January 3--7, 2005 I can almost taste the anticipation--those who can't wait for the flood of bonus and retirement money to hit the institutional accounts in the coming days and drive stocks higher. Don't misunderstand, I think we have one more high for this rally ahead, yet but I suspect a big open will get sold, as both retail investors and mutual fund managers who've held off for the tax year to roll over step to the plate and throw 'em out.  We might even have seen the first hint of that Friday, when the momentum players were whacked to close the year. Might even have fuel for a little more of that thanks to 60 Minutes too cool expose on Google, and all the nifty new programs it's testing, though GOOG, itself, isn't immune, with another lock up expiration on the 16^th.

Then, again, there's a new short sale rule in effect as of Saturday. Won't mean much until 44 days later but, I suspect, it'll mean quite a lot, come February, perhaps even supply another reason for the early February top I wrote about in the January Outlook.

Time was Weight Watchers, Bally Fitness, and the major ISP's were a group you'd grab in the New Year. The slim down plays were related to New Year's Resolutions but Atkins last year stole their thunder, transferring it to egg and poultry plays, like Cal-Maine, which made some a bit cautious. As for ISP's the time when people got a new PC for Christmas transferred into spikes in new internet accounts is probably long past. Most PC's sold today are laptops, and upgrades, rather than new users. That doesn't mean some of the offers over the holiday won't drive a little blip up in satellite TV or TIVO accounts. That could still happen, thanks to TIVO players offered for $49 over the holidays but, again, the tech world isn't quite as cut and dry as it used to be. Now, cable providers sometimes provide TiVO or other hard drive based storage, or server based competitors for video on demand, while some DVD players, now are equipped with hard drives.

Time was the airlines went into their winter lull, now, but cruise lines soared. But airlines haven't soared, more like dived, while cruise players are already up smartly and so loved even news of a Carnival ship failing inspection early in December didn't take the stock down.  Travel bookers, themselves, have been working overtime since the Tsunami's hit, both rescuing and rerouting travelers, which might result in some statements related to charges.

Of course, in the post-holiday reasssessment, package delivery companies often slipped but, now, FedEx owns Kinko's, which might smoothed out results, while fuel surcharges haven't been reduced, providing a better spread against a, now, lower price of crude. Will auction sites see a surge in listings, like they usually do in January? Of this I am sure, only unsure if the surge is even bigger than before, as broadband has raised the number of participants.

Of course, the big numbers this week are Auto Sales, Chain Store Sales on Thursday, and the Employment Situation on Friday. As if the deals for cars weren't tempting enough, down in Florida, from where I write, Friday was the last chance to buy a car before sales tax saw a boost of one half percent, which might have put some over the edge and acted as an incentive (In actuality, the additional tax on vehicles applires to the first $5K, or capped at a big fat $25, max, but dealers did everything to prey on the uninformed in their ads). Furthermore, with the Federal tax deduction of up to $100K "trucks" also set to expire Friday, the automakers might have seen a last surge of deal closings.

What you might notice about the SSS are the wide disparity between the big gainers and everyone else, with luxury still the place to be. The Employment Report, though, is an entirely differently problem. In November I expected an above consensus number based on the hiring activity at retailers--or at least the Help Wanted signs still hanging in store windows. When the numbers arrived, however, we learned that retail hired far fewer people--perhaps didn't fill all those positions advertised, and the jobs added were almost half what was expected--far short of my expectation, too. However, through the magic of Federal counting, jobs NOT added one month translates into lay-offs not ordered the next, so the December Employment Report becomes a real wild card. Did retailers hire the people they still sought in November or did they do without, therefore reducing lay-offs, and boosting the Employment numbers?  For once, I don't have an answer except to say that the sales people I saw in stores were largely the same as those seen in the summer, still working since Christmas, so there is at least a chance the lack of hiring previously boosted employment since, except for all the lay-offs. And you know, the hi-flying transportation sector was rife with lay-offs in December, not to mention the nearly 70K extra seasonal workers companies like FDX hire temporarily who have probably already been shown the exits. There've been more lay offs in the auto sector. A big Employment Report for December? The 198K economists are looking for? Seems difficult, at best--unless the workers finally hired at the end of November didn't show up until December payrolls and won't be released until January's. Either way, you can see how Federal accounting adds and subtracts in a way that muddies the picture.

