and follow-on lack of water with which to make coffee. Say what you will about SBUX coffee--and I say it tastes like motor oil, at least the hot version--it managed it's business well despite less than ideal circumstances.

The end of the week will bring the Unemployment Rate for August, which some will assume has to improve since the moving average remained below 400K new applications for four weeks but nothing is farther from the truth. The Rate of Unemployment is derived from a household survey that queries who's looking for work, and whether jobs are easy or hard to find. Since many teachers return to their jobs in August, and college kids return to school, while high school kids often quite summer jobs for a couple of weeks of R&R before school resumes, we can assume fewer people were looking for jobs in August. Then, with so many unemployed for a few years and discouraged, we can assume some have given up by now, so it's possible the Rate could fall--just as long as you know it's NOT for the reasons one would normally assume.

Vechicle sales should prove the foreign automakers are still stronger than their domestic counterparts, since word has it there aren't any '03's left for clearance on lots when the label is Acura or Lexus, while the American Automakers are still offering ever better clearance deals, including zero percent financing or $4,500 cash back, with H2's, for instance, so overstocked, the price has plunged.

But on the upside, retailers are seeing a strong back to school season--no doubt helped by some cooler and rainy weather in the northeast--a BIG retail tell. Wal-Mart, Target and others, including, most recently, Radio Shack have already raised the bar for August. So I ask, if the "adults" return this week, is there reason to sell?

Away from data, the conference season gets underway large this week, With Solamon Smith Barney hosting a tech conference, Kaufman Brothers Communications, Media & Tech, Keefe Bruyette & Woods offering Insurance, Dutsche Bank hosting Global Emerging Markets, while Prudential Hosts it's annual Back to School conference, heavy on lunchbox items, rather than on apparel retailers. As if that weren't enough, CFSB hosts Global Software, while both PeopleSoft and Intel host analyst meetings--Intel's the mid-quarter update kind, though there shouldn't be bad news there: Intel already raised both revenues and margin guidance, so it follows, it should next raise earnings expectations or, at least, not cut numbers. You might think there's already enough going on but CE Europe started over the weekend, and it's every bit as big a consumer Electronics show, over there, as the January show is in the U.S.

So, though I remain a skeptic about this recovery, and believe volume may not necessarily soar just because Labor Day weekend has ended, I find it hard to get bearish, here. The charts look okay, the economy has improved, the Fed and White House have been joined by global leaders everywhere in the effort to inflate economies. Until there's a catalyst, trends don't suddenly reverse: price isn't enough alone. While I can't recommend getting long here, neither can I say sell, just because volume is low--but I'd keep my trigger finger well-tuned and ready cause the issues that have often triggered fall sell-offs haven't been repealed--something I'll write about in the  

© Sandi Lynne 2003 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.

August 25--29, 2003   BEARS CAN'T BREAK OUT CHAMPAGNE...YET     Friday, the DOW rallied to 9500 before reversing and ending the day down, along with the other major indices. If you think that ended the rally with a bell ring at the top, take a step back and run through several hundred charts before jumping to that conclusion. I did and can report the bears are far from in control. In fact, I'd argue, the bulls remain in control until there's follow through to the downside……

The banks did look a bit dicey on Friday, with Citigroup the worst but C has issues of it's own--namely Weil's announced "retirement" from day to day activities at the end of the year. Go back and check history and you'll see the same thing happened when other high profile execs stepped aside, Lou Gerstner at IBM and Jack Welch at GE, most notably. Last week's leadership, techs, particularly semiconductors, gave up nothing Friday, except some of the frothier intraday gains. Trend lines held across the board. Elsewhere, brokers were okay, while biotechs gave some back but they usually do this time of year, anyway, as theirJournal and Scientific Meeting schedule takes a vacation until September.

Believe me, since writing the August Monthly Outlook, I've expected the typical August sell-off to arrive shortly after the meat of the earnings season ended, as it typically does, but that hasn't happened, yet, and Friday's reversal will have to prove itself with downside follow-through before it's reasonable to declare the rally over. Then, absent a break of the lower end of the range that's support stocks, stocks could again rise and traverse back to the top of the range. Donchya think bears will think twice before staying short at the bottom of the range? That, alone, could create buying which would, again, trigger technical buy signals  For the bears, complications abound near-term, since the coming week is both the end of the month and a pre-holiday week, both of which tend to upside biases, though no one should expect to spy a trend based on Friday's volume, which should be silly slow.

As for data out this week, the bull's may have more on their side than the bears, since existing home sales may have hit a record in July, while related data suggests Durable Goods could be strong. Come Thursday, the revisions to both GDP and Corporate Profits could rise, again giving the bulls some tailwinds.

The headline weekly unemployment application number released at 8:30am Thursday could surprise by rising above 400K for the first time in a few weeks but that's the aftermath of the recent black out that closed states offices Friday, the 15^th, which means those who might have applied that day, probably applied last week, making last week, in effect, a six day week for unemployment offices in regions that had been closed on the 15th. While I'll grant that Wall Street often has a short memory, so could overreact to the initial release, the economists will be out by the time stocks open to explain away the spike up, which should neutralize any negative effect.

I am worried about DOW component Altria, since the board of MO meets this week and has, traditionally, upped the dividend at this meeting, which seems unlikely in light of the $12B bond MO's gotta pay to appeal the Illinois case. After pleading for a reduced bond based on financial hardship, it wouldn't look good, on a P.R. basis alone, for the board to raise the divvie and, believe me, MO's board realizes it's waging a P.R. war as fierce as anything it's faced in court.

Other corporate news that might help the markets include weekend news reports that Verizon and it's unions are, once again, close to agreement, while Arizona should see gas flowing from it's pumps, again, since Kinder Morgan claimed it was ready to restart it's pipeline. The semiconductor sector had been hot even before Intel raised the revenue range on Friday but all ears will be on Novellus, which offers it's mid-quarter update on Thursday. During earnings season, many analysts heard equip sector statements denying signs of a pick-up and chose to dismiss the warnings with claims that the execs were low-balling the Street. Should Novellus stick to a cautionary outlook, it may not matter if the analysts are dismissive. Last Friday, at least, proved that people are willing to take profits at some point--and that point could return should NVLS repeat what it said after it's earnings. Sometimes it's the reaction, not the trigger, that says the most about investor pshycology, so it's the reaction I'll be watching. Then, again, what if NVLS says orders started coming in? Ever seen a bear get a shave?

On the earnings front, McData could disappoint and it wouldn't change the fact that most of the storage space reports improving business--a necessity the recent black-out underscored. Toll Brothers, a large, luxury homebuilder hardly matters since it's future could smack it in the face--backlog or not--if rates don't cooperate, so it's action in the Treasury pits, that counts, with a 2-yr auction scheduled. H&R Block reports, but with tax season over, and it's mortgage business sub-prime in nature, I'm pretty sure it can't roil the markets one way or another, since no one should be shocked if it's mortgage activity skids on higher rates. Otherwise, earnings reports slow, with none on tap as familiar as those already mentioned, though Corinthian Colleges is part of one of the highest flying groups around, while Brown-Forman is sure to tell us if wine coolers perked up for the summer. Unfortunately, liquidation plans from the MorganFunShares, a closed-end fund that invests in "sin" could result in BF.B getting sold even on a good report, IF  the not so much "fun" shares hold any shares (which I don't know that it does). What does it say about the bear market when even sin didn't meet expectations? Tough week: even FOX learned it didn't own "fair and balanced," which Al Franken is free to use in his book title. What was Fox thinking, anyway, stopping a spoof? Has it lost it's sense of humor? Did it really take all it's "reality" shows that seriously?

I expect more downside follow through on Monday, as the markets react to the resignation of Freddie Mac's CEO, which means the financials could again lead the market down. But the decline could reverse by late afternoon. I don't expect Friday to be a rally day, just because it's the last day before the holiday. On the contrary, we've seen Friday profit taking for awhile, with little reason for that to change this week--especially given recent terror activity abroad. In between, especially Tuesday, the last day to trade under T-3 settlement, it's a toss-up: some will book profits to end the month, while others will banish losers,and still others will dress up their portfolio's with the month's winners--which leaves the day anything but smooth, and leaves the worst performing groups, like drugmakers, vulnerable to more selling.

Don't misunderstand, just because I'm not jumping to declare Friday's action a bell at the top doesn't mean I think the rally has much more to go. On the contrary, the week after Labor Day has often seen sell-offs that undid prior excesses and, with stocks still near the top of the trading range, a move to the lower band would be consitent with recent activity. There's still any number of reasons September should be weaker than recent months have been but that's something I'll write about in the September outlook, posted September 1^st, when I'll also post the Weekly Outlook because of the markets will be closed next Monday in celebration of the Labor Day holiday. As for October, the 1^st is the date many Adjustable Rate Mortgages could see increases for the first time, cutting disposable income to many consumers--something the street should start talking about after Labor Day--so tune in next week, and have a cool, dry, refreshing weekend in the meantime.   

© Sandi Lynne 2003 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.

Some will tell you the day will impact GDP the way a snow day does but I'd beg to differ. Many machines and plants are kept running during a snow day, when roads may be impassible. Friday was no snow day--refineries that idled, due to loss of power, could need at least 3 days to restart--3 refiners were shut down, just when crude was finally backing off those recent high's. Automakers have said the plants that need to be restarted could take three days, too. Around the country, offices will open tomorrow and employees may have to wait for the IT department to finish rebooting the network before any work gets done. For refineries and factories, rebooting the network is just the first step, getting the equipment running and synchronized is a chain of events that doesn't synch because a network or switch was turned on. You think everything in your refrigerator would spoil if power was out for nearly 24 hours? How about the local Piggly Wiggly--and all it's meat, poultry, fish, ice cream, milk. and dairy products. (Hint: If you weren't effected by the August 2003 outtage, and it happens to you sometime, you want to head for the local Chinese Restaurant--they cook ONLY with gas) A snow day? I don't think so.

Certainly, the "Not In My Backyard" crowd will have much to answer for. Ya know all those new home sales numbers we've been hearing about the last three years, since rates really started taking a dive to all time new lows? Those were new construction the power plants built 30, 20, and even ten years ago only estimated for. The actual numbers of new homes built exceed what was estimated, while no new electrical plant has been built here for 10 years. Maybe the California energy crisis of a few years ago was engineered by Enron and it's collaboraters but I think there are millions of people now thinking it was a warning--as Friday's outtage was. There's no doubt in anyone's mind that it could happen again--and will.

When all was said and done, last week, the indices did quite well, with the DOW and S&P rising 1% while the NAZ rose 3%, mostly on the back of semiconductor stocks that rallied during the SoundView Conference--much to my surprise. IF the markets are back to rallying and rallying on events, then Wall Street In Advance once again owns the sweet spot--since there's no other site that comes close to providing it's subscribers as many catalysts covering as many industries in nearly as many countries--even with so many August Asian events again postponed.

So exactly what does the schedule tell us, now? Retail owns the earnings reports, with the following well known companies scheduled to step into the confessional this week: Home Depot and Lowes, Electronics Boutique, Gamestop, and Toys 'R Us for the kids, department stores Saks and Nordstrom, discounters BJ's and Ross Stores, Amazon competitors Borders and Barnes & Noble, as well as specialty companies Gap Stores, Sharper Image, Talbot's, Men's Warehouse, Stage Stores, and more.

No big Investment conferences this week, though Merck will spin off it's pharmacy division, Medco, which will immediately enter the S&P, while Vivendi is supposed to close bidding for it's Entertainment division. Next weekend, George Gilder holds his annual Gilder/Forbes Telecosm but I don't think Gilder holds quite the sway he once did, or think too many will care.

As for industry events, BICSI, a Telecommunications Association event, and ISCE: a Satellite Communications event meet starting Monday, in separate cities, while Jupiter is holding Search Engine Strategies, which ought to get people wondering, again, when Google will go public--especially since recent internet sector stock strength suggests a window of opportunity opened. Ironically, there's an Energy conference, co-sponsored by the Department of Energy--perfect timing, donchya think?

DVD Entertainment starting Tuesday should attract attention, especially with Electronic Arts at an all-time high, while TOY, ELBO and GME are set to report While DVD more traditional refers to filmed entertainment, the number of video game releases tied to blockbuster movies suggests they're so intertwined, it's no longer possible to talk about one without the other. Speaking of films, movie buffs will be at the Venice Film Festival, in Italy, in case you're not up to snuff.

I didn't mention Hewlett-Packard's earnings when I listed some of the better-known companies set to report because it's unlikely to have much impact beyond, possibly, Lexmark, the printer company. Instead, in tech, I think the talk will concern companies like SunGard Data and IBM, which managed the back up centers that let so many companies impacted by the black out save files and protect information. Likewise, with so many networks in need of reboot, the temp agencies that specialize in technology should get some buzz. (Iron Mountain, better known as an underground dead file storage facility, actually operates back-up centers, as well, so it's another name that might be heard.)   Furthermore, for the most part, cellphones worked during the black-out, while Research in Motion's Blackberry message texts proved, once again, utterly reliable and invaluable--at least as long as the network back-up power worked. I haven't heard much about the reliability of the newer, competitive products but we're sure to hear come Monday.

Obviously, utilities will be a focus, as will energy companies, again, since just when crude had fallen below $30 a barrel, again, three refineries were blacked out, while Iraq's export pipeline was sabotaged, pushing back plans to export for profit and, simultaneously, taking out potential supply that the commodities markets had begun to price in. Makers of turbines and other power supplies for utuilites could also be viewed as beneficiaries, with GE one that could positively influence the DOW.

It's a somewhat slow week for data, though the overanalyzed preliminary University of Michigan Consumer Sentiment numbers were postponed until Tuesday. The same day, after the close, the Semi-Equip group should post it's July book-to-bill but I don't expect too many surprises: the group finished reporting with last week's report from Applied Materials, which means we already have more current commentary. As for Thursday's Unemployment application number, expect a multi-month record but meaningless low. Hundreds of state offices in the blacked out area were closed Friday, which means one less day of lining up to fill out your first-time application. Will the government "guestimate" based on activity the first four days of the week. They ALWAYS estimate but I think most economists will wait and see this week's numbers, when reported next week, then average the two. If Thursday's Philly Fed Index is much talked about, then it's out of desperation 'cause the unemployment apps number will be so useless.

I expect a down Monday cause most post-expiry Mondays are down--the rally Friday making it surer, since Mondays tend to reverse up expiries, especially. There were a few Mondays, early in the rally, when stocks rallied strongly at the end of the day to post gains on Monday, but I've seen less evidence of such eagerness, lately, and would be very surprised if that happened.

The charts suggest the indices should rally early this week--even if they don't on Monday but everything I know about seasonality suggests the winning stocks should thin out, and any rally in the indices will disguise broader weakness below, with breath very lopsided to the downside. As retailers report, we'll get more post-earnings comments on how August is shaping up, though even those will be marked with an asterisk, since so much of the country was closed on Friday. With mid-quarter updates dead ahead--Novellus on August 28^th, Intel September 4^th, I can just hear the press releases now. First it was Iraq, then SARS, then weather, and, now, the black-out--but excuses are what bulls will point to make their case, and it's been tough being a bear since mid-March.

In sum, while I believe retail will put in a short-term peak with so many in the sector reporting this week, and tech should soon begin to flail, as mid-quarter update anxiety interrupts the optimism, there's little reason to expect much more to the upside but, also, no reason to expect a collapse, either.  I'll be watching put option activity very closely. With so much of the open interest expiring on Friday, and so little open put interest for September's expiration period--a quadruple expiry that's often been very nasty to the downside--I'll be looking for active put purchasing . Without it the market may find it lacks one significant source of support--even if that might be September's business, rather than this week's. Watch bonds and rates, and watch crude, then keep a close eye on open put interest 'cause the markets might just find it's walking into a perfect storm, Black-out excuse or not. 

© Sandi Lynne 2003 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.

The news, this week, seemed almost silly last week, With I'll Be Back Arnold declaring himself a candidate for California Governor--if Gray Davis is successfully recalled. News media is sounding like it's a done deal but much can happen between now and the election. Meantime, by the time candidacy petitions were closed, 149 other candidates had filed the necessary papers to run for Gray's job and, still, it could get funnier: California will use the punch cards of hanging chad fame--about which we Floridians could tell 'em a thing or two. Standby and shut off the networks: Reality TV doesn't get any better than this--unless you're from California, of course.

Despite the fact that a congressional report has found the government's color-coded alert system vague and confusing, I'm keeping the red alert on NAZ for at least the first half of the week, and trust you all know exactly what I mean. Retailers will be the focus of earnings but, given the mostly better than expected quarterly overall revenues and comporable sales reported last Thursday, most of both the bad and good news is out. One retailer reporting this week, Tiffany, doesn't provided frequent updates, so it will be almost as closely watched as, say, Wal-Mart will be for the general populace, since TIF is seen as holding clues to luxury spending--with an international tourist component to boot.

Other significant eanrings reports will come from Applied Materials, Echostar, Fox, and Dell, but it's WMT that will catch as much attention as any of the big name tech confessors--while it's also less likely to disappoint than the rest--though resistance at 58 is the bogey it hasn't conquered for some time.

This week, starting Wednesday, SoundView technology is holding one of the least spoken about Semiconductor Conferences, in a long time, which is the best shot the group has for a rebound. Mind you, I said rebound, not recovery: nearly every company issued a down beat outlook that was ignored, at the time earnings were announced but the group flew, anyway, thanks to analysts who were convinced they were being low-balled. Suddenly Friday, traders looked like believers cause that group was whacked the hardest to end the week. Even before Soundview convenes, both IBM and Hewlett Packard will commence DevCons that analysts are sure to attend. The good news for IBM is it's T-Rex mainframe, which started shipping two weeks before last quarter ended, with 3 quarters of backorders stacked up before the first one left the plant. For Hewlett Packard, they'll be a lot of body language reading by those who consider themselves most adept at reading crossed arms--never mind how little I think analysts are able to do so--even with arms wide open. Last year, at this time, Capellas was President and jumped the gun, proclaiming the Compaq integrations ahead of plan. This time, if nothing bullish is said, HP's stock could sell off some more--since no news will be taken as bad news coming, with earnings not until the week after this.

Trade Shows and Expos are the sort that trigger analyst musings on Halloween, and the holidays--their farsight for outlooks steadier the farther out into the future you go, which is why no one will speculate on how well early Back to School sellings is going. Down here, I can report, the second busiest mall in the country, Town Center, was having one of it's worst days of the year on Saturday--dead, unlike the same weekend one year ago. Stil, the analysts should be enthused by the International Gift Show at the Javits center in NY, while home center analysts will be talking about International Hardware Week.

Not to be left out, in addition to dominating the earnings calendar and the two big shows mentioned, retailers will also gather at NRFtech--a technology for retail show, as well as at the Variety Merchandise Show--a favorite of dollar store buyers. One thing is sure, the 80 page memo pad I picked up at Eckerd Drugs on Sat, at $1.39, to take notes for my mall report has gotta be cheaper at a Dollar Store--if I only knew where there was one around here.Today's Walgreen ciruclar promised them for 10 cents each--d'ya think Eckerd'll give me a refund on a memo pad with 65 used pages? When did memo pads get so expensive?

The Direct Marketing Association's List Vision could get interesting, since all the big portals and providers are accumulating valuable lists--getting to know customers as well as TiVo thinks it does it's users. eTail, a retail conference in Boston is one of the last surviving dot.com conferences--and that's no exaggeration. It will be very interesting to see how much longer it takes for the US Gov't to get on the stick and begin to include the billions spent on the internet in the Retail Sales figures that will be released Wednesday, as a matter of fact. D'ya think consumption would look even better than it is if online commerce were included? But, heck, the Fed's are gonna save that for when they really need it to make the numbers look better--just as the Fed has reconstituted so many indices, as the ones they used failed to provide the answers desired: CPI to name one especially Other retail related events this week include Outdoor Retailer, for ski, swim, skate and ski boarding, while the Tupperware Festival is held in Sweden--No kidding. Check the calendar: it's there. Now is there any doubt in your mind that it will soon be back-to-school and holiday?

A couple of biotech events, including a nanotech event, round out the schedule, while Flat Panel Display in Taiwain covers one of the best growth areas in electronics, with start of football season sure to prove it. Reg FD. comments from scheduled companies at Soundview could put cancel the favorable outlook for displays, as tech tends to trade as a group. But, as happened with other hit electronics, prices are falling, which is spurring demand but, already, the chip makers for LED and LCD displays are looking like roadkill--killed by falling prices and competition, which has led to a boon for consumers.

If that weren't enough, there's an Options Expire at the end of the week, one that's usually down, while the FOMC meets on Tuesday, with consensus overwhelmingly to the nothing done side. Truth is, the bond market is holding the strings, and it's no longer all that interested in what Chairman Greenspan and his merry men have to say. The Bond boys are convinced they were already misled to expect a half point cut at the last meeting when only a quarter point was delivered--with John Berry of the Washington Post the accused mismessenger. We've all heard the improving data and earnings, we don't need the FOMC to tell us things are getting better, even if we don't know if the improvement is a rebound off a depressed base and nothing more than restocking, or first signs of improved demand. The FOMC doesn't know any better than we do but the bond market, which refused to get on the recovery ball early in the rally, is suddenly pricing in even better times than the equity markets had priced in, which in itself could crimp the recovery. That's why the Fed is likely to do it's best to tame the bond beast, and talk down rates. Problem is, it rarely happens when the Fed talks on schedule--like the rest of the market, bondland responds best to surprises, like the time the FED announced discontinuation of sales of the 30-yr.

In short, we have the NAZ breaking down, the S&P seriously cracked, while the DOW is moving on a puzzling divergence which isn't likely to last too much longer. The August expiry is rarely to the upside, and I expect Friday to end down as well. Monday didn't look so good on the charts, either, though ya have to respect the markets' tendency to levitate on the Tuesday morning before the FOMC announcement--old habits die hard. With the calendar now into the worst two-month period of the year, the third quarter too young for many up or downside announcements, and with the bond market causing a ruckus, there's sufficient uncertainty to make if very difficult for stocks to even hold current levels, let alone advance. Retailers, of course, remain the exception, as their season for earnings and back to school sales leads to optimism. If ya didn't lighten up last week, it's not to soon to do so now. Traditionally, Rosh Hashana has been the next most predictable up week, and that's very far away, the last weekend in September. The bulls are in trouble here--make sure you're not.  

© Sandi Lynne 2003 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.

August 4--8, 2003   BOND MARKET ALREADY STRESSED FACES A TREASURY AUCTION      I ended last week's outlook by saying I probably wouldn't post the August Monthly until this weekend, because I didn't think the outlook would drastically change before the weekend. However, Thursday and Friday's action in the bond market, along with the huge intraday reversal in equities, Thursday, threw a wrench into my certainty. The bond market, as the media has made a point to suggest, hasn't seen such a huge sell-off since May of 1987, and we all how that ended by October of that year. There's a snowball effect when a market pukes, like bonds have, and often, there's no stopping the direction until there's not one man left standing. Rumors of some hedgie blown out is the least of worries: with the hip bone so connected to the thigh bone in bondland, and the US Treasury about to bring to market $60B in 3 through 10-year notes, Tuesday through Thursday, the carnage isn't nearly over.

Consider, for a moment, how unattractive some recent corporate offerings, that came at a premium, now look when compared to the yields and safety US treasuries--assuming capital can be preserved. Asset allocators are sure to find equities less and less attractive as yields rise. particularly as equities enter their worst three months of the year..

The equity market reversal on Thursday wasn't, in and of itself, a death knell for equities. In fact, despite Friday's follow through to the downside, the 750 charts I scanned tonight suggest that, despite many more stocks breaking support, with the financials hit hardest, Merrill Lynch actually escaped significant injury. Meantime, techs didn't fare poorly, at all, which left open the door to the trend reversing--as divergences always do. However, with bond yields now sure to draw money out of equities, it may be only a matter of time before stocks break their recent trading range. While techs held up fairly well, they may be just the last to fall--Cisco's earnings on Tuesday or not.

Short sellers have been reluctant to press many bets, since shorting at resistance--or even on trend breaks-- has been a losing strategy during the rally, and many fear being short if Saddam is suddenly captured or killed. But that fear could be offset, now, by Thursday's intraday reversal, Friday's weak close, and the certainty that asset allocators will be moving money to cash, hoping for an opportunity to capture higher yields when the carnage in Chicago is over. And that's the single hope equities have--that Institutional money managers are so tempted by better yields that they step in to stop the cascade in the bond market. If they don't, we could see an unravelling in bonds and equities, simultaneously. Of course, it's also ironic that this is the last full week of trading before the next FOMC meeting, on the 12^th.

Aside from Cisco's earnings, retail takes the spotlight, with the group dominating earnings the entire month, and back-to-school on every analysts' lips. Thursday's Chain Store Sales should be preceded by some Reg FD previews, thanks to some retailers appearing at both small cap investment conferences this week. (use the Premium Area sort under categories/sectors to access "analyst meetings.) The mall around here (Southern Florida) was jammed with school shoppers this weekend but, then, our schools start next Monday. Elsewhere around the country, especially in the northeast, this week is the middle, not the end of summer.

Beside Chain Store Sales, Thursday also brings Chairman Greenspan's favorite number, Productivity, about which I don't have a clue. We've heard about the lay-offs but also know factories were operating far below capacity throughout the last quarter. When that happens, companies often have more employees than they needed, causing productivity to fall. As for Monday's June Factory Orders, that's already been previewed by the Fed's Beige Book and no one should find much to celebrate there, even though the Beige's orders and inventories did suggest there's hope for July, when inventories typically build in advance of back to school.

In short, the week promises rocky road rather than a smoothy, with the bias now shifted to the downside, as fear--missing these many weeks--reappears. I expected some dislocation as bonds started pricing in the recovery stocks had already discounted but the bond market is taking it too far--getting out of control, and any out of control market is a dangerous market. If you're fully invested, you should be scaling out. If you're invested in a sector other than retail, you may have overstayed your welcome--while retail is no source of safety since the group has been running up in advance and selling off on the news. Until the bond market settles down, I'm bearish equities, fully expecting that low, low VIX to suddenly kick up--big time, and that change in direction, alone, would be a sell signal for stocks.    

© Sandi Lynne 2003 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.

I don't like to quote myself but will anyway. Last week, I said, "With that backdrop, and Monday already identified as a day that should reverse an up opening, Tuesday and Wednesday to muddle through, with sectors sparking and dimming on the latest sector leader's earnings report. Come Thursday, we should see positioning in advance of Friday's data, and, yes, as it's done for some time now, I expect the markets to end on an up note, come Friday, unless the data really shocks to the downside, again something I have no reason to expect." By Thursday night, as bad as the charts look after the intraday reversal, the financials held which had me reminding institutional clients of the possibility that "Saddam next" would be the rumor du jour, since Hussein's sons had been killed and put on display and, sure enough, the first rumor happened to arrive Friday just in time to cancel Thursday's odd reversal which looked a lot like a forced liquidation, right down to the hour it arrived, when houses often sell to bolster over-extended margin accounts. I can't say I know or understand exactly what caused Thursday's reversal but I'm not buying the asset allocation jibberish which seems to be the fallback when know one knows anything.

As for rates, I see the damage rising rates are doing to the homebuilders but rates are still historically low and the FED will not be raising 'em anytime soon--not if the chairman and his cohorts are to be believed which, on that score, I think they can be. The Fed mission is reflation, and that's only accomplished by keeping rates low. Heck, 7 months ago, between Christmas and New Year's, mortgage rates were closer to 6%--and they only dipped so low 'cause it's the slowest week of the year for that biz. For months, economists and analysts have been criticizing the equity markets for pricing in a recovery the bond market didn't see--rates, at the time, kept going lower. Now that they've reversed, and seem to be pricing in better economic times, some would have you believe it's all over for equities. Not yet! It may very well be that the September/October decline will be the upheaval resulting from the market adjusting to the new rate environment but, as a trader, all my experience and research suggests it's too early to call the rally over. There's one last party ahead, so use it to your best advantage to take profits and position for the agida ahead.    

© Sandi Lynne 2003 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.

July 21--25, 2003      EARNINGS MEET TAX CREDIT CHECKS       Most Sundays, by the time I sit down to write the Weekly Outlook for the Premium area I'm raring to go, the week ahead clear in mind. Of course, that doesn't mean the week, necessarily plays out the way I foresaw it, only that I saw it clearly in my minds eye before I wrote. This wee, I'm still mulling a host of cross signals.

First, it feels like the market is playing out like it usually does, inline with the usual seasonal pattern, except it's been developing a week to ten days behind schedule--both peaking and surging a week to ten days after it usually does on the calendar--which correlates closely to the economic and earnings calendar. Second, the charts troubled for the number of stocks brought down from high to touch a strike lower, or two, during mid-week, before rebounding.by Friday. Third, an analysis of NAZ in June reveals it opened and closed with 10 points differential, then exploded to the upside in July, which makes June a consolidation month (The NAZ, though traded with an 88 point range during the month but I was only referring to the open, close, and early July action.) Come Friday, last week, a coupla days of really negative action was strongly reversed in the DOW and S&P, while the NAZ lagged. Most remarkably, energy stocks exploded to the upside after spiraling down, and the service stocks can claim in the ignoble distinction of releasing the most negative pre-announcements, and higher percentage of missed estimates, so far. Still, all the Thursday reversal and big, open candles from Friday did for the group was reverse the earlier in the week decline, with those stocks that posted gains for the week managing about a point, at most. Meantime, volume was light on Friday, and NAZ underperformed for the week--the only major average posting losses for the week.

What did stand out about last week, though, was the absence of dip buyers in NAZ, the number of stocks that broke uptrends for the first time since March, which should serve as a warning, at least. QLogic is one name that comes to mind. Of course, given the fact that trading has been dominated by pro's all year, it's hard not to look suspiciously at last week's action based on the sheer number of high profile stocks that moved right down to options strikes with large open interest.We all hate the think the markets are easily manipulated but, on the other hand, can't ignore the unlikelihood of so many coincidences--and I'm not, as long time readers know, not given to grand conspiracy theories.

So, when in doubt, I turn to the calendar and, quite honestly, there's reason for some optimism this week, once we get past the post-expiry gyrations on Monday, which should see an up open--perhaps up big--before selling. sets in and reverses the gains. Most important, this week, will be the first mailing of tax credit checks, on Thursday, though many workers saw a slight difference in their paychecks, last week, when withholding was adjusted for the new tax laws. So, unlike Julys past, when retailers often collapsed, there's reason to suspect retail and apparel stocks will catch a bid, since the only precedent for mid-year mailed rebates saw those groups react well. (Look for Wal-Mart to offer to cash the rebate checks like it did last time, though Albertson's beat it to announcing just such a plan last week.)

Also, this week, we get the biggest crush of earnings reports, based on sheer volume, on Wednesday and Thursday, especially. However, with most of the key earnings already out from JNJ, Intel, Microsoft, Citigroup, JP Morgan, IBM and GE, the only stock that could really move the markets is 3M, since the DOW is a price weighted index and 3M is the priciest stock in it. Though every earnings releases is followed by a pseudo analyst meeting, in the form or a post-earnings conference call, Microsoft actually holds a formal analyst meeting, this week. Ironically, that also takes place Thursday.

The economic calendar holds no earth shattering releases until Friday, when Durable Goods, as well as both Single Family and Existing Homes sales all are scheduled--all for June. A number of Homebuilders, as it turns out, report this week, too, but their fate is more tied to the bond market than to their earnings or backlogs--or the two sales numbers shceduled. So far, the bond market is threatening the homebuilders party, as rates have risen, dragging mortgage rates with them, nevermind how far rates could rise before anyone would think mortgage rates are anything but a good deal, in historical terms. Aside from the G.I.'s returning home from World War II, rates have never been as affordable--6.4% unemployement be damned. The flip side of 6.4% unemployment is 93.6% employment, a rate that's the envy of almost every country in the world.

As for trade events, there's nothing to compare to last week's SemiCon, though I won't minimize the ability of World Alzheimer's Congress to move stocks working on clearing plaque in the brain. There's a gift and home show in Chicago, and that may get analysts thinking about the upcoming holiday season, but it's no match for the scheduled earnings deluge. Granted, the reports that cause the most angst are already out but any number of companies in addition to 3M could impact the major averages, particuarly the DOW, including Merck, BellSouth, Boeing (which has already relaesed a ton of bad news), International Paper, and, for broader interest, AOL, which lagged both internet and media stocks until recently.

So, what we're left with, is charts that can't be relied upon because of the impact of expiry, the same hope for a second half turn around the markets have promised for three years, this time bolstered by workers who'll receive some of their earnings back in the form of a tax rebate, and earnings, more, earnings, and more earnings, which have been better more often than they've been worse, so far. With that backdrop, and Monday already identified as a day that should reverse an up opening, Tuesday and Wednesday to muddle through, with sectors sparking and dimming on the latest sector leader's earnings report. Come Thursday, we should see positioning in advance of Friday's data, and, yes, as it's done for some time now, I expect the markets to end on an up note, come Friday, unless the data really shocks to the downside, again something I have no reason to expect.

However, I don't think the rally is complete. I believe we'll see seasonal activity similar to years past, with one last surge to the upside, after this week is over--the earnings relief rally that arrives more often than not to close out the month. I'm not forgetting that I said the dip buyers didn't show up last week. They did, just not as quickly as they have during the recent rally, and not merely because a tech stock came within dimes of a trend line. Dip buyers did, though, show up to buy the entire energy complex on support--despite how bad the fundamentals have been for some of them, the service sector in particular. I expect that to happen in tech, the group buyers struck most universally last week.. However, I also expect the last leg of the rally to be more discriminating than we've seen since March, which means breath may not be as strong as it was earlier in the surge. That's all part of the topping process and, make no mistake, the markets are are topping before the usual late summer/fall change in tone. The only question that remains is whether the change in tone will lead to only consolidation, or a wholesale sell-off, as is typical of August through October. Right now, my vote goes to a more judicious sell-off that might be shallow enough to be considered a "pullback," even if it may not feel that way if it's your portfolio retracing a standard fibinocci 31.8%.  MONTHLY OUTLOOK POSTED HERE.

© 2003 Sandi Lynne Nothing contained in this commentary should be considered a recommendation to buy or sell any security. The opinions expressed are the author's alone.

Many times over the last few years I've mentioned that the financials and tech companies, themselves, are the biggest users of technology. With the financials and tech stocks doing so well in the rally, it won't be long before the biggest wallets of all start opening up. No, it won't be like it was in the 90's--it won't be ever again in our lifetimes--but it will probably be enough to carry the economy through the election year, which leaves a lot of months to make money on the long side, a reason to get long on the next deep setback--assuming the dip buyers allow a setback to occur, which I'm betting they will. But that's not likely to happen before mid-August, exogeneous events excluded.    

© Sandi Lynne 2003 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.

While ends of quarter have often seen the quarter's winners bid up, with the losers dumped mercilessly, the 750 charts I scanned today suggest most traders will be looking at all the wrong groups. First, accept the fact that the very short week is likely to see only skeletal staffs at their desks. Given that, there's little reason to expect the remaining crews to swing for the fences. Furthermore, thin markets make for outsized volatility, so large moves could be punctuated by tight range trading in between. If the 750 charts I looked at tonight speak the truth, financials and tech have little chance of moving to the upside tomorrow. Likewise, biotechs looked most likely to continue their pullback off recent highs. Selected retailers looked poised for some more upside, along with selected big cap pharma, while energy services looked ready to mount some kind of recovery, though why that should be the case is beyond me. The group has seen many a warning without any positive surprises. The reason natural gas got so expensive, and stockpiles fell so far is because drilling activity hasn't kept up with prices. In the absence of big oil announcing increased capex, that should remain true--leading to potentially higher prices, which will hit consumers in the wallet, now that northern states are seeing more seasonal temperatures..