Investment banks seize the lull between holiday and earnings to squeeze in some investment conferences, just as industry gets back to business, introducing the year's new products. Therefore, the schedule will be busier than it's been in weeks. Storage Visions in Vegas leads into CES--the Consumer Electronics Show, starting the 6^th. Dozens of companies have already announced their intentions to hold press conferences at CES, so be aware that there are several sub-shows, with pavilions all their own, like Home Networking/ Home Theaters, Mobile Electronics, and Digital Games. Of course, a slew of new products will be introduced, many Blackberry/phone/MP3 combos, while others will be targeted at expanding satellite radio penetration, especially add ons and connectors for the new handheld receivers, more of which are likely to debut at CES. New Chips from Intel and an IBM/Sony/Toshiba consortium plus previews of nextgen game boxes are all planned. You know anyplace offering so much brain power and new product attracts execs, who attract analysts, so CES should be prime topic this week, even as others start looking ahead to the North American International Auto Show which starts on the 9^th, and MacExpo, which starts on the 10^th. But take lots of notes at CES cause EHX--Electronic House--used to be in May but is scheduled in February this year.  Of course, if you own insurers, you might want to look ahead to the American Meteorological Society Meeting starting the 9^th, as well.

RBC Capital hosts both System Area Networks and Fabric Computing this week but both are sort of the warm-ups for what's yet to come, since NEXT week is even busier. I supposed there'd be more but too many analysts will be at CES to hear Bill Gates and Mike Dell, along with tens of other "keynote" speakers. Clearly, CES has become what Comdex used to be--one heck of a brain power meeting--a must for analysts.

Oh, did I mention it's also warnings season? The quarter did close, Friday, and computers have made compiling information so much quicker bad news becomes clear that much sooner.

In sum, the markets may just open big on Monday but get sold, before finding its footing again, perhaps by late Tuesday but, with big numbers looming on Thursday and Friday, a flood of cash may stay on the sidelines a little longer, waiting to see if the last two low volume weeks were basing before a surge or prelude to a break down. For now, I'm think a threat of a breakdown could appear but will get bought quicker thanyoucanreadthis. I still expect one last surge I'm just not certain it will come as the year opens, as so many others seem to think.  

© Sandi Lynne 2005 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author's alone and shouldn't be relied upon without more extensive due diligence.

SAY HI TO 2 Double Naught 5 

December 27--31,2004  This is not going to be much of an outlook for this week because there's not much expected to happen this week. Earnings are practically non-existent or, as Barron's put it, "There are NO S&P 500 Company Earnings Expected to be Announced this week," though there are some restatements that could come in for a landing. 

Asian markets will make the New Year a 4-day weekend, while the U.K. makes more of Boxing Day than most, also celebrated as Three Kings Day in much of Spanish Speaking Latin and South America. a day bigger than Christmas. Therefore, it's only hapless equity traders in the US who won't even get a half day off for New Year's Eve, though you might not conclude that from the volume I expect Friday afternoon.

 As it was last week, Data mainly arrives on Thursday, though there's a chance that Wednesday's crude stockpile data could be more meaningful than Thursday's Chicago Dec. NAPM Index or the Weekly Jobless Claims.  Also Wednesday, Nov Existing Home Sales which probably won't appear as weak as the New Home numbers did last week if, for no other reason than the fact that closings in the south scheduled for September and October were frequently pulled into November because insurance could not be underwritten until 30 days after the last storm. Furthermore, since Existing Home Sales often pick up in November, anyway, as seasonal players decide to buy instead of renting from season's getgo, there's likelihood that Existing Home Sales could look a lot more stable if not stronger than New Home Sales did. 

If you short stocks, you owe it to yourself to get familiar with some new Rules in effect on the 3^rd of the New Year, since low float shares could become harder to short in the future while forced buy-ins will become more common.    

You might use the coming week as a freebie, to recharge the batteries before the onslaught that will open the year. I'm thinking of both Chain Store Sales on January 6^th, the same day CES opens, as well as the December Employment Report on the 7^th.  Of course, warnings are usually lighter this quarter than most any other but that doesn't mean some won't sneak in some disappointments. For the most part, retailers don't close their quarter until January ends, so there's plenty of time for gift card usage, clearance and White sales to save the day but plenty of other sectors could see warnings, even as estimates have been trimmed all quarter. One group likely to run early in the year is storage, especially since earnings have been recovering. The group meets for Storage Vision as a lead in to CES, and has often performed well to open the year as a result. For more outperformers in January, check back next week for the January Outlook which I'm very disappointed not to have a 3-day weekend to write. 