As you might imagine, there'll be only a trickle of earnings, with investment confwerences and trade shows on our shores on hiatus. However, the Russell indices will be rebalanced on Monday's close, which should make for some unusal trades to both the up and downside late Monday and early Tuesday. For the most part, though, portfolio managers probably prepared for the changes in the past week or two. As is typical for the opening days of the month, the economic calendar dominates, with Vehicle Sales, the two ISM's (formerly PMI's), as well as the rare Unemployment Rate announcement on Thursday, the same day weekly claims are announced.

Now, with the quarter's end seen as bullish, after a big rally, and the first few days of the month often spurring rallies, as automatic deductions flow into retirement accounts on their way to mutual funds, and with pre-holiday trading also often bullish, the world, it seems, expects big things from the short week ahead. Problem is, as I said, the charts I looked out suggest otherwise.

Clearly, charts are backward looking--they capture what's happened, and don't always predict what will happen, otherwise, the best technicians would trade to billions in profits a year and, probably, never tell a another soul how to duplicate their methods. But charts aren't perfect predictors of the future--they're only a tool that must be mixed with other tools, including earnings, sentiment and rates. On the last, Greenspan and company has been supportive. Sentiment, however, has gotten way too bullish--to an extreme that's often signalled tops. Earnings? Well, there's the rub--we're between reporting season and, often, the first few days of the quarter yield a predominance of warnings , with the very short week, and short day on Thursday, the perfect opportunity for companies to sneak in bad news and hope the markets forget or forgive after the long weekend.

The one thing traders forget is how often the December quarter ends with some pretty nasty days until, sometimes, the very last day of the year. Because the June quarter is most similar to the December quarter, each the end of a half year and the perfect time for PM's to rebalance their portfolios, I'm less certain we'll see a rally than others seem to be. Not that I don't want the markets to rally: I absolutely do, so I can get short for the two weeks beginning July 7^th. But that's a story for the Monthly Outlook,  posted here, Sunday night.

In sum, while I don't discount the possibility of higher prices tomorrow, or Wednesday/for the half day Thursday, I see no reason to expect it to occur in any but the groups mentioned positively earlier. The rally peaked on June 6^th, for some sectors, June 16^th for others, with some pretty nasty weeks probably ahead, until late in July, when another earnings relief rally should materialize. But as long as we're talking halves, I think it will be late in the second half--more specifically, about a month into the final quarter, before we see the recent highs retested, let alone taken out. If the markets provide the customary end of quarter rally, I'd see it as an opportunity to lean the other way.

There will probably NOT be a Weekly Outlook posted on July 6^th or 7^th. I am taking an honest to goodness real vacation for the first time in years. However, the last time I did so, in Septmeber 2000, I saw enough to come back and report, on September 16^th, 2000, that I thought a global recession had commenced. I'm hoping to get the same clarity and advanced view about the next year on this vacation. Either way, I'll report back my findings, which should make the trip valuable to us all. If I don't post an outlook for the week of the 7th----11th, I'll extend all subsequent renewals for an extra week. Just know if advance, I expect that week to be down. How far down? That depends on the economic data, and what happens this week. Should the markets defy conventional wisdom and retreat this week, then the pullback won't have extra ground to cover, or need to condense a pullback into one or two horrifying weeks. Either way, I expect the next pullback, whether it starts this week or next, to last thru the July expiry, on the 18^th.

© Sandi Lynne 2003 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

June 23--27, 2003   CONFLICTING INFLUENCES     The FOMC holds a two-day meeting this week at which it's once again damned if it does, damned if doesn't. Polls show market participants evenly split between belief ina half and a quarter point cut, with at least some of the confusion fostered by opposing articles appearing in the Washington Post and the Wall Street Journal. Suppose the FED whispered different things into the writers' ears to see how the market would react to flotation of each possibility, what did it get? Not much: the market seemed to have preferred the 50% version but we'll never really know because of a rare quadruple expiry which, after all, probably influenced trading more than anything. With half the market likely to be disappointed no matter what the FED does, expect the usual kneejerk to the upside followed by a sell-off. That sell-off, however, doesn't have to last long--could set a record for brevity, in fact, with Wednesday's trading equally influenced by the end of the quarter--specifically, T+3 settlement.

End of quarter usually means stocks that have done well get bought, so portfolio managers can show the names in their portfolio, while weaker issues get sold, so to banish losers from the eyes of shareholders--especially after a strong quarter for the markets. While that sounds simple enough, in practice, it won't be quite that easy thanks to heretofore weak groups, like the big pharma stocks, suddenly demonstrating strength, while the strongest, like homebuilders, took the kind of dives late last week that could drive out PM's fearing profits lost.

Truth is, the markets topped on June 6^th and have practically churned since, with index gains masking weakness in some former leaders which have been replaced by prior laggards. The big surprise of the weekend was running through some 750 charts and finding just a handful of broken trendlines, while the vast majority have done nothing but pullback in a fashion that's healthy after a big run.

I'm on record at the beginning of June saying pullbacks could be short and shallow, which has not often been the case in July, so that's one of the issues I'll be re-examining next weekend, before I write next month’s Outlook. However, with VIX so low and so many puts added as the markets continued rising, it may just be that the same could hold true for July, which is often one of the weakest months of the year, for the first 19 days of the month, as warnings scare investors out. How do puts provide for shallow pullbacks? By allowing PM's to go long shares against the ability to sell them for a defined price. The newspapers, this week, have been vocal in claims that individual investors are back in buying. Word of their return has come from the online brokerage industry, which is reporting increased online trading, as well as fund flows, with one firm tabulating some $11B of recent inflows. However, if you read statistics on institutional trading, program trading has accounted for over 40% of all activity on many days. Given that, and given pro's tendencies to hedge, with options or paired trades, the potential groundwork is set for a milder than usual warnings season. Add in the fact that business hasn't worsened, even if it hasn't improved, much, since the war ended in mid-April, while analysts didn't get aggressive setting targets for the quarter, favorable forex, and there's a multitude of reasons for the markets to fair better in early July than it does some years. That doesn’t mean the first three weeks of July will be as strong as June was but it could mean a softer pullback.

Unfortunately, the reaction to the FOMC equity traders should watch most closely won't be on the stock exchanges but in the treasury pits. While the FOMC sets overnight rates for banks, the rates upon which consumers rely are set out in Chicago, especially by the yield on 10-yr notes, against which mortgages are reset. After hitting a low that caused 30-yr mortgages to dip to 4.99%, the treasury market lost some oomph last week, causing rates to back up just a touch. If the back up starts looking like a trend, equities could struggle, as analysts start worrying about what higher rates will do to consumer rates and spending. The food for fear could come in the post-meeting FOMC statement on Wednesday, at around 2:15pm. Should the Fed suggest another rate cut is insurance that could quickly be reversed, things might not go as smoothly as they have until now.

With the week promising end of quarter activity, an FOMC rate decision, and the likelihood of some more earnings warnings, the schedule would be busy enough without all the data points set to arrive, particularly Wednesday and Thursday. Durable Goods might, this week, matter as much as the two home sales data points set for release because durable goods are more closely correlated with capital investments which all the corporate convertibles offered recently should support, eventually.

As for earnings, the calendar includes Goldman Sachs, FedEx, Carnival, General Mills, Kroger, and Nike, a decent cross section of industries. Were Kroger to miss, it would join it's competitors, so it's earnings might matter least of all the ones named.

Of the scheduled trade events, Human Resources in Orlando could make surprising noise since the two biggest job sites are owned by online companies. With internet stocks posting the biggest percentage gains in the rally and new jobs a signal of corporate confidence, what should be a niche show could turn into more. Most unusual this week, though, are the number of DevCons--software developers meetings. Apple, Cisco, Oracle, and BEA Systems all hold DevCons this week. DBS Summit, for the Direct Broadcast Industry also meets, with the usual lead-in, CASBAA, postponed this year because of SARS, leaving this one all there is. Also scheduled are an eBAY Shareholders meeting, and Entertainment Tech World, which includes ShowBiz Expo and the DV show.

The investment conferences on the schedule (Premium Area subscribers should do a show sort by Industry/Sector, then skip down to the "Analyst Meetings") won't, in themselves, be source of news because SWS Securities, Wachovia and Wm Blair go to some lengths to keep their schedules of presenters a secret, in contrast to the recent Bear Stearns tech conference, the schedule for which Bear made readily available, along with webcasts of the actual presentations. However, Reg FD has been translated into press releases in advance of conference presentations, with those releases often bearing unhappy news of earnings shortfalls. NASDAQ is also holding a conference in Europe for some of the tech companies that trade on the NAZ Exchange, so that's another source of potential Reg FD warnings.

In sum, with the schedule topped by the FOMC, and the calendar closing on the end of the quarter, conflicting forces could work to cancel each other out, leaving the markets little changed by the end of the week. However, a slow couple of days at the beginning of the week while the FOMC is pending could lead to quite a crescendo on Wednesday, before trading backs off towards the end of the week, as is typical for summer Fridays. Of course, the quarter doesn't really end until Monday the 30^th, and many PM's mark to market, eliminating T+3 as an issue, altogether, so the summer doldrums aren't set to arrive immediately. Wall Street In Advance Offices will close from July 1--9, 2003  

© Sandi Lynne 2003 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.

Tuesday, the Semiconductor Capital Equipment Organization will release the book to bill (the number came Monday, down 37%) , while the May Housing Starts and Building Permit numbers are also scheduled, which will give us all another opportunity to throw shoes at our TV's, as CNBC beats the drum of the "housing bubble." This is a quadruple Option Expiry week, the quad referring to single stock futures, as well as the usual quarterly triumvirate, which should make Tuesday and Wednesday especially volatile, If the two days play out in customary form, one will be a mirror image of the other. That means, any gains posted Tuesday will be completely reversed on Wednesday, or vice versa.

Of course, we're starting the week off on the wrong foot, thanks to the Barron's Cover, "BULL RUN!" It refers to an Andrew Barry article inside, in which he posits the market's undervalued levels, with one-time captain of the street bears, Byron Wien, of all people, his ally. I'm sure you've all heard of the magazine cover indicator, that predicts the fall of exec or company that grabs a cover. (Okay, I'm exaggerating, the real indicator suggests there has to be more than one cover but Barron's is all some need to score a TKO--especially with uber-bear, Alan Abelson, still sprouting horns.)I

If you really look at last week, the DOW posted over 50 points in gains, while the S&P closed up a point. Only the NAZ posted a decline on the week, which couldn't possibly upset, given it's outperformance. Anyone who ran through the charts, as I did 750 tonight, would quickly see it was more buyer's strike than a rush of sellers (ex- special situations like Guidant and Freddie Mac), and what selling there was, was so concentrated in tech and energy services, it would be difficult to call the market sick: On the contrary, the financials and retail/apparel held well, while gaming soared after weeks of underperformance, spurred by a large dividend declaration from Mandalay Bay Group which can just barely afford the size dividend planned.

Now, if anyone tells you the Consumer Sentiment numbers brought the markets down Friday, laugh. In a note to institutional clients, Thursday night, the subject line said "Calling for a Pullback here.". Anyone who's forgotten the years of markets prior to the last 3 deep bear years have forgotten the tendency for volume to dry up on Fridays in the summer, as institutional managers leave for country homes. Profit taking in advance of a weekend has often been par for the course. While an occasional unexpected upside catalyst has sent the averages up on a rare summer Friday, fades are more typical. The clue for me, Thursday night, was the number of stocks at resistance, after a long run. I expected some to see resistance as reason to sell, a point I'll return to.

What I saw tonight is a market that could stall, rather than make big moves in either direction, while awaiting the many announcements I mentioned in the first paragraph, as well as earnings, this week, from Micron Technology, Bed, Bath & Beyond, KB Homes, Best Buy, and, especially, Lehman Bros. Holdings, Morgan Stanley, and Bear Stearns.

I'm sure any number of technicians who study the same charts as I do might call for an additional pullback (and I think we see some more follow through, come Monday) but that isn't assured. In a bear market, rallies that take stocks to resistance are a set up for reversals--declines. HOWEVER, in the bull run we've been in, or in a bull market, rallies that take stocks to resistance can carry them to nothing worse than a level at which they need to base. In bull markets, stocks may see some profit taking while basing, as it means the easy money has temporarily been made, until the next break-out. But in a bull phase, which I believe this is, (within a secular bear market), stocks get to resistance and base for hours, days, weeks or months before powering ahead to the next level--not to mention attracting dip buyers lying in wait on pullbacks. Because so many stocks had reached resistance equal to levels a year ago, it was clear to me that the techs, at least, were going to pull back, as price levels triggered knee jerk reactions from traders conditioned by three years of reversals. Knee jerk reactions may no longer be the best trading discipline. With the FED determined to INFLATE the economy, new tax cuts helping to support liquidity, and the FOMC all but promising another cut on the 25^th, I have every expectation of slightly higher prices by the end of July. The sheer number of corporate issues, especially converts, coming in the past few weeks, suggests FED and White House efforts to inflate are now having an effect. The markets are responding. While none of it may trigger new demand, for now, the markets are anticipating that it will. Doesn't matter if I disagree with either the method, or the madness: fact is, the markets are reacting to the FED's pumping--finally. If you think we're retesting the October lows, now, after the latest bear market rally, you might be in for a rude awakening.

Which isn't to say I don't think we will give up a lot of ground come the fall--we probably will, because I don't see demand picking up over the summer, a traditionally slow time of year. But even given my expectation for a steep decline in the fall, I think a really serious pullback is unlikely between now and the end of July--unless terror strikes our shores, again.

While we're talking about declines, and the fact that I believe techs could pull back more, without dragging down the rest of the market since the group gained the most, I might as well state, flat out, that I think the biotech sector is also way ahead of fundamentals--pricing in successful phase III trials, approval, and profits years before that's likely to be seen. However, with rates at such low levels, and presumed to fall more on the 25^th, and banks still charging higher rates for loans--especially credit card debt--one could argue the banks aren't yet at levels inconsistent with their near-term profit potential. Then, for all the moaning about the dip in Consumer Sentiment, which we were told was cause for Friday's decline, retailers didn't break support, Kenneth Cole and Kohl's the lone exceptions in the universe I track--some 35 stocks.

I was in retail in the 80's. Summer is slow, volume lower than it is in the fall, if for no other reason than that price points are lower. If you're selling bathing suits that retail for $60 bucks, you're not going to see the same level of revenues as you can selling overcoats. Throw in some atrocious weather, especially on the east coast, which is nearly 32% of all U.S. sales, and there are stiff headwinds that doesn't mean the consumer has closed his/her wallet. Come back to school season, retail will bounce, again. The summer slump does mean I won't own retailers between now and August--where this week's reports from Best Buy and BBBY could send the group to a peak. But that doesn't mean I see structural issues in consumer spending. On the contrary, I see seasonality. So, in addition to techs, and, after the end of the month, biotechs, while impressed by the relative strength in retail last week, I'm expecting the group to start fading. Truth be known, I think the financials will be the strongest group for awhile.

In healthcare, this week, Pfizer meets with analysts Tuesday, while the Am. Diabetes Association began meeting Friday, so news could first impact the group Monday. Later in the week, there's a New York Psoriasis symposium but there are only three major players in that space, only one anywhere near making money on a product, so it won't be enough to keep the biotechs levitated indefinitely, even as I'll grant, the recent run likely sustains buoyancy through expiration--possibly  through end of month.

Mortgage Brokers started meeting in Baltimore, on Saturday but Freddie Mac trumped anything out of that conference. Newspapers meet starting today but, again, the FCC ruling on share ownership superceded the meeting and, if anything, there's a chance of deals or rumored deals from that, which would be positive for the markets. Wall Street loves M&A activity--is starved for it. The Paris Air Show is expected to be a smaller affair than usual but it's never been kind to Boeing, since Airbus has dominated the announced deals at the meeting, while BA has often come back weeks or months later with announcement of deals initiated in Paris that took time to close.

SAP holds SAPhire, it's analyst meeting cum devcon this week, but that will be as much about Oracle, Peoplesoft and JD Edwards as it will about SAP, donchya think? SAP isn't the only competitor salivating at the possibility of grabbing share, signing customers who simply want to avoid the confusion Ellison caused with his bid. What might have been the biggest tech event of the week, CASBAA, also known as Broad-Cast Asia, with associated equipment vendors, was cancelled due to SARS. CleanTech still meets in Frankfurt but can only hope to offset a weak Semi B2B, at best. CeBIT America meets this week but enough's enough. Networld+Interop set telecom on fire and now, it's all up to Verizon, Sprint, and competitors to award contracts for planned upgrades--VZ and FON mentioned because they've announced plans for major initiatives. Ya think the techs will collapse while VZ and FON are awarding contracts? How long after VZ and FON start signing deals dya think it will be before competitors get the "gotta keep up with the Joneses feeling?"

There are two Apple events ahead but before those convene, traders will react to Microsoft's plans to stop upgrading Internet Explorer for MAC, having announced, this weekend, that Apple's test browser, Safari, is sufficient alternative.

There are a coupla investment conferences, including Thomas Weisel Growth Forum, CSFB's Global Retail & Apparel, SWS Securities' Investor Conference, as well as Morgan Stanley's Competitive Edge but the three raise nothing but concerns in my book. As the quarter draws to a close, many companies are reaching the point where they see, clearly, that they won't make the numbers. From here on in, through the third week in July, investment conferences represent nothing but potential for earnings warnings, as companies release Reg FD compliant statements in advance of presentations. Retailers, for the most part, won't report until August but for most of tech, software excepted, we're in the danger zone. Last week saw Texas Instruments warn. If memory serves me, a warning from a major tech company has often flushed out more warnings. They're not officially on the schedule of events but will arrive, anyway.

So, I headlined this piece by saying it would be volatile week. And it will, through Thursday. But come Friday, anything can happen, since most pros will have already closed out June expiry before Friday dawns. By Friday, those who haven't escaped to their vacation homes will already be looking ahead to the following week, which holds a two-day FOMC meeting, as well as the end of the quarter for anyone using T-3 settlement. I won't predict direction other than to say that tech should lag to the upside, lead to any downside, with tech, even after last week's pullback, a group that remains at such high levels it still needs to prove itself--needs to justify the enthusiasm. Of course, the biotechs will have to do the same, too, eventually, but with so few armed with earnings, the worst that can happen is one warns on revenues, as Intermune last week. Oooops!

In sum, if you're in a non-financial stock that has you checking prices and marvelling at your good fortune and luck, you're probably in one of the issues most likely to suffer--if not by expiration, then perhaps either next week or as soon as the quarter closes. Protect yourself but don't let the bears get to you--yet. Pullbacks should get bought in advance of the traditional July earnings relief rally, a rally that will be much improved if some of current froth comes off, which it should do this week, something that could be accomplished by basing and doesn't demand a correction.   

© Sandi Lynne 2003 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.

June 9--13, 2003       WHERE WILL DIP BUYERS STEP IN?          Wasn't Friday something? An intraday reversal, on enormous volume, after many a stock made recovery highs. The stage is set for some follow-thru selling Monday, if not for the week. Question is, how much of the buying Friday morning was short covering, and at what level will the dip buyers be tempted back in?

First, to appreciate last week's rally, check the new hi's and low's last week. I don't mean merely the numbers--1082 new highs on the big board, versus 10 new lows--I mean the stocks themselves, so you can see how broadbased the was. (To me it proved many sectors got overcooked but that's another story.) What was, was, and since I'd expected the pullback after May 15/6 to be steeper than it was, I think we have quite a bit to pullback--possibly back to the mid-May levels. Do I expect that to happen? Not necessarily, because business should have improved--should have rebounded--from a near standstill for most of the first quarter. Additionally, buying dips has been the winning strategy since March 19^th, when the first bombs fell on Baghdad. And let's not forget, there's often been a post-earnings rally at the end of July, for which, some believe, you'll have to position sooner rather than later, since the mid-quarter updates suggest business rebounded in May (After this was posted, MOT warned early Monday morning but MOT has missed for 3 years, so I don't know if there'll be ripple beyond handset companies).

Was Larry Ellison's lowball bid for Peoplesoft some kind of definitive moment? Probably, though, if you heard him interviewed, it was pretty hard to take his bid seriously; pretty hard to imagine he really wants to own P-soft.. I can't imagine Peoplesoft insiders selling out, knowing all Ellison wants is PSFT's client list--that he intends to scrap it's software, if you can take him seriously. I guess Larry hasn't heard that the way to win a competitor's clients is to have your salesforce outbid their's. and assure your software runs better, installs more easily and can be maintained with less effort.

Oddly, while last Sunday, I thought we'd see inflows by Wednesday, as often happens at the beginning of a new month, I never imagined we'd see the froth we saw last week. Stocks like IBM, Microsoft, Maxim Integrated Technologies and virtually all the big cap pharmaceuticals were suggesting the rally was something other than earnings driven. But that ending, on Friday--something truly amazing to behold. WHAT IF?

What if some individual investors sitting on really long-term gains decide they want out, now that 15% is the maximum tax they'll pay? What if the shorts have covered, and none are left to stop a rout with a bid? It's not hard to imagine stocks going down pretty hard and fast--despite my earlier outlook for a shallow pullback. That outlook was never based on the market averages getting so far ahead of the fundamentals--even considering Friday's turn. So, maybe we have some extra ground to cover on a pullback but, mark my words, performance anxiety is rife on Wall Street; individual investors would welcome a new bull market--something that's often occurred beginning in the third year of a President's first term. Money is sloshing around everywhere, thanks to an accomodating FED more worried about deflation than anything. And, as I've said, this quarter should compare well with the first quarter, when waiting for war dominated for the opening two and a half months of the quarter,  before war actually started--the start of which didn't, exactly, inspire business confidence, at the time. Recall how sure everyone was the war was bogged down outside Baghdad--remember the critics saying the surprise bombing of a supposed meeting of Hussein and his cronies in a residential neighborhood forced the war to start prematurely, before everything was ready, while we were still waiting to hear if Turkey would allow US troops and aircraft to use Turkish land for staging areas.

Yet, after all was said and done--despite the economic standstill--Q1 profits weren't bad. Imagine how much better they MIGHT be this quarter, with the war largely over mid-way through the first month of the quarter. Oh, yeah, they'll buy the dips. Question is: Where?

Suppose Wednesday's Beige Book is more upbeat than any recent ones? Maybe the employment portion won't be but, certainly, other parts, like business activity--even orders--could be. After all, we're rebounding from a standstill. What if Thursday's Retail Sales are better than expected? It's possible: Chain Store Sales held some positive suprises and the retail price of gas actually ticked up for a short while before falling again recently, even though crude is now back above $31 a barrel. Suppose, for a moment, April's Trade Deficit (Friday) finally shows at least slower imports, even if the depressed dollar isn't yet helping exports--nah; that's not happening. April's a big month for auto and apparel imports --not to mention produce and Flowers--ya forgot Mother's Day, didya? (If ya did, don't forget Father's Day next Sunday) But Friday also brings the preliminary June U. Michigan Consumer Sentiment Index and it's not hard to imagine sentiment levitating with the markets. Better than 60% of U.S. households own equity investments of some sort. It would be pretty tough for UM to take the survey and miss investors, most of whom had to be cheered by the markets' rise.

Earnings aren't going to derail the rally this week--there are few. Mid-quarter updates, you ask? Nokia's is Tuesday but I don't think anyone would be surprised by a weak statement. Asia is the biggest market and SARS has people wearing masks not lipstick. It's much harder to talk on a phone through a mask, donchya think? Bear Stearns is hosting a huge tech gathering starting Tuesday. Keynotes Speakers Tuesday are Andy Bryant, CFO of Intel, and Joe Tucci, CEO of EMC. On Wednesday, the keynotes are Kevin Rollins, CFO of Dell, and Tom Engibous, CEO of Texas Instruments--TXN the only one who hasn't commented on the quarter, yet, so the first three are like a bye in a tennis tournament. But, if you want the full schedule of presenting companies, go to (Sorry, the information is available to Premium subcribers, only) have a field day viewing the brochure for the conference. I counted 115 companies last time I looked, ranging from the biggies offering keynotes to some pretty small ones, like Boingo Wireless. The software companies aren't likely to warn at the conference, since it's customary for them to close the majority of their business in the last two weeks of the month--still ahead. Besides, Oracle affirmed when it made it's lowball bid.Dell recently reported and is too early in the quarter to worry about.  INTC already affirmed, so that's a bunch of bullets dodged.

The problem with trying to predict a REALLY big pullback this week is the favorable environment that the dip buyers will want to seize. As for professional sellers, the shorts' problem is the wounds they're licking from the last two months--the knowledge that the environment for equity investment is more favorable than it's been in a while, that longs have recently savored the sweet taste of momentum and that's tempting more investors in--investors who've seen the financials provide leadership for the first time in a long time--even if they got nearly as overcooked as the internet stocks. (Early Monday morning, after this was posted, Freddie Mac made disturbing comments about revenue recognition, and announced top-level resignations but, despite it all, it didn't indicate the issues would cause a lowered earnings restatement)

But, as you maneuver through this week, deciding whether you're a dipper or a seller, consider two events in the weeks ahead that could take a chunk out of the favorable environment--both rates wise and psychologically. The first is the June 16^th date in Federal Court, at which a judge is set to approve or disapprove of the Global Wall Street Settlement. At recent open hearings it became clear that the judge took umbrage with some aspects of the settlement. What if it doesn't gain approval and it's back to the drawing board for some of the very stocks that have recovered best during the recent rally--throwing the street back into turmoil, once again raising the spector of Street shenanigans? The second event is the FOMC meeting that begins June 24^th and ends June 25^th. What if, after all the Fed Governors' and Chairman's statements that's led the market to expect another cut--as insurance against deflation--the committee stands pat? What if the FOMC decides it can wait until the NEXT meeting to see if it still thinks it needs to declare an insurance cut? Hmm--will that spark an all new rally to the moon? Would the street take that as "proof" the FED thinks the recovery is strengthening or will it throw the treasury market into such a state that rates ratchet up, drawing asset allocators back to the Chicago pits?

So where, I ask, will the dip buyers step in? If the shorts have covered and are reluctant to put on new positions, will the dip buyers have the fire power needed to halt a sell-off that represents a 5% retreat from the March 19th lows? A 25% retreat? 50%? How about a standard Fibonacci 61.8% retreat? There's better than 6 weeks left before the bulk of Q2 earnings arrive, so it's at least 6 weeks before we should see a post-earnings relief rally, by which time we'll see more warnings, for sure. A lot can happen in 6 weeks. A lot of support levels can get broken in six weeks, just as many resistance levels were crushed in the last two weeks, alone. If you’re a trader, and staying long only because you expect dip buyers to emerge to take the markets back up, you might want to take some valium. Next week, in addition to the Federal court decision, there's an expiry. But there are lot of cheaply bought July puts a coupla strikes below to add support to a falling market. I think dip buyers will emerge but, after the run the markets have had, I wouldn't be surprised if we saw a steeper sell-off than it would have been without the last two weeks' added froth. On the other hand, I also think the sell-off will be quick 'cause the environment hasn't been as favorable in a long time, which will encourage investors to buy the dip--even if they don't, necessarily, this week. Say good-bye to a super low VIX for awhile. The market's about to get a lot more volatile than it's been in months. And I wouldn't be surprised if a lot more charts post lots of V's and M's, as rallies prompt more selling, and more saves, until the July/early August post-earnings rally retests and probably surpasses Friday's highs, setting up the usual fall sell-off that has kicked-off as early as mid- to late August in some years--especially years when the indices posted big gains in the first half--gains portfolio managers sought to protect until their year's close October 31. One thing's for sure: you'll hear a lot about dip buyers in the week ahead. 

© Sandi Lynne 2003 Nothing contained in this commentary is a recommendation to buy or sell any security. The opinions expressed are the author's alone.

Speaking of which, Monday should be a particularly interesting day, with the FCC set to expand the number of media outlets any one company can own in a market. In the local paper today, the Sun-Sentinel, a Tribune company, ran a business section article stating flat out that Tribune would be one of the first to jump on an acuisition. Think management gave the comments the thumbs up? If you're watching tech, you won't be watching some of the best action, which should be in media, where smaller companies like Belo or Pulitzer could be crowned potential takeover targets.

Last week, I was almost certain that we'd see a drop through the air pocket this Monday, as we saw May 19^th, after the May 15/16^th interim top. Tonight, I must quote Defense Secretary Rumsfeld to express my either or feelings:

As we know, there are known knowns.There are things we know we know. We also know there are known unknowns. That is to say, we know there are some things we do not know but there are, also, unknown unknowns, the ones we don't know we don't know.

To try to pin down the market's next move, I ran through weekly and monthly charts for all 750 stocks I look at end of day. On the plus side, the financials were very strong, with many breaking their 200 day moving averages-some clearly above all the technical resistance levels which marks them in new bull markets. A rally led by the financials has stronger underpinnings than one in which they lag. Obviously, the biotechs have been extermely strong, which serves as a viable substitute for the digital techs which, with the financials, led the 20 year bull market. However, with ASCO one of the driving forces behind the biotech run--the real run kicked off when positive data on Genentech's cancer drug was released a couple of weeks ago--it's possible the biotechs rose in anticipation and will, now, fall on the news, since ASCO opened on Friday, which lifted all the embargoed abstracts for release to the public. Digital tech didn't have a lot of big cap members on the weekly and monthly break-out list, with the 800 pound gorilla, Microsoft, particularly weak. Storage was one of the exceptions: even stocks like EMC, absolutely crushed when the NAZ bubble burst, is now breaking out on weekly and monthly charts.

I heard all the yadda, yadda about the tax cut being impetus to Friday's surge but I'm not buying it. A 15% cap on long term gains should, ultimately, be incentive for long-term holders to finally rebalance their portfolios. It may not be something we'll see until after the July earnings reports, which have often led to an interim top that isn't surpassed until November or December, given traditionall declines in the fall but it's something I'm expecting.

What drives me nuts about Friday's rally is the lift in Novellus, after what was, by any measure, as bad a mid-quarter as any. Clearly, the rise in that stock, on the back of it's mid-quarter update, must have been fueled by short-sellers. Or was it?

The history of bear markets is strewn with bubble-like rallies. We're not necessarily in one now--that remains to be seen. After all, a key midwest manufacturing index rose above 50. However, is a rebound such a surprise after two months of depression-like numbers? Is the rebound mere reaction or does it have staying power? If anyone tells you they know the answer to that, don't believe them. However, with a slug of May data due out this week, and the May Unemployment Rate scheduled for release Friday, we should all have a better idea of whether the rally is justified or mere pouff. We know vehicle sales weren't terrific: the automakers upped the ante on deals, with GM even offering customers a 24 hour test drive before buying. Chain store sales are out Thursday and those are questionable because of some really awful weather on the east coast, where Ft. Lauderdale, for instance, saw 13.3 inches of rainfall May 27, in the space of a few hours but that followed 5 straight days of torrential rains that were matched up and down the coast. New York saw Memorial Day weekend hi's in the low 50's combined with rain and, I can report first hand, the city was empty--some of the best restaurants had empty tables over the weekend. The rain so disrupted flights, I'm sure any number of airlines will mention the damage done--though I had to laugh tonight when I heard El Al was going public on the Tel Aviv exchange on June 10^th. I can't imagine a worse time for any airline to go public, can you?

Another key event this week is SuperComm where, for the first time in at least two years, there's room for hope as a number of RBOC's have stated their interest in ramping up DSL and other broadband services while Sprint has announced it's plans to virtually scrap and replace it's current network.

Then, again, Intel offers it's mid-quarter update, after the close Thursday, and, though I believe Intel will shave some off the top as it's consitently done in every mid-quarter for years, the unknown I cannot know, to paraphrase Rumsfeld, is how the market will react. In the past, the cut off the top has battered Intel's shares. Suppose that doesn't happen, this time, as it didn't with NVLS, and the shorts have to step into cover? Can the market rally even in the face of another weak Unemployment report? Of course it can: everyone agrees employment is a lagging indicator, nevermind the fact that cuts in employment boost productivity and, it's likely, the jobs we're exporting to China and India are never coming back. Wednesday we'll get the revised Q1 productivity numbers and, I'm willing to bet, it will be revised higher, just as GDP was--it's what the FEDS need to do to keep the rally going since, we all know, a strong market leads to confidence and confidence leads to spending and spending leads to profits and stronger GDP--a virtuous cycle that will make talk of deflation disappear faster than Casper.

Then again, we're in a very "Don't worry, be happy," rally: a really lousy Unemployment number and a less than bullish revision to productivity will lead traders to conclude that the Fed will cut rates, again, when it next meets on June 24 and 25^th, which will send bonds higher and yields lower, which in turn should make portfolio managers reallocate their portfolios, sending more money into equities.

As we saw in the early part of 2001, momentum feeds on itself and the one thing I learned from looking at hundreds of weekly and monthly charts is that the market has turned momentum into some fairly impressive knowns--strength in the financials, in particular. Early in every month, automatic inflows into retirement accounts often serve to rally the markets, though the fact that the 1^st of the month fell on a Sunday could delay that effect until Tuesday or Wednesday.

In sum: there are many unknowns known to me. While I believe the market will pullback on Monday, led by the the biotechs, and follow through some more to the downside, Tuesday, before the monthly inflows get put to work on Wednesday and Thursday--a day that should see hesitation because of both Intel's mid-quarter update and positioning in advance of Friday's Unemployment report, making the week less bullish than last week was, it's altogether possible there's plenty more short sales to cover, and plenty more money already headed into equities BECAUSE of last week's rally, which would lead to another rise to higher levels--until the music stops. And stop it must because the data does NOT yet support price levels and it's unlikely to become more supportive over the summer, which should be as slow as it usually is. Don't forget, the business closures in August, in Europe, are government mandated vacations.

One way or another, the rally either has to be digested, until the data can catch up, or the markets have to decline to reflect the weak data. What's unknown to me is when that will happen--and whether that will happen this week. All I know is that I can't understand who's buying stuff up here, right now. 

 This week we get the tail end of April data, as well as two Consumer Confidence numbers and well as GDP. If that weren’t enough, Chicago PMI will provide the first glimpse of May from the heartland. Given the elevation in the alert status to Orange, and a string of overseas terror attacks, I wouldn’t be surprised if the Conference Board’s Consumer Confidence number failed to rouse the markets. For the same reason, I wouldn’t be surprised if the U of Michigan’s number slipped from the preliminary number released two weeks ago. As for Home sales, both New and Existing, that odd, late Easter could have diminished activity. GDP will be week—get over it. The question is whether it will be even weaker than most expect, partially shaved by the outsized Trade Deficits even a falling dollar hasn’t reversed, yet. 

As for Trade events, BookExpo, Gaming Technology Summit and FIPP’s World Magazine Congress probably take a back seat to Novellus’ mid-quarter update which, itself, won’t hold a candle to ASCO—the major cancer researchers’ meeting.  ASCO likely propels the biotechs to the stratosphere, which is where the sector’s been heading recently, while Novellus could force reality into tech investors’ trading plans, especially since SARS is crimping Asian economic activity and Asia’s where foundry activity is busiest, as a rule. 

Ironically, homebuilders dominate the earnings reports, this week. However, should rates start to rise, or the two home sales numbers not please, good earnings, once again, could fail to help the homebuilders trade to decent, market multiples. 