The charts look vulnerable to some profit taking to open the week but the seasonal tendency is to run, and run fairly strongly right through the first few days of the New Year. I'd normally feel contrarian, given the universal certainty that the rally won't be over for the next week to 10 days but this is one time it's rarely paid to be contrary for the sake of contrarianism. The key is picking up the stocks mostly likely to run strongest and farthest and, for that, there's no secret that small caps are the vehicles of choice this time of year.  With tax loss selling light so far, picking some rebound stocks may be work for next weekend, not this. Large cap pharma is one group I wouldn't necessarily bet on this week, despite years of outperformance the last many years, though last year's dogs are looking healthier than the usual analyst favorites. Were it not for resistance so nearby, I'd almost play Bristol Myers and Schering Plough towards the end of the week myself. 

If you're convinced the strong "5" years will be repeated again next year, then I recommend you read CBS.Marketwatch (now owned by Dow Jones) on that score. The article I'm referring to is contained in the Guru's Corner and called "Years Ending in "5" Always Thrive." Of course, the first year of a new administration's term have often been some of the worst but that's not what has me concerned. Rather, I'm watching the dollar, gold, oil, and the twin deficits which forces higher rates. Throw in only the first shoe to drop at Fannie Mae and……

So, light volume ahead or not, never forget the power of a few choice futures trades to roil the markets and catch many a trader flat footed. And forgoodness sake, take the opportunity this week to kick off your shoes and put your feet up. Don't overplay your hand or trade for the sake of trading. Just because you've gotta be in front of the screens doesn't mean ya gotta make a trade. Sometimes the best trades are the ones not done but do plan on where you want to be early in the new Year. Myself, I kinda like that break out in the biotechs and remind all that some of the most market moving events of the year for the group come in January. On the other hand, a formerly sure thing--F-Cells--at the Detroit Auto Show is no longer a New Year's weekend thing. That show has moved to later in the month so you have plenty of time. It's all up on the Premium Calendar for you.

Happy New Year to one and all! 

© Sandi Lynne 2004 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author's alone and should be only one part of due diligence

Of course, if you happen to own a pharmaceutical stock, the true meaning of "adverse side effects" keeps hitting home, after home, after home. Pharmaceutical investors upset with all the recent bad news should consider how the families that lost loved ones after taking some of these miracle drugs feel.

The schedule offers little in the way of catalysts. Trade shows and investment conferences are all but done for the year. Retail analysts may be obsessed with what's going on in the malls but the rest of the market is more concerned about packing it up for the year or bonuses. For the most part, ignore all the analyst fretting about mall traffic and likely sales but especially ignore MasterCard's announcement that charge activity was up 9.2% this past week. No one knows who's retired their maxed out Visa card and switched to MasterCard plus, for instance, when JP Morgan Chase took over Providian accounts it switched 'em all to MasterCard's from Visa. Activity on a single card rarely says much about profits, even if New Yorkers claim foreigners are buying up merchandise in the city like New Yorkers used to buy overseas back when the dollar was king of the currency hill. Expert opinion: The South has seen steeper and more widespread discounts, earlier than in past years, after four hurricanes hurt two months of sales. Second opinion: the so-called death of department stores was far too premature. They're very busy this year, despite mostly undistinguished offerings.

The Leading Indicators were down for months so an uptick in November, should it come Monday, would be a pleasant surprise. The EU Court's decision on Microsoft Sanctions should be worth a twenty minute reaction but not much more. . However, revisions to Q3 GDP and Corporate Profits, if there are any on Wednesday, won't cause a trader anywhere to bat an eye. Friday is a holiday for all markets, and the Treasury market closes early on Thursday, so the whole week could be nothing more than cleaning up, especially after Friday's S&P and NDX rebalance. As we've seen in past weeks, the big data is out Thursday, with November Personal Income & Spending, Durable Goods, New Home Sales, and the University of Michigan's final read on December Consumer Sentiment. You might recall the preliminary reading saw a big jump up. This is the one month UM releases the final survey early, so early it shouldn't be much change. Of course, by Thursday, there won't be many at their desks to read the releases over their Bloombergs but, never mind. Anyone who'll be around is already looking forward to the week after Christmas, when retailers often book their biggest revenues of the month, while traders will be plucking small caps and fallen angels out of the junk heap, hoping for the typical January rebound.