Other than builders, retailers will dominate earnings reports, with spirits purveyor, Brown-Forman, and Mandalay Resorts also on tap. The CEO of MBG happens to be delivering the keynote at the Gaming Technology Summit, so that company will be under the microscope, though I don’t happen to think it’s the strongest of it’s sector. 

Underlying the week’s schedule will be the calendar, with the end of the month coinciding with the end of the week. I think it’s anyone’s guess whether portfolio managers will choose profit-taking or buying, as often happens for end of month, but, given a guess, I’m expecting at least more active profit taking than seen in the last two months, the onset of summer, as well as the a seasonally weak month ahead adding impetus to the activity after two months of very healthy gains. But, remember, I said it was anyone’s guess and month’s end has so often been such a boost to the averages that the calendar may very well trump everything else—with some index rebalance gaming likely to be evident. 

When I posted the May Outlook I said May 15/16^th were the most likely days for the averages to see a top and, to date, that remains viable. With June ahead, and no expectation for good data to get released the first week, when May data kicks off with vehicle sales, I think the path of least resistance remains down, even if it’s a more gentle descent that some May/June’s we’ve seen in the past. Bear in mind, by last week, Autodesk had already warned. The roaring economic revival expected once the Iraqi war ended still remains elusive, and PM’s have sizable gains to protect which is best done with either sales or options strategies. It may turn out that a gentle May/June and early July decline leads to a resumption of momentum come late July but, in the meantime, absent catalysts to drive stocks higher, the markets should mark time at best. However, for many PM’s ready to take time off for the summer, a market marking time on thinner volume is a market best sold. Once selling picks up, traders will jump to avoid being last to the exits. Investors, meanwhile, have a top long-term capital gains tax capped at 15% as incentive to join the sellers. While buying the dips worked during the rally that started March 11^th, the averages are far enough away from the March lows to justify a more sizable dip before it makes sense to step in.   

I’m operating under the assumption that this May/June decline could be tame by comparison to some but that may change if demand shows no sign of strengthening or warnings start ramping up—with the misses larger than a penny or two. Profit-taking is in order. Puts remain cheap. And if you truly believe the market is correctly forecasting a stronger economy six months from now, consider LEAPs, with the 2006 series set to open next week, after this week’s expiry is over. 

(c) Sandi Lynne 2003 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.

This week, in fact, could be less smooth than last week felt when the week ended with such a flourish. The ISM Service Index is out on Monday. While this Index kept improving while manufacturing kept falling, last month, with war underway, the March release punked out. Tuesday's FOMC meeting should be accompanied by some sort of bias after the last meeting, also in March, when the Fed members also punked out--declining to state their bias. Hours after the FOMC ends, Cisco will weigh in with it's latest quarter. While able to equally fuel or suppress the tech sector, it will have some competition from many telco-related companies who'll speak most of the week at JP Morgan's Tech & Technology Conference, with few likely to have anything negative to say so soon after their post-earnings conference calls And it's too early in the quarter to abandon hope. In fact, like the markets which often rallies early in the month and quarter, companies tend to feel renewed optimism as a new quarter gets underway. Is it their salespeole offering promising possibilities because crunch time is still 8 weeks away? Is it because human nature tends toward optimism--because salespeople tend to believe they can finally close the deals that got put off in past quarters, put off while war was overhanging? Doesn't matter--fact is, it's hard to imagine any company having to warn so soon, and a lack of bad news is often taken as good news.

As for Cisco, with $23b on its balance sheet, and nearly two years worth of written off equipment to cannibalize for components, it's margins rose last quarter, much to everyone's surprise. Ah-Huh!. Can't imagine it was done deploying all those written off components before this quarter was over so margins should again be outstanding.

Chain Store sales will be much-watched this week, with Thursday the official release date, though many companies will begin releasing data as soon as Wednesday. Since retailers start reporting en mass, this month, many will report quarterly as well as monthly sales this Thursday. Given the drop off in auto sales, some traders worry about the consumer pulling back. Truth is, most of the quarter was obsessed with war, but there was also some unusual weather and a shift in Easter, so I'm not sure the Chain Store numbers will prove anything. Still, without evidence of corporate demand, economists and traders will take to heart a drop off in Chain Store Sales--for a day or so, at least. But many will merely dismiss the numbers, and attribute weakness to well known anomalies.

Traditionally, the markets have rallied on light volume in advance of FOMC announcements, then knee-jerk rallied for only minutes, after conclusion of the meeting, before turning south for a day and a half, often pulling back up by Thursday afternoon. With the Wall Street Maxim "Sell in May and Go Away," creating a seasonal inflection point right after the indices broke out, many will be tempted to sell because that's been the prudent thing to do for three years. But others will say, "Not so fast!" We broke some pretty important technical levels to the upside, Friday--especially the Bank Index, which has suffered terribly while the Global Settlement, finally announced, had been, for months, rumored to be coming "next week" --since November, I think. That bank break out is a technical buy signal, while other market sages will suggest the market is simply forecasting an economic recovery six months from now, as I wrote in the Monthly Outlook.

What does it all add up to? First, a lot of nervous trigger fingers, ready to sell at the first signs of a reversal that would suggest that Friday's break-out was a fake out, meant to set up as many longs as possible for the next severe decline. Second, it sets up a lot of people entertaining the possibility of going long because, technically, a buy signal was issued. In sum, it sets up a battle royale between the bulls and bears, one I think the bulls will win this round--for this week--because no one expects the Fed to do anything this week, yet MUST acknowledge some concern about the lack of demand--the failure of the data to show signs of recovery in either corporate spending or employment--not even via surveys taken once the outcome of the war was clear. Chain Store sales are going to be celebrated if good but dismissed if worse than expected, for the reasons stated above: war and weather. So I think, by Friday, the bulls will have another shot at higher levels but, after mid-week  next week, bull fuel will go on hiatus. If you read the Monthly Outlook, you already know when I think this rally will top. But that's not this week's business. This week's business will be the battle between the bulls and bears which I expect the bulls to win, though I'm not sure they'll win by more than a hair, since some choppy trading could have them battling back from lower levels set mid-week.

Where could I be wrong? The bulls could take control from the get-go which might only send the market to even higher levels than I expect, providing more territory to be lost when the May/June decline finally gets underway. Or the bears could take control immediately, as has often happened after a few good days at the start of a month. There is precedent for that right after an apparent technical break-out in this bear, but never before on a $BKX break-out. With earnings surprising to the upside, Congress still maneuvering on a tax cut package, combined with the fact that war has ended after months of overhanging the market, the bulls get my nod—for a short while longer, anyway.   

© Sandi Lynne 2003 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.

Surprisingly enough, the charts don’t reveal the answers. There were a number of divergences—not the least of which was GE managing to outperform, on Friday. Tech, which had gained the most, got hit hard, Friday, but there weren’t any trend breaks.

So why aren’t I willing to call the rally over, and a full-fledged correction in progress? Because the end of the month, and the beginnings of new months have often brought rallies. But that’s not all: since it was tech that got hit hard, Friday, I see a number of tech events coming this week that could stall the decline. First, there’s Merrill Lynch’s Hardware Heaven and Networld+InterOp. While N+IO have been dour affairs in the past few quarters, surprisingly stronger than expected earnings reports from telco—AT&T included—and optimism over a coupla flavors of WiFi could make this N+IO a more upbeat meeting—the first in over a year. Next, there’s an IBM shareholders’ meeting often attended by portfolio managers, analysts and media, and IBM management could talk about it’s relative strength compared to broader tech and give the impression that the company is performing on plan—something the CFO didn’t commit to in the post-earnings conference call.

Reflecting on the earnings out, themselves, I heard multiple mentions of a bad winter, the war, and even the relatively new global threat—SARS--but, as I recollect, very few companies said their visibility was "cloudy." We’ll hear more, of course, this week, when Disney, Maxim Integrated Products, ExxonMobil (the largest company by revenues) and Proctor & Gamble report. Suppose a company OTHER THAN P&G has more positive comments? With the war over, and SARS not yet a U.S. problem, it’s not hard to imagine how quickly bullish sentiment would return. Especially at the end of the month.

Biotechs have been on fire and there are a number of events this week that could keep the group aloft—which won’t be easy. The sector recently broke out but got so overbought it’s hard to imagine new money stepping in right now.

Apparel companies and retailers start reporting this week, while Best Buy holds an analyst meeting starting with dinner Tuesday. With the consumer bearing the burden of spending for the past three years, good news on consumer spending patterns would go a long way towards allaying fears that the consumer is tapped out.

Now, while I favor more than a slight dip this week, to consolidate recent gains, at worst I see a mild downside bias while I expect the markets to meander around the mostly unchanged level—waiting for a reason, waiting for a catalyst to either correct or soar. I don’t see that coming this week. So like the fish bowl I’ve mentioned many times in the past, aside from a slight downside bias that will upset no one, I think we’ll see lots of activity around the unchanged line and, at the end of the week, we will have gotten nowhere—just like fish in a bowl, in constant motion,never getting anywhere. Why don’t I think there’ll be a steeper pullback? 'Cause traders are afraid to sell and miss the next BIG rally—afraid to underperform the indices if, by chance, allied forces get Saddam Hussein or find weapons of mass destruction. The VIX says traders are more afraid of missing a rally than they are of getting caught in a decline. Until that changes, we’ll all be fishes swimming in the bowl. 
© Sandi Lynne 2003 Nothing in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author's alone.

I can feel how badly the market wants to rally but, with 35--40% of the trading, lately, program trading, the technical resistance overhead is a barrier that won't be easily broken. Furthermore, EVEN if you assume the best outcome for peace and reconstruction in Iraq, there's still North Korea, still SARS, which is dramatically impacting business and leisure travel, still the global Wall Street settlement and class action suits, and then, according to late Friday word from Morgan Stanley, the possibility of more actions against investment companies, as the SEC targets more companies over allocation of IPO shares. On the consumer level, there's still more unemployment to come, still hi energy prices--with OPEC scheduled to meet to discuss production cuts on April 24^th--and still terrorism uncertainty as, for now, Saddam Hussein joins Osama bin Laden as two of the most wanted men who haven't been captured. As Rosanna Rosanadana used to say, "If it isn't one thing it's another." Fundamentally and geopolitically, there's still more for the markets to contemplate and much of it isn't yet good. The market remains in a bear trend--bear rallies notwithstanding.   MONTHLY OUTLOOK HERE

© Sandi Lynne 2003 Nothing in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author's alone.

Been having flashbacks for a few days, actually: Drugs , Financials and big box retail leading the way. Some of us are old enough to remember that market decades ago. Okay, biotech has been strong, too, so it’s not quite the nifty 50 of old. But how about that P&G? Contrast that, if you will, to Intel, Cisco, Microsoft and Hewlett-Packard. They’re not yet entirely broken but sitting on their last line of defense, with a Seibel warning, late Friday, for the markets to react to. Uh, oh!

Early this evening (actually late this afternoon but I turned moved ahead almost all my clocks), a report on Headline News claimed an embedded reporter told his bosses that his unit was being evacuated after finding the elusive WMD, believed to be either Rincin or Seran (gee, I’m pretty sure I’ve spelled that wrong but I refuse to look it up—believe I’ve purposely blocked out the spelling cause these are things I NEVER should have come to know in my or any other lifetime—calling Shirley MacClaine!!) If true, Germany should be moving over the coalition side any minute, which would be excuse for the market to rally. However, that might just be the postponement of the inevitable. Truth is, the markets often decline pretty steeply beginning this week, and often don’t recover until the end of the third week, or the last week of the month, as earnings aren’t as horrendous as the warnings before the earnings suggested.

Come to think of it, the markets often decline in April as soon as April 15^th comes, and the last of the last minute retirement plan funders finish up under the wire. Come to think of it, the markets, in the past 3 years, have declined more often than they’ve risen, even though there have often been early in the month inflows, and an end of month effort to boost ‘em for the month’s close.

No man’s land—that’s where we are in the month: That’s where most of the charts are, too. Yet, it’s hard to get really, really negative when the financials act so well—especially when the financials act so well despite word, late last week, that the Spitzer engineered global research settlement was hours or days away.

No man’s land in earnings, too, with the schedule not quite cranking up until NEXT week, despite the headline reports expected from GE and Yahoo! This week. No, I haven’t overlooked Dow Jones, E.W. Scripps, SunTrust, Tenet or any of the other earnings expected. But, this week there’s GE and Yahoo! For the real headlines, while next week brings IBM, Microsoft, Intel—get the difference???? Need I mention that there might be more warnings, this week but that, for the most part, those that needed to warn have. The ones who haven’t won’t report until NEXT month?

Headline trade events come via Broadcasters and numerous pharma/biotech symposiums—though Cancer Researchers cancelled due to SARS, as did Intel cancel two Asian Devcons for the same reason—a trend that might hit more trade events as the month wears on, on cases rise—particularly since doctors are more attuned to diagnosis the mysterious new virus. Oh, and watch your panic, please. The fact that so many more are aware of SARS is likely to increase the reports, making it seem like an out of control epidemic which it isn’t, yet. Still, World Vaccine, in Montreal, will be abuzz, I’d think. Otherwise, American Indian Gaming and IMRA, for Mass Retailers take a backseat to headline earnings and economic releases.

The economy?!? You remember that. Last we heard, it was doing worse, though you wouldn’t necessarily figure that out by looking at NYSE stocks PG and WMT. Wouldn’t have figured that out watching MER, C and JPM, all of which broke out last week. Ya know, McDonald’s is holding an analyst meeting on Monday, and I wonder if the coming word won’t be even worse than some anticipate. I suspect things have gotten worse not just because unemployment in the factory sector is still rising but because of slower traffic at malls and airports, where MCD has placed units. Ship out 250K servicemen and other popular MCD locations, near bases, lose customers. Just wondering aloud, since I’ll take everyone’s word for it that the food is awful—I’ve NEVER indulged.

Speaking of the economy, Monday brings Consumer Debt, while Thursday promises Chain Store sales, some of which will be released starting Wednesday afternoon. Friday we’ll get March Retail Sales, PPI and the Preliminary April Consumer Sentiment numbers. So let me tell ya where I stand on these numbers: Consumer Debt should have shrunk, if Auto sales are an indicator. Traders see debt shrink and claim consumers are pulling back, so retail pulls back. Come Thursday, chain stores will weigh in with March sales, with rewards to those who boosted comps, raspberries for those who didn’t. However, bear in mind March 2002 included Easter, a ‘reason" to shop, which isn’t arriving until April this year, so comps aren’t really comps. Which is exactly why traders will celebrate when March Retail Sales come out higher than expected on Friday, which is why there might be cause for an attempted rally, come Friday. But then, they’ve done that for quite a few rallies since the war began and I wouldn’t be surprised if the preliminary UM numbers stabilized or rose—based on coalition’s quick move to Baghdad. So let’s say retail sales are higher than expected—a near given seeing as pump prices rose to over 2 bucks a gallon for high test—and Consumer Sentiment can at least be pointed to as stopping it’s relentless fall, and you can see why, post GE earnings, there might be sufficient excuse to play the week the many recent ones have gone. A down open that ends with a recovery.

Meantime, I’m orange. To understand why, check the cover of volume one of the Daily Orange, 1969, and see the picture on the cover under the headline, "What the well-dressed freshman will wear." (They didn’t call us freshpersons back then.) Then fast forward a coupla months to the article about ZBT killing it’s chance to sponsor the Homecoming Queen when it picked a freshman to sponsor. Yeah, I’m felling really orange this week—NCAA and market both. Though I’m not ready to flash the red sell signal yet cause I still think there’s one more flourish to the upside, towards the end of the month, before dues are paid in May and June. As they always are.  

© Sandi Lynne 2003 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.

Sum it up and you can see there'll be news from every sector this week--and little of it will support a rally. As for the war, it seems bogged in a holding pattern, waiting for supply lines to catch up with the front line, and for reinforcements to arrive. In short, should we get a quarter ending jiggle to the upside, it would be a selling opportunity. Just don't turn your back on the market. Those sneaky, sudden rallies have been very profitable to trade. Like the weather, stay tuned: it could change on a dime. But barring the unforeseen, the week could get quite ugly once the quarter closes on Monday. 

© Sandi Lynne 2003 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. 

Mondays that follow up options expiry tend to trade in reverse, so combine normal trader activity with some added nervousness over Tuesday’s showdown in Baghdad, and it’s reasonale to expect some sort of pullback when the markets reopen for the week. Question is, will it be a mere pullback or is a more serious correction in the cards?

To answer that, I turned to both the charts and seasonality because seasonality is my specialty. On the charts I saw some powerful break-outs, with retail a surprisingly strong sector—despite the shift in Easter and analsyts’ assumptions that consumers would stay home to watch the news. In fact, that hasn’t happened, perhaps because the news has been monotonous and nearly uneventful, with SatCom not even briefing reporters until Saturday, then claiming there was little it would say since, to say anything, would give away it’s plans to the enemy. In the meantime, satellite phone-equipped reporters on the military convoys have sent back more immediate news than what the Pentagon possesses, most of it reports of convoys moving unimpeded across Iraqi highways.

Seasonally, there’s a powerful force at work this week—the end of the month and quarter. Given the 1,000 point climb in the DOW since the March 12^th low—a rally that caught most pros by surprise, it’s sensible to assume that end of quarter window dressing will meet performance anxiety, with portfolio managers desperate to look "smart" to their investors. As of now, looking smart requires being long, so there’s basis for presuming some buying pressure into the close of the month.

As I did last week, I’ll askew detailing the data or trade shows and conferences on tap for the week—there are bigger fish to fry. Besides, some atrocious data was overlooked last week, since a rebound in spending, and an improvement in sentiment is widely expected now that the issue of war is resolved. Mind you, the war isn’t resolved but the issue—whether we will or won’t go—has been. Since the war will be only 9 days old by the end of the coming week, it’s too early for traders to worry too much about the length of the war. After all, there wasn’t anyone who thought it would take less than a month to win. As for trade shows and conferences—even earnings warnings—they’re secondary to the war and seasonality.

So, in short, I think a shallow pullback early in the week is probable, with higher prices at the end of the week, as performance anxiety forces PM’s to get buy happy. (Assuming Baghdad is taken quickly and with few allied casualties) Furthermore, retail investors might start shifting some money into equity funds, just as they’ve done during prior big rallies—July and October to name two--which could add more fuel to the rally. Call it the individual investor equivalent of performance anxiety, with those who were net sellers over the last three years afraid they’ll miss a "new" bull market if they don’t start putting some money into equities.

Longer term, I think this is another bear market rally—not the start of a new bull market. However, I think it will carry higher than I did weeks ago, and winning the war could very well set the stage for a one quarter rebound that should be impressive—though far off the rates seen in the 90’s.

In short, if you’re comfortable with your longs, you don’t necessarily have to sell early in the week. If you sat out this rally, you might pick some selected issues to own on the pullback, but only for a trade. However, if you’re more comfortable investing than you are trading, the bulk of the gains have already been booked. It’s not reasonable to expect another 10—13% gain after the recent gains. Besides, at higher levels, the same points gained yield smaller percentage gains, so either way, it will be harder to catch up no matter what you do. And higher prices aren't guaranteed but predicated on the quick capture of Baghdad with minimal casualties. 

© Sandi Lynne 2003 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.

So, how much do you think this week’s FOMC meeting means? Despite rumbles to the contrary, I don’t think the Fed touches rates, though it cold certainly express disappointment at the economy’s continuing malaise, and reiterate it’s readiness to intervene if conditions warrant it by worsening. Hard to believe but earnings return to the fore, with LEH, GS, MWD and FDX reporting—the mini-earnings preview season, that will compete with mid-quarter updates and analyst meetings, DOW member Disney’s, included.

While the march to war is clearly nearing it’s goal, technicians everywhere are looking at the same things, aware that the technicals suggest a pullback but, as long-time readers must remember, Monday is St. Patrick’s Day, one of the most consistently bullish days of the year. Should stocks power higher Monday, the technical picture would completely change, suggesting far higher prices ahead. My gut tells me that won’t happen, if for no other reason than the technical levels are formidable, and some steep sell-offs in other markets, from oil, to bonds, to gold, should entitle them to a bounce, which should suck some strength out of equities.

The big conference, this week, is CTIA, in Orlando, a meeting of the Telecommunications Association. A host of new phones are slated for unveiling, though Nokia accidently leaked it’s products to Finnish analysts in a press release, while Barron’s carried an article about Texas Instruments’ WANDA chipsets, and Qualcomm upped it’s chip sales forecasts for this quarter.

Just as the bulls and bears battle it out everyday, this week, geopolitical tension will compete with the economy, via the FOMC and some headline earnings. While last week I boldly called for a an "imminent" rally,  this week I’m going to call for a fish bowl—a lot of moving around to get nowhere. With Monday’s St. Patrick Day’s bullish leanings competing with charts that don’t seem ready to break above resistance, and an end of week quardruple expiry, that’s too often been ugly, we’ll be lucky to pass the week close to unchanged—which is what I’m betting is going to happen—unless the war starts. I think we’ll close largely unchanged because I don’t think war will start before next week, so the forces of approach/avoidance should be especially strong this week. However, I don’t think the bear market rally that started last week is over. Instead I think it’s more likely that the second leg won’t arrive until the last week of the month—after this Friday’s expiry. And I wouldn’t be surprised if the market, which has so often surprised with it’s contrarian moves, the last three years, fakes out history and seasonality by going down Monday, then rallying on expiry—the exact opposite of what usually happens. And, while you’re at it, bear in mind it’s the Nasdaq that’s now up for the year—the group left for dead, if you listened to what others’ had to say for the past two years.  

© Sandi Lynne, 2003 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.

Still, there’s no question the economy is in a funk—nearly crawling. Which raises the question, is war overhanging the economy, or is war the excuse for an otherwise weak economy? Chicken of egg? If ya go back to August 2001, there’s an argument to be made for war being only an excuse but does anyone doubt there’ll be some celebration—some SPLURGE—when war is finally here, rather than coming, coming, coming? We’re in purgatory—always getting closer but never there—neither invited to heaven nor sent to hell. I think finally getting there will make a big difference. Mind you, I don’t think finally being at war, or even winning an Iraqi war, will solve all the economic problems but I do think there’ll be a BIG rebound that will make a lasting difference. Think of the parents of a newborn who never go out without their baby: first time they do, if everything goes well, they think, that wasn’t bad, I’d like to do that again. That’s how it is when spending and planning for the future: when you get out of the habit, you become more entrenched—test how penurious you can become. (Like dieting: if you get down to 1000 calories a day, you see if you can cut it to 800, then 500.) However, once the behavior is reversed, as tentative as it feels the first time, it gets easier with each step. The withdrawal we saw in fall 2001 was followed by a big splurge in Q1 2002, then it tapered off. The economy didn’t really grind to a virtual halt until the last quarter of last year, when we, then, believed the war would start Jan. 27 or 28. Since then, everything’s been on hold. However, once everyone gets off hold and realizes how good it feels, the big rebound should lead to more steady, reliable, and reasonable growth.

And make no mistake about it, we’ve been in purgatory, neither at war nor at peace, neither recovering nor collapsing but always marching closer to war—to some technical level. Now, with March 17^th the presumed deadline for Saddam to disarm, we can expect Bush to finally do what he’s determined to do—with March 30 to April 4^th the next period of least moonlight.

Now, for the coming week, I’m not going to talk about OPEC’s meeting on Tuesday, or the coming data. Not going to talk about the trade shows, which skew towards drug discovery. Not going to talk about earnings, of which there are few, with retailers dominating. Not going to talk about CeBit, in Germany, which is what Comdex used to be here, or the BIG on-sale date for Intel’s new Centrino chip which integrates wi-fi, ‘cause you’ve been seeing the commercials on TV, in which Intel promises to change ‘not only how you work but where you work.’ I’m going to talk about the market, which has been at the mercy of technicals, nudged around by programs that it’s said now comprise nearly 40% of trading.

I’m gonna talk about the technicals because the markets have come thisclose to collapsing so many times and didn’t. Because the short sellers are afraid to press their bet in case we start bombing and they get caught with their pants down in a big rally. Gonna talk about the technicals because so many groups broke down and didn’t seem they’d ever stop going down—like defense stocks. Gonna talk about the technicals because I run thru 750 stock and index charts each and every night and what I’m seeing is a rally looming. You won’t see it if you’re looking at charts for Microsoft, Intel and Applied Materials. You won’t see it if you’re watching Wal-Mart and Target. But what I saw from hard looks at 750 charts is stocks getting so cheap real buyers are, well, (surprise , surprise!) buying. It’s not in the momentum names. It’s not in the names most day-traders are watching but it’s plenty of other places. In consumer non-durables. In casinos. In non-headline tech. Pharmaceuticals. Even in some financials.

I can’t promise the rally will start Monday; can’t promise we won’t see one HUGE swoop down before we turn up. All I can tell you is that there is stealthy accumulation going on away from the stocks CNBC constantly talks about and, eventually, that kind of buying creates the divergent signals technicians and programs are devised to spot. Doesn’t make sense in advance of war, even with every one and his uncle telling ya war will trigger a HUGE rally, because the deadline of the 17^th probably means we’re at least 2 weeks from war and the markets could, theoretically go down quite a lot more in two weeks. Doesn’t make sense when we’re all afraid of retaliation once the war starts. But the charts I look at tell me investors are back accumulating stocks, and that sellers are done, or about to be.

So hang in there. Bush knows the weather will soon turn against a war effort and is likely to strike sooner rather than later—really. Set up your dream portfolio and pick your spots. Pick your price levels. Bond holders should think seriously about taking profits—yields are NOT about to go lower and, if they do, a massive re-allocation will take place, which will only accelerate a coming rally in stocks and reversal in bonds. Enjoy the last days of purgatory—‘cause the end is closer than it’s ever been and the many charts look like they want to end the long declines they’ve suffered. Enjoy the last days because once it’s over, you won’t be able to buy stocks as cheaply again for awhile. NO, I’m not suddenly bullish. I’m just telling ya what I always tell ya—what my near-term outlook is for the markets, and that outlook suggests a rally is near.  

© Sandi Lynne 2003 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.

Missed the weekend news? No problem. There was more besides Turkey. Saddam has destroyed 10 of the Al-Samoud-2 missiles and N. Korea is threatening "nuclear consequences" if the U.S. invades it’s territory. Now, we all know Bush keeps promising a diplomatic resolution but the U.S. and S. Korea are scheduled to engage in joint military exercises this week: Who knows what the madman of the North will see in that?

So March has started, a weak month to begin with in the best of times. This week, the usual parade of monthly economic data, from February vehicle sales, to retail sales, to the Unemployment number. I’d expect anything to do with consumers to be down for the month, as is typical for the winter doldrums, made worse this year by a rare blizzard. As for the Unemployment Rate, it’s hard not to imagine it ticking up from last month’s seasonally adjusted number that did nothing but reverse the silly December adjusted number. If you recall, December saw a surprisingly large "loss" of retail jobs, which were jobs not filled last year. So, come January, we saw an unusually large drop in retail lay-offs, which weren’t anything but the mirror of the December adjustment. Let’s say 5.9% as this non-economist’s guess for the rate, with 6%, the December number a possibility. Retail sales? Well, that should be the first in a string of "weather" suppressed numbers.

Businesswise, take your choice of headline events this week: Intel’s after the bell mid-quarter update, on Thursday, or Blix’s appearance at the U.N. Friday. Factory orders on Thursday are for January. Aside from the fact that it’s moldy, expect a rise after the many plant closures at the end of December. Wednesday the Fed will release the Beige Book, published 10 times a year but don’t expect much change from prior Beiges, all of which has referenced slow everything will little hope for a pick-up in employment. Iraq is a mushroom cloud overhanging sentiment. Sentiment rules business as much as it does consumers. After all, humans still run companies, last I heard. That’s why Blix makes it into the "businesswise" section.

As for earnings, retailers lead, with current conditions off-setting actual earnings which, for the most part, under the circumstances, weren’t bad, thanks to lean inventories and decent margins, even if sales didn’t excite anyone.

If you don’t usually look through charts, ya ought to: most are vastly improved in the last few weeks, even if Friday’s gains were far more muted than the past two Fridays’. Even the financials look like they’re recovering. While I could make a case for more upside, I can’t predict the news, and it’s the news that’s controlling sentiment which, in turn, is controlling market action. You could sit it out, of course. Or you could expect more of the same—the herky jerky we’ve seen for the past few weeks. Just know that, despite Greenspan’s recent testimony, Richard Lees at 21forward.com says the Fed is being extraordinarily accommodating. So watch yourself on the short side even more than on the long side; the biggest surprises have been to the upside when the FED is as accommodating as Richard says it’s been most recently. Doesn’t mean Monday, necessarily, since Mondays have been reversals of Fridays in recent weeks. Doesn’t mean we’re up everyday either. But it does mean we’re not likely to collapse—barring the unforeseen. And that’s the problem: ya can’t bar the unforeseen and, for now, it doesn’t seem war is about to start this week. Heck, they haven’t closed a museum and the alert code has been lowered back to yellow from orange.  

© Sandi Lynne, 2003 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.

In the coming week, earnings will slow, though a coupla biggies await. Lowe's, Home Depot, Federated Department Stores, and Hewlett Packard to name a few. There'll be more than the usual economic data to deal with, including January Durable Goods and New Homes Sales, as well as the preliminary Q4 GDP. But forget all that 'cause Friday the Chicago Purchasing Managers' survey will be released, the first read on this month's business activity and I can't imagine it's better than the punky data we got last week.

Headline trade shows and investment conferences include CEO/BioInvestor; Lehman Industrial Manufacturing; Bear Stearns Retail, Restaurants andApparel; Satellite 2003; IT Storage Forum; Homeland Security; a MAJOR two part Advanced Microelectronic Manufacturing and Microlithography event, which includes the year's Compound Semiconductor Outlook; and the National Council for Prescription Drug Programs, all of which is likely to be dwarfed by Goldman Sachs' Technology Investment Symposium.

But forget all that 'cause Hans Blix gave Iraq until March 1 to turn over all the missile warheads that have a range greater than 90 miles, the U.S. and U.K. are planning on introducing another U.N. resolution to the Security Council, while Blix is due to report back to the U.N. on Friday. As if that weren't enough, word over the weekend was that Saddam's second in command was willing to talk to the U.S., while Turkey and Powell decided on an agreeable bribe, which means U.S. troops waiting on ships could soon hit land, and set up the first strike staging camps.

So who woulda thunk we woulda been up two weeks in a row--up the best on Fridays, before weekends? Does it matter that stocks are starting to get overbought on the charts? Evidently not, since everyone seems convinced ya gotta be in before the first strike. And while they've been saying that, they've been saying with equal certainty that crude 'll be heading back to $20 bucks, though you'd never know it from the looks of some energy stocks--the service stocks, in particular. And they'll tell ya how gold's headed back down to $300 an ounce, but it's gold they're buying everytime the market waves down, like it did on news that a barge blew up in a fire ball off Staten Island. And trust me, they'll be telling ya how ya gotta be buying even as they're booking profits and easing back 'cause we're still in a bear market, still don't know what Iraq will look like after Bush is done destroying the country. Or will he? Cause the way France and Germany are acting, it seems to me, Saddam oughtta be negotiating himself a nice Pied a Terre on the Place de la Concorde, or Rue de Fauberg St. Honore, and another on some ritzy strasse in Berlin--though that's a double negative from where I sit, given that I've been to Germany a number of times and it's France I'd pick. But heck, if Turkey got $30B, suppose Saddam were to start negotiating? Whaddya think it would take to pay him off?

Too bad we may never know cause Blix could just play bad cop, like he did for his earlier U.N. report . He could decide those troublesome missiles are just too much to overlook. And France and Germany might just, when push comes to shove, abstain. Ya think??? I don't. But 9 outta 12 Security Council members would be a mandate in Bush's book. So prepare for war--and the unexpected. Then decide if you want your money on the line for the unexpected. Pardon me if I sound skeptical but, who woulda thunk?    

© Sandi Lynne, 2003 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author's own.

Weeks ago, when Blix delivered a more scathing report, the markets fell. Last week, his better progress report was celebrated. Or was it? I think not. After ten days of technicians claiming the markets were oversold and due for a bounce, the bounce came Friday, at least half of it after the bond market closed early for the long weekend. So, the news caused the rally, or the rally happened, so the news was, once again, custom fitted to "explain" the rally? The latter me thinks. But, now that the "reason" is set, Homeland Security’s Ridge’s weekend announcement that the alert status might be lowered to yellow again within 48 hours is sure to light another fire under stocks.

Over the weekend, anti-war protests were seen across the globe. NATO aggreed to help protect Turkey, which has agreed to let the U.S. use it’s terrority to mount the Iraq war but, by Monday, Turkish leaders were saying support for U.S. must be voted on by it’s Congress and the vote, scheduled for this Tuesday, wasn’t actually scheduled but would be soon.

Meantime, once the news had decided Blix’s report and planned return to the U.N. on March 1 delayed the war—even opened the door to a peacefulr resolution--the U.S. markets rallied, spurring, Europe to follow suit on Monday, with techs and insurance leading the way.

Meantime, much of the east coast is snowed under, closing airports, national monuments and museums. All I could think about when I saw the storm on the news was the poor airlines, that didn’t need another disruption to their schedules and cash flows. Then, since it happened at the start of a week off for many school districts, I thought what a bad break it was for school kids and teachers, to have a snowday when school was closed anyway. The disuption goes farther than a few friends not making it down here for a visit I’d eagerly awaited: a friend went into a supermarket in Coral Springs and learned she couldn’t buy fresh chicken because the deliveries were no shnows, thanks to the storm. So, expect some wild times in the pits on Tuesday.

Speaking of which, I’d been attributing the recent reversal in gold to a pet contrarian indicator—a very well-known and visible pundit’s February 5^th article declaring it time to buy gold. It was a n incrediblly ill-timed article. Februrary 5^th was the day the CME raised margin requirements on gold by a whopping 50%.

So what’s up this week? Barring the NYSE and Amex having to close because of weather—something not entirely out of the question—the rally should have more room. Option Expiration weeks often see Tuesday rallies that are reversed on Wednesday, though that wouldn’t have been the automatic call during a week in which the markets are closed Monday. However, given the late Thursday reversal, and the flourish ending on Friday, there’s some more room to the upside before resistance is hit. As for the markets opening on time Tuesday, that will depend on when the snow stops. As of 7pm, the show was still falling but it’s a matter of pride—honor—to the NYSE to get the markets open and running no matter what, so plan on the usual schedule for Tuesday. NASDAQ could open either way since it’s an electronic market but NAZ has a rule that closes it if the NYSE is closed.

The economic calendar has some big numbers, including January’s PPI and CPI but neither should hold suprises. The markets have been ignoring rising raw material costs in PPI, dismissing it as petroleum related. However, since Options expiration often sees Wednesday down if Tuesday was up (and vice versa), PPI combined with the December Trade Deficit and February’s Philly Fed Survey could be the built in "excuse" the talking heads could need if the Monday holiday pushes everything back, and the reversal doesn’t come until Thursday. One of the other reasons I think the reversal waits until Thursday is because Treasury Secretary John Snow will speak about the "President’s Jobs and Growth Package" on Wednesday. We all know the market wants to see Bush’s package as bullish for Wall Street—heck, Microsoft and Qualcomm have already announced dividends and Congress hasn’t has so much as two minutes of debate on the subject, let alone passed the bill making tax free dividends law.

The earnings calendar is dominated by retailers, with Wal-Mart, Target, Abercrombie & Fitch, Radio Shack, and Liz Claiborne just some of he names on tap. Since far milder snow storms were blamed for sales off in January, imagine what this storm did to reatil sales. Then, around here, Valentine’s Day was not up to even last year’s sales, and the group could see some pressure. Unless…. Unless the market’s in such a good mood traders are willing to dismiss weak current sales as one-time snowstorm related events, rather than a trend. But, if you here that, tuck in the back of your mind the fact that Easter was in March, last year, and falls late in April, this year, so March comps could be weak, too. One other reporter of interest this week is Hormel, maker of Spam. Dya think all those people buying water, duct tape and plastic sheeting with which to wrap their houses are also stocking up on Spam?

On the trade schedule, Toy Fair has already started in NY, with this weekend’s blockbuster, Dare Devil, pulling in a record for a February opening, normally a back water. You don’t hear much about toys about to be unveiled at Toy Fair prior to the event because prototypes are closed guarded to protect against Asian copies. Nonetheless, the recent success of Sony’s robotic dogs, and Hasbro’s FurReal Friends suggests more technically advanced toys are on their way. GSM World Congress is often about the previously mentioned Qualcomm, as much as anything else, but Intel’s Manitoba chip already made the news. Just in time for retail and apparel earnings, MAGIC meets in Las Vegas, another reason you’ll hear more than usual about the group. The softline analysts will be at MAGIC, many hosting conference calls and/or dinners with execs, talking about not just menswear, but womens and kids too, since MAGIC has morphed into an all apparel event from it’s original men’s and boys roots

As for Investment Conferences, my guess is the Consumer Analyst Group of NY rescheduled it’s event, scheduled to start Monday in NY. I don’t have the schedule for RBC Capital Market’s Whistler Summit, up in Canada, but it’s tradionally focused on smaller retailers and micro=cap techs. Wouldn’t surprise me if some scheduled attendees were also no shows, thanks to the weather.My guess is that Salomon Smith Barney’s Leisure Conference goes ahead as planned, on Wednesday, with presentations by Toys ‘R Us, Mattel, Electronic Arts, Disney, and the like because those companies would have already been in New York for Toy Fair before the weather disrupted air travel. Both cruise companies are scheduled at the event and could send New York area reps but won’t necessarily be able to get Miami execs up in time. My guess is it won’t matter: earnings from retailers trump investment conference presentations.

So, strap on your seat belts for another quick, tradable rally, with techs sure to lead. Just Keep an eye on the financials, which must join the party for this rally to have even a multi-day run. And don’t overstay your welcome or ignore what’s happening with gold or the dollar. March has often been a winning month for gold. Since Iraq is still unresolved, and North Korea is demanding attention, a sizable pullback in mining companies might be worth a trade for March, as geopolitical risk is bound to reassert itself and pressure the markets again, especially as certain technical barriers are reached as the rally runs it’s course. And while the U.S. and the U.K. are still working on another U.N. resolution, Bush won’t be stopped just because the U.N. doesn’t come around. Then, as I hope I’ve made clear, this winter storm has disrupted business—impacted the economy.     

© Sandi Lynne 2003 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author’s own.

With war growing closer each day, there’s no reason to expect anything from Greenspan but more about "geopolitical" concerns weighing on the economy, and the FED’s readiness to step in, if necessary. However, it will be very interesting to hear Greenspan talk about both the trade and budget deficits, as well as Bush’s proposed tax cuts, ‘cause watching Greenspan backpedal on previous positions is always more fun than watching stocks erode. Maybe someone from Congress will ask Greenspan why the FED isn’t doing what homeowners nationwide are doing—locking in cheap rates for 30 years—instead of issuing only shorter term paper and notes.

I will menton some key earnings, data releases, and events, this week, but only with the proviso that they won’t mean much—won’t stop the shrinkage in stock market caps. Last week I said please ignore those who would have you believe the markets are so oversold they’re do for a bounce. I’ll say that again, pointing out the averages are even lower, now, and, presumably, more oversold according to the technical crowd but again, it doesn’t matter. In fact, I’ll go farther out on a limb, this week and recommend you ignore, as well, those who will tell you the economy and markets are poised to run to the upside once Iraq is settled. North Korea is doing everything possible to assure that once Iraq is settled, Korea is next—nirvana will not be delivered with Saddam Hussein’s demise. That doesn’t mean we won’t get a relief rally once we’ve strafed Iraq, but rather, I’d suggest, it will be another bear market rally that will end in disappointment until N. Korea is likewise settled.

Earnings, this week, will come from a diverse group. Headliners for tech are Applied Materials, Network Appliance, Brocade Communications and Dell Computer. On the consumer side, Yum! Brands, Clorox, Coca Cola, May Department Stores and Viacom are scheduled. But there’s a lot in between, from insurers Aetna and XL Capital, to truck maker Navista,r and mining company Barrick Gold.

On the event side, while World Shoe meets in Las Vegas. Fashion Week is in New York. Blood Product Safety meets in the nation’s capital, with white particles found in blood shipped to southern medical facilities a concern—especially since know one, yet, know how the particles got into the bags. Zurich is home to a huge biotech event, while Bear Stearns hosts management from Newmont Mining at a luncheon, on Wedensday. Ironically, Friday, the day Blix is at the U.N., is also Valentine’s Day, which will, also, see the opening of Dare Devil, based on a comic character from Marvel, all of which leads into the start of Toy Fair, the biggest show for toy manufacturers and retailers—a troubled group, exemplified by the bankruptcy of F.A.O Schwartz. Fashion Week? Shoes? Toys? Valentine’s Day—the day to celebrate love--and Blix! ?!?!!! Whaddya think the University of Michigan’s Consumer Sentiment Index for February is gonna look like, on Friday, at around 9:45am?

You might think it was silly for me to pull together Blix with shoes, fashion and toys but, point is, while Wall Street appears to be going about it’s business as usual, it’s NOT business as usual—the markets keep telling us so. The contrast between what’s happening in the world and on the business side--both the schedule and the turn investors want to see for business and the economy—are incompatible. World tensions dominate: The U.S. has recommended that non-essential personnel return from the Middle East. Private air craft have been banned from an area above the capital. The Homeland Security alert status has been raised to Orange. Security has been tightened at bridges, subways, tunnels, monuments and high-profile buildings. More troops and reservists have been called up. Before long, the U.S. will tell the U.N. inspectors they should withdraw from the area. Musems and national monuments will one day, soon, be closed, and then, within hours, the bombing will start.

So, expect the markets to continue their downward trajectory. I don’t think Bush will be the least bit delayed by recent news of Iraq’s stepped up cooperation, which has included unmonitored interviews with scientists and release of some papers dealing with selected biologicals weapons that were known to be in Saddam’s arsenal the last time inspectors failed to find a smoking gun. Then, after Iraq, Bush will deal with Korea. Though support from Japan and China seem assured for that effort, the war with Iraq will intensify anti-American sentiment around the world, and that sentiment might make gathering wider support for dealing with Korea another tough fight—might make the stand-off with Korea another drawn out affair that weighs on business leaders and the economy, crushing the hoped-for post-Iraqi rebound.

Ignore those who’d suggest it’s too late to sell—on a stock by stock basis, it may not be. If ya think a holding is going lower, then it’s not too late. The forces leading to the bear market—including the original excess capacity—remain as influential as they’ve been the past three years. And, despite intraday rallies, with stocks oversold or not, the selling isn’ over. The many hundred point gains that have disappeared by the end of the day suggest traders reluctant to hold stocks overnight. If traders are reluctant to hold stocks overnight, and haven’t held them over a weekend, they’re not going to be any more willing to hold ‘em over the long weekend ahead. One the contrary, on a couple of occasions last week I even mused that Bush might be enamored with irony enough to start the fighting on President’s Day, just to show Saddam who’s boss. As for stocks—a seller be. There’s no reason to ride ‘em lower and we’re still not at the point when war is only hours away—nevermind I’m not convinced buyers will emerge merely because the first bombs are falling.         

© Sandi Lynne 2003 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author’s own.

Friday bring's January's Unemployment Rate, a number that might just surprise to the upside--thanks to seasonal adjustments and the surprise 104K loss of retail employment in last month's report. But traders don't seem inclined to hold stocks overnight, let alone, over the weekend, so don't expect a strong report to break the recent trend.   

© Sandi Lynne 2003 Nothing conatined in this commentary should be construed as a recommendation to buy or sell any security. The views expressed are the authors own. At the time of this post, Sandi, and or her affiliates were long Cisco, though those positions may be hedged with options, or change at any time without notice.

Right out of the gate, Monday opens with the U.N. inspectors presenting their preliminary report to the Security Council. Now, don't bother asking me what I think of that organization, in general, especially now that a diplomat appointed by Lybia’s Kaddafi heads up the Human Rights Commission. But this is a body organized to broker peace. The inspectors held a press conference and said they’re not ready to declare the U.N. breached. Nevermind the resolution actually demands, not just unfettered inspections, but that Iraq take the inspectors to sites where decommissioned WMD remnants can be seen. Have ya heard a word about that happening? Of course not because it’s NOT happening. But WAR????? The U.N. wasn’t organized to declare war! Who’s idea was that? It was organized to maintain peace.

Tuesday, there’s the confirmation of Snow as Treasury Secretary. More of the same, I think, without the recently departed secretary’s feisty outspokenness. So don’t expect much help for the battered dollar. Tuesday evening, the President will deliver his State of the Union Address. Nevermind we know too much, already, about the President’s plans for the economy and war. Nevermind he’s likely to spend a good deal of time trying to sell war to Americans. Nevermind he delivered a speech from a distributor this week, with a wall of "Made in America" boxes his backdrop, all of them fake, hastily placed to hide the real boxes the distributor ships, stamped "Made in China." The MORE the President tries to sell war, the more his constituents turn against him and he doesn’t care.

Now, you might think I forgot the FOMC meeting Tuesday. I didn’t. While that, combined with the SoTUA probably slows trading all day, Tuesday, the FOMC meet is a two-fer, meant to prepare Chairman Greenspan for his semi-annual trip fo a Congressional quizzing. Nevermind the few gurus who are now predicting the FOMC will move to an easing bias. Nevermind because I don’t think that’s happening. Sure, the Open Market Committee members have to be a tad concerned about the economy; sure they acknowledge the dampering effect all the war talk is having on the economy (don’t we all?). But are we forgetting earnings haven’t been all that bad, even if the outlooks remain cloudy? At worst, I think, the FOMC reiterates it’s feeling that it still has an arsenal at its disposal which it can use to stimulate the economy. But move towards an ease???? I don’t think so. Do that now, and whadd’ill they do when the war actually breaks out?

As if that wouldn’t be enough for a week, as it is, there’s more: Thursday we’ll get the advance look at Q4 GDP which won’t look as strong as most Q4’s have been in the past. Depressing it further could be a number of outsized Trade Deficits, as well as a weak dollar which hasn’t translated into more exports, a situtation worsened by a dock workers strike that wreaked havoc on shipments.

Which brings us to Friday, when we’ll get the U.M. Final Consumer Confidence numbers, though the Conference Board will have led with it’s own, on Tuesday. If ya think either rose, you must not have read a newspaper or seen a news report, and heard the drums of war growing louder. Must not have heard about what any of the companies which have reported said even after reporting upside surprises: no signs of a recovery.

I won’t spend time on the earnings. Not because I don’t think American Express, Proctor & Gamble, Disney, or any of the other scheduled reports are important but because I don’t think any earnings reports can supercede the list above. And I won’t talk about trade shows or investment conferences, though the major invesment conference concerns the defense industry, so there won’t be war relief there, either. I just don’t think earnings or trade news will matter for more than a minute. I don’t think seasonality will either, though earlier in the month I held out hope for the traditional earnings relief rally. And maybe we had it: maybe that flutter to the upside last Thursday was it.

Maybe we’ll even get another one come Friday, this week, after four forgettable days. But nevermind the ten minute or one-day wonder rallies. The prolonged drum roll for war IS impacting consumers; IS impacting corporations; IS impacting the economy and stocks. The bulls had their chance and blew it, though it’s really not their fault. The headwinds were too strong. The usual parameters didn'’ apply since it's war we'’e talking. The ball is back in the bears camp, with a big assist from a President who seems more intent than ever, even if it means a unilateral war. Oh, sure, the allies will probably rally round when the bombs start flying and it becomes obvious that Saddam is no match for the U.S. Defense Sector’s power and might---for the power and might your taxes and mine have bought. But until then, the stock market….Nevermind.   At least not if you're a bull.

© Sandi Lynne 2003 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are strictly the author’s own.

Besides the fact that I resist the easy assumptions, I've been keyed for a few weeks onto some technicals levels. First up, is the December low, where it seems all the averages are headed, with some techs getting closest. However, that level also coincides with the Oct. 14, 2001 gap up second wave surge from the Oct 9^th turn, so I think there's reason to at least hope that the averages will find some support there. I'm also ignoring the pundits and their clichés, "as the first week of January goes, so goes the month," as well as the one they're bound to trot out this week, "as January goes, so goes the year." Since we've just finished up the third down year in a row--itself an unusual event--and since the nation and world are looking war in the face--another unusual circumstance--I can't see how any of that matters. Of course, I'm in the camp that believes the war rhetoric is suppressing the economy, so at least you know my bias.

What I am reminding myself is how often the markets have sold off in the first big week of earnings season, only to rally towards the tail end of the three straight weeks of the quarterly earnings report bulge, as individual company disappointments are supplanted by relief that the earnings, overall, weren't as bad as they could have been. As for the lack of visibility, even disallowing my belief that the war overhang is suppressing enterprise investment, I'd rather managements remain cautious than turn suddenly bullish because last quarter improved over the prior quarter. I can still remember John Chambers, CEO of Cisco, bullish on prospects in fall 2000, long after it became clear that it was wrong to be bullish. Suppose managements can't see a turn coming, even if it is? I'd rather caution remain, distrust improvements, initially, so companies continue to be run like tight ships, in contrast to the freewheeling ways of the late 90's.

With most of the biggest tech reports out of the way, the earnings focus shifts to the financials, this week, where low rates and most of the Enron/WorldCom, and similar write-downs, should be in the past. That's not to say the market won't obsess about the semi- book-to-bill. Of course it will but that's a trailing indicator. The companies reporting, and their post-earnings conference calls are more current tells, even if some of the largest SOX members aren't scheduled this week. Other economic datapoints include December Housing Starts & Building Permits which should be down--a seasonal thing, except where local municipalities pass building code changes that start with the new year, though that’s rare, since most fiscal years for government begin October 1.

Investment houses take a holiday from conferences, as earnings keep analysts and Portfolio Managers glued to their phones and screens. An exception is Oracle AppsWorld, a DevCon. Otherwise, the two big shows will be NATPE, for television programmers, and Super Show, for the sporting goods industry. The International Builders' Show is for vendors ptiching to homebuilders, so think lumber and plumbing. To supplement the book to bill, Japan hosts Internepcon/ Electrotest. Aside from NATPE, where we'll hear what's next in the repugnant "reality" field, earnings trumps everything else.

Wednesday's annual outlook from the National Association of Manufacturing could be more bleak than we'd like but, really, is there anyone who doesn't believe that would change if war were off the table or behind us?

Regarding earnings, Citigroup, JP Morgan Chase, Motorola, Washington Mutual, Wells Fargo, Qualcomm, Texas Instruments, McDonald's Amazon, Lilly, Amgen, Caterpillar, BellSouth and United Health are just some of the major names scheduled. Non-money center banks, like WAMU and Wells probably report best, while UNH probably saw the best of it's earnings increases in the past--despite what is sure to be another good quarter, perhaps, eclipsed by new medicare reimbursement plans for the future.

If you have a copy of Barron's handy, please read The Debt Bomb, by Jonathan R. Laing, particularly his review of Irving Fisher's 1933 article about deflation and depression. While I believe war is holding back the economy, it's the hand we're being dealt by the current administration, so there's little reason to expect the averages to break out, or avoid another down year, until the issue of Iraq is settled.

Shorter term, with the Monday holiday, post-expiry settlements will be completed on Tuesday. That's often meant an up opening that quickly reverses. As for the rest of the week, the markets might spike on some bellweather's positive earnings surprise but I wouldn't expect that to hold--at least not until the December lows are tested. Should the markets follow-through strongly to the downside early in the week, I'd expect some attempt to recover by the end of the week. Otherwise, we're all looking at the same charts and they're saying the major indices broke and have more to the downside before they reach the next area of support. However, the one group that didn't collapse last week, financials, are heavily represented earnings reporters this week. Should that group continue to hold, the bear case would weaken. If the financials hold, it will set up a divergence that should lead to the annual earnings relief rally. That's why it's hard to presume the breaks in the indices, on an expiry, especially, mean the bears will simply have full rein. Furthermore, many tech stocks got so swiftly oversold, and are so quickly nearing their December lows, a rally attempt could emerge "out of nowhere" at any time.  

© Sandi Lynne 2003 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are strictly the authors own. At the time this was posted, Sandi or her affiliates were long Citigroup stock, though that position may be covered by options, and may change at any time without notice.

About that tax plan: It sounds like the market makers and specialists sat around with the Republican leadership and thought up every way possible to generate active trading. Some time during the discussion, the CPA's walked in and said, "Ya know, with our audit division under a cloud, and business being lost to software like "TurboTax" and "TaxCut," we could use a little extra confusion to make us essential again. "Done," the boys musta said, cause the dividend tax proposal couldn't get anymore convoluted if Rube Goldberg tried.

You might recall the Republicans campaigned on the promise of more simplified tax structure. You might even recall that Steve Forbes, publisher of Forbes Magazine, represented the right wing of that mission, running for President while advocating a "FLAT" 15% tax that could be filed on a postcard. So y'd think Forbes would have gone ballistic against Bush's proposed plan on his Saturday morning Fox show, "Forbes on Fox." Not so. To my amazement, he was a good little Republican, supporting the proposal. NOW I'm incensed! So, for those of you whose eyes glazed over the details in the newspaper, here are some of the salient points.

1. The proposal, for reasons I'll explain, makes the tax code far more confusing than ever before.

2. Savings are still taxed--savings being what most of the non-wealthy possess instead of stocks and mutual funds. "Savings" the very thing the FED has often bemoaned Americans don't do enough of.

3. In order for dividends to be tax free, the companies paying them must pay taxes on income. Believe it or not, that eliminates some pretty hi-profile dividend payors, from most of the oil companies (who can offset taxable income with depreciation and losses on failed exploration), to some drug companies, like Pfizer, for instance.

4. Companies can elect not to pay dividends but "retain earnings," in which case their long-term shareholders will be allowed to reduce the total capital gain by the presumed "potential dividend" embedded in a company's retained earnings.

5. Features number 4 and 5 will significantly disadvantage start-ups, like biotechs, despite the fact that start-ups are the entrepreunerial heartbeat of this country-not to mention the driver of new employment.

6. Suppose, as happened many times in the past, last year especially, companies restate prior year earnings. Would, say, a Qwest shareholder have had to restate--AMEND--his/her taxes because the company restated? It seems so.

7. Companies will have to add a line item to Federal filings--not just retained earnings but "synthetic dividends" embedded in those earnings and, probably, taxpayers will be limited to "capturing" the tax savings on only a quarterly basis, limiting the tax benefits for shares bought mid-quarter. Nonethless, this adds another layer of record-keeping and disclosure.

8. The states, already facing significant budget shortfalls, will have to issue municipal bonds at higher yields, since the tax-free nature of munies, in the past, were the very substance of a state's ability to pay below average yields.

9. Tax free dividends within already tax protected accounts, like 401 (K)'s or regular IRA's would, presumably, be sold, since it's silly to pay straight income tax rates upon post-retirement withdrawal when the dividends would be tax-free in the here and now.

10. There will be sales of some preferred shares which, in recent years, were set up as Trusts, making their yields "interest" not dividends, and therefore, not tax free under the plan.

11. REIT's will lose their advantage since REIT's pay no taxes and pass on 90% of their earnings to shareholders, a structure that was specifically designed to minimize the amount of earnings REIT's "retain," and to create a structure that taxes dividends only once, at the recipient level.

12. The worst crime, in my opinion, beyond the complications this bill would add, is the favor it does to the wealthy at the expense of the lower income tax payer whose net worth might be only in his home and savings.

OKAY--enuf! You get the idea; this is the most dumb--_ss plan I've ever heard and I hope some Republicans jump party lines and defeat it, even as I hope someone else comes up with a better idea--at least one that would make savings tax-deductible, as well. Since the consumer has been doing just fine, and corporations are the ones that aren't investing, I'd prefer if Congress just eliminated the tax on corporate earnings paid out as dividends, which would save corporations money they may then elect to invest in equipment, as well as encourage companies to boost the amount they pay out, so big cash hordes like those possessed by Cisco and Microsoft are paid out to shareholders.

Now, back to the week ahead. On the trade show front, there are no investment conferences, since everyone knows the portfolio managers and analysts will be on post-earnings conference calls. Bit trade shows include International Housewares, BICSCI (telecom), and both Customer Relationship Management and the American Marketing Association, though it's hard to see how any of these could trump the coming earnings reports.

Headline reports will come from Intel, Microsoft, IBM and GE, while internet favorites Yahoo and ebay are also set to report. Other name brand reporters include Fannie Mae, Tyco, JP Morgan, Wells Fargo, Apple Computer, Forest Labs, Bank One and Bank of New York, General Motors, Sears and United Technologies--a number of DOW stocks amoungst them. Because techs, particularly the semi's, led the market higher on the New Year, it's INTEL I'm keyed to. First, Intel has missed it's last few quarters, though you'd think that wouldn't happen after a mid-quarter update that always narrows the earnings range. More important than Intel's earnings are it's plans for capital spending--Capex, in street parlance--since spending by Intel is crucial to the health of the semi-equip companies, members of the SOX, which led all techs in the New Year, just as it did in the October rally. Word late last week was Intel planned on maintaining Capex at last year's level, so I'll be very curious to see Intel's SEC filings in a few weeks, to check if it actually spent what it planned last year. You might recall that last year, the January rally reversed when SEC filings revealed a slow down in spending despite proposed budgets and plans.

Last year, Intel announced a price hike on certain chips effective January 1^st, that was said to have caused a surge in end-of-year orders ahead of the increse. There's a calendar quirk I noticed yesterday that might make Intel more bullish than one expects, and might have sealed the quarter on target or above. The Chinese New Year falls on the first of February this year, instead of mid-month. Since the Chinese are quickly becoming a huge consumer society, and their New Year is like out Christmas, reason for big ticket gifts--big gifts of money--the early New Year could have spurred late in the year orders to Intel that might not have been placed until January under other calendar circumstances. While I don't expect Intel management to get overly bullish, since the price of missing aggressive targets is a crushing of stock value, this is the first quarter in a long time that appears to have a number of stars aligning for Intel. Of course, last quarter having distributors stocking up on chips in advance of a price hike and Chinese orders earlier than usual, could align equally, to make the current quarter weaker than most--albeit, already a weaker quarter than the traditional Q4--but ya know it's the bottom and top line reported off which the market keys. So, if CAPEX holds up, the market could get a report from Intel that doesn't derail the New Year rally. Except…

Except, it's also an Options Expiration week, so you need not be reminded that Tuesday is often up, Wednesday a mirror down--or vice versa, as the big players unwind and roll their positions out to more distant months. Likewise, I'll mention Microsoft's earnings because those have often set up next day declines, as management has gone OUT of it's way to temper enthusiasm and explain away a quarter's strength, to keep expectations in check. The one-two punch of expiry machinations on Tuesday and Wednesday has often been matched by a one-two punch from Intel and Microsoft--with one causing a mirror image of the other in day-after trading, and both causing techs to sell-off in the last three earnings sessions. Given the fact that many stock charts have entered the December 2--3, 2001 rally reversal, there's also technical reason for the markets to have some digestive problems this week. Then, if you check out the open interest in some of these big caps, there's expiry reasons to expect gains to be limited until next week, after Martin Luther King's Holiday, on the 20^th.

Also working against the major indices is OPEC's Sunday decision to up production, which follows last month's similar decision which was more recognition of ongoing cheating than actual added production. You can see where the 2 energy members of the DOW might decline on that news. PPI and CPI are out this week, though ex-energy, neither should hold many surprises even as PPI should continue to show higher costs for raw materials, given that the CRB has steadily advanced even as the economy has stalled. However, that's been going on without much angst--though some would argue that's helping the price of gold--so I'm not particularly worried about traders suddenly awakening to higher commodity prices this week, when the focus will shift to earnings. Given the strength of auto sales, Retail Sales for December, out on Tuesday, should extinguish some of the worry about the consumer closing wallets, even as it probably means the November Trade Deficit, out on Friday, comes in higher, after months of being lower, since auto imports remained strong. However, given the steady decline in the dollar, and the fact that foreign automakers are making many models stateside, while not raising prices on imports, the Trade Deficit might reflect a bigger effect from settlement of the dock strike, that saw imports return to normalcy by November. But then, ya can just hear economists and traders explaining away the deficit as a one-time dock thing before moving on.

Besides the Trade Deficit and Expiry, Friday also brings Industrial Production and Capacity Utilizaton, which shouldn't have improved, based on other data released, not least of which was the last Durable Goods report. The University of Michigan also releases it's preliminary January numbers on Consumer Confidence and it's easy to imagine the market rally being offset by more severe cutbacks in employment (as the December Employment Report revealed, setting 101K as the number of lost jobs), not to mention the seemingly inexorable march towards war with Iraq, as well as North Korea with it's nuclear plant saber rattling. Call the UM a draw--neither up nor down, though why anyone cares so much about what the 250 people surveyed say is beyond me. The bond market closes early Friday, in advance of the Martin Luther King holiday so it's possible the last half hour of of the week's trading could show a sudden surge to the upside but, for the rest of the week, choppy is the best I'm hoping for.

In sum, sitting here on Sunday, the week ahead looks likely to deliver a lot of volatility that keeps both gains and losses in check, with up one day, down the next, a probable scenario, until the last half hour of the week which, with most of expiry duties dispatched, and any number of traders gone for a three-day weekend, the markets should post all the week's gains in the last 20 minutes to half hour.  

© Sandi Lynne, 2003 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are strictly the author's own. At the time of this writing, the writer or affiliates were long INTC and IBM though those positions might be covered by protective options, which means disclosure of a position shouldn't be construed as either bullish or bearish. Positions may change at any time without notice. 

I won't mention how often the markets have taken a dive while Bush is speaking 'cause, by now, nearly everyone on earth has noticed the relationship. However, I will mention the potential for disappointment since there's NO WAY Bush can possibly satisfy everyone's wish-list--especially since late weekend comments were already describing the plan about to get unveiled as "watered down." In the end, I fear, what the markets will have to contend with is a reality that makes more upside harder to foresee: The FOMC slashed rates by 1/2 a point when it met on November 6^th because the recovery from the recession hit a "soft patch," while 12 rate cuts haven't stimulated the economy, leading the Street to look to Congress for a different panacea. Well, what's the panacea for a build up to war, given that gold has now crested $350 an ounce, while crude is above $33 a barrel, and North Korea is rattling it's saber? (Rhetorical question, folks!)

Speaking of war, which it seems is too often spoken of, D.C. Current in this week's Barrons reminded me that Bush had set this Tuesday as a deadline for Iraq to supplement it's WMD disclosure with the REAL deal. Well, reminded me, isn't exactly true: it's not a deadline I'd heard about before but, according to Jim McTague, it's out there, so I thought I'd better put it out there, too.

On the earnings front, a somewhat light week in advance of the onslaught, with Dow member Alcoa, as well as a few homebuilders, along with SunTrust Banks, two supermarkets, a coupla consumer credit companies, and Nautica, the once hi-flying apparel company. All I can say is, expect the disconnect between the homebuilders' profits and their stocks to remain in place. The analysts see weakness in retail sales as consumption weakness, even though I beg to differ and blame the lack of hot designs. To that end, Thursday's December Chain Store Sales will also keep investors on edge, though I expect no different than it's been in the past--not nearly the disastor some fear, nor the savior others hope for. There will be winners and losers, as always, with the rest muddling through close to plan.

As for the trade show and investment conference schedule, that's back to Standard Operating Procedure: Optics Sweden, MacWorld in San Francisco, Storage Visions, and next weekend's Consumer Electronics Show vie for attention with the L.A. and Detroit auto shows, as well as some key investment conferences that include Morgan Stanley's Software/Services, Internet, and Netowrking, Salomon Smith Barney's Entertainment/Media, and Telecom, Needham's Growth Tech (a contradiction in terms, from a glance at their presentation list, which includes Micron Technology), RBC's System Area Networks, as well as JP Morgan's Healthcare Conference, morphed from the old Hambricht & Quist Biotech conference, that used to send the Biotech Index to the moon. This year, medical products and distributors also pepper the presentation list.

So, as the year ended, it begins, with war and the economy on everyone's mind. But now, the war seems closer, even as the economy seems to be stalled, making the wall of worry enormous, for those who like to climb it.

Normally, I'd run through some 750 charts before writing this weekly, getting a sense of the technical picture of the markets, drilled right down to sectors and individual stocks but, alas, Telerate is having database problems, making the task impossible--unless you believe HPQ closed at $5.76, GE at $8.72, Intuit at $4.56, etc. Don't ask me! Even Telerate doesn't know what went wrong. However, using a different system, I was struck by how simialr the averages looked at Friday's close, to the way they did back on October 10 and 11^th--another instance where a BIG rally stalled a bit, creating an inside day on the charts. Given the ground covered on January 2^nd, it's not impossible to imagine stocks marking time, right here, waiting for the next datapoint off which to key. With Bush's speech, Chain Store Sales, and the Unemployment Report the biggies for the week, it's hard to imagine the markets bucking the pressure from those high-priced commodities--particularly oil--despite the Saudi's promise, Sunday, to make up a million barrels of lost Venezuelan oil, if necessary. (Despite since, even after API posted 9.2M in drawdowns last Tuesday, the Saudi's seem to be enjoying escalating prices and, therefore, haven't deemed it necessary, yet)  Crude price rises go directly to the pumps, sapping consumers' discretionary income. Given that fact, and the geopotical background that doesn't preclude the Saudi's pressuring Bush to ease off Iraq, for now, at the risk of seeing $2.50 a gallon prices at the local gas station, it's clear something's gotta give--especially now that N.Korea has stepped in to add to the pressure.

Can the markets climb a wall of worry--THIS KIND of wall of worry? Momentarily, yes. But overall, the best it can do is hold on to as much of the recent gains as possible. So, if ya think ya oughtta jump in right now cause we're about to see another rainaway train, get over it. From a Lufthansa jet forced to land in Chicago, to a stolen Cessna forced down and away from the European Central Bank building thought to be it's target, to the latest Israeli bombings that took at least 15 lives, to North Korea's defiant nuclear plans, the global stakes are very high, and it's not about just the U.S. economy, or whether Safeway beats or misses by a penny.Think about it: what the heck's a penny mean, given all that's going on--all that Bush, evidently, plans to proceed to make go on?   If you weren't in by the end of last year for the post New Year rally, think very hard about whether it's time to rush aboard now. While the averages could eke out tiny gains early in the week, and again at the end of the week (assuming the end of week data isn't a disastor, which is my assumption), the mid-week action could cancel it out, leaving the markets flatfo another week. And that would be a victory, if ya think about it. 

© Sandi Lynne 2003 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. 

December 29, 2002 Editor's Note: As mentioned when the piece below was posted, last week, I have not updated since my views haven't changed. This week represented the best shot at any kind of rally, while I believe the rally, if it arrives, will be short before more weakness ensues. While the markets are actually withstanding bearish news far better than it has any right to, thin volume and a lack of conviction leave the downside wide open until the news flow improves. While the news should improve, as it often does, when earnings get reported--the bulk of which will start arriving the third week of the January, the possibility that war will commence at that time might derail any rally until it's clear the US will be victorious.

Take earnings. Ya can't take earnings cause only two companies were scheduled and one, Carreker, postponed do to accounting irregularities. Otherwise, American Greetings is it. Pshaw--whaddam I gonna make of that?

Events? Three movie openings, a half day for the markets, on Tuesday, which happens to be Christmas Eve, nothin' Thursday or Friday but the opening of the New York boat Show. Ah--hmmmm. Ok, wealth effect indicator but, trust me, the boating crowd is the bond crowd and those guys have had stellar returns for three years.

Economic data: Well, if ya checked the calendar last week, ya saw final December University of Michigan Sentiment on the schedule for pre-Christmas. Okeedokee. But really, does anyone really care about that or do they care, much, much more about Tuesday's Weekly Chain Store Sales? Riiiiiight. The Weeklies win, and on that score, I have something to say and it's not as good as I'd like. The stores are okay--they're busy, but they're NOT Christmas madness--NOT Black Friday after Thanksgiving. NOT as busy as last year or, especially, the year before. Now, personally, me thinks the cause is the early Chanukah, which started the day after Thanksgiving, this year, unlike in 2000, when it arrived on the 22^nd,  The weekend before Christmas. 1999, you ask? Well, Chanukah started the first weekend of December that year but let's not forget it was the Millennium that people were celebrating, as well as the dot.com riches they were spending as the NAZ was still headed for it's 5K peak the following March.

But the conclusion can't be avoided--if Chanukah sales were pushed towards Thanksgiving, and the last two weeks were "at the lower end (WMT)" or "below (TGT)" plan, and this weekend was NOT as good as the two years prior…………. What? You need technicolor to get the picture???? Dya know what the talking heads are gonna sound like--the cliff they'll see consumer spending headed over--when the weeklies get reported? when the December monthlies get reported come January????????? Though, on that score, the jury is still out too since many people shop more AFTER Christmas than they do before.

So about that bottom that everyone else was so sure was put in last October 9^th. If corporate spending doesn't pick up, a retest of that bottom lies ahead, sometime in 2003. Mind you, I do NOT think consumer spending has fallen off a cliff--everyone in the mall was shopping--every man, woman, and child carrying a shopping bag. A couple of super young kids stumbled forward next to their carriages as the carriages acted as shopping carts. But the fashions were uninspiring. Where's the action???? Footwear, jewelry, handbags and make-up, make-up and make-up, as well as the home, and electronics. I kid ya not: clothing was walked past with regularity. Third floor housewares busy; ground floor, shoes, handbags, make-up, perfume and jeweler busy but in between,  on  the second floor, the ladies' apparel departments were vast deserted spaces. But it's the designers I blame. They did after 9/11 what they did after the market crash of '87--lost their zest and inspiration. Got too somber, boring, and/or serious and no one's buying it.

So, without a compass to see ahead, it's the past I look to: July 4^th and Thanksgiving in particular. Remember July 3^rd? Tentative. Remember the 5^th, one of the top five gainers of all time. Then Thanksgiving: The day before up over 300 on the DOW, the day after--another half day, by the way--nottin'. A big bust. Down. Yeah, I know, I know: the Santa Claus Rally. Oh puhleeze! There have been many years when December went straight down until the 28^th, 29^th, or 30^th. So rather than give ya this broken up week, alone--since it's altogether possible I simply will take next week off, here's what I'm thinking MIGHT happen from now until the end of the year: We neither go down big nor up big and the best action will occur on the 31^st, and the first two days of NEXT YEAR. But I already made a bet that the DOW ends the year higher than it closed on Friday, the 20^th, so I might has well define higher--I'm thinking like 200 points. But 200 points over two weeks with a possibility that the best of the gains will be booked not just after Christmas but after this week, during the week of December 30--January 3, where another coupla days of gains may start the New Year and fool the bulls. In between now and then, I think the opening is very close to the close--that you could snooze after the first 40 minutes and miss absolutely nothing. Unless…….

Unless soemthing ya don't wanna happen happens--and I'm thinking that's not happening either, 'cause I'm thinking positive--thinking optomistic--and thinking for a few days or so, there'll be something more like Peace on Earth.