Into the near ghost town that will be Wall Street will step a host of household names to report earnings. Notable amongst them will be Jabil Circuit, Bear Stearns, Morgan Stanley, Solectron, Research in Motion, ATI Technologies, Conagra Foods, Micron Technology, Red Hat, and American Greetings, only mentioned because you've surely sent out your Christmas Cards by now. Haven't you?

So what's the week hold in store? Well, the street is split. There are those who believe Friday's action is precursor to some widespread selling this week--a total unraveling--while others think real selling will wait until January or as late as March. I think we see almost all the week's volume on Monday and that the week will end not far from where it begins. Both the week after Christmas (Santa Claus rally), and the first two days of January are so well known for big rallies that any spanking in the offing will get bought long before serious damage is inflicted. Granted, it might be only retail investors buying any decline, rather than the institutions that give money flows the spurt that triggers stops but there are enough people who waited in the wings, and enough money that gets invested at the end of the year or early in the New Year, when bonuses are distributed and final retirement infusions are deposited, that dips are likely to get bought.

Surely, oil is destined to get bought, as another wave of cold here is supposed to reach so far into the south that Florida is bracing for temps near freezing. The markets didn't even need a Yukos sale for that to happen though it can't hurt.

Can you say Orange juice futures? Don't forget some of the crop was seriously damaged in the fall's hurricanes so a freeze could be the final blow. Homebuilders have been the province of skeptics but be aware that mortgage rates usually take a noticable dip towards the end the year as a suspension of activity causes the laws of supply and demand to take over. Therefore, if you're about to buy a house, or were thinking about refinancing, plan on locking in your rate between Christmas and New Year's, when rates and offers will be most flexible and lowest. On the other hand, the sharp fall off in mortgage activity often spooks investors into thinking housing is suffering a slump. Someday the sector will cool but I wouldn't take the end of year fall in mortgage activity and rates as the sign.

Don't count out another surprise merger or two before the end of the year. If the dollar's recent action scares some into thinking it's the first hint of an emerging trend reversal, then foreigners who've been contemplating mergers or acquisitions will strike while their currency is strongest. At the same time, all but retailers will know how their month went by this week, which often prompts some earnings warnings into the long weekend ahead, in hopes that cooler heads will prevail by the time the markets reopen on December 27^th.

In sum, I think we'll hit some rocky patches this week but don't think the markets slip and fall. Rotation would be more typical, with the strongest group of the past five years, the small caps, the group traders are most likely to want to rotate into. It's not that I don't see the issues the major indices are facing, including some toppy action in the last three weeks. It's just that money flows are key to market action and the likelihood of a strong inflows the last few days of the year and the first days of the New Year weighs against a serious correction this week--exogenous events excepted, of course. If I sound a bit complacent, believe me, I'm not. I believe the recent rally is not well supported by fundamentals--believe the rally has gone too far--but that has rarely meant anything at the very end of the year and isn't likely to this year either. It should. It should have for a few weeks. But it hasn't, so there's little reason to expect the big reversal right now. Wrong time of year, plain and simple. But just in case, I've been taking advantage of the biggest mark-downs the market offers--in put options, which haven't had many fans of late. 

MERRY CHRISTMAS and Happy Holidays to all! 

© Sandi Lynne 2004 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author's alone, and should be just a factor in more intensive due diligence

For now, I've abandoned expectations of a 3% correction before the end of the year--barring any unforeseen, unthinkable events. Still, it won't be smooth sailing and the markets are likely to do exactly what they've done n recent weeks, give some back early in the week, then recovery late in the week, for a net gain that won't gain sufficient ground to make much of a difference to anyone's rankings. 

© Sandi Lynne 2004 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author's alone and should be used in conjunction with more extensive due diligence.

Maybe they don't ring a bell at the top but my ears have been ringing since Thursday and, tonight, the charts suggest the major averages are about to take a mini step back while energy names are about to recover.  Not that oil didn't take a belly punch last week. It did but then, you have to worry what roll the Chinese Aviation debacle played in that decline.  IF anyone on the street knew before the news became public, it's not hard to imagine the last leg of the rise to $56 a massive short squeeze forcing the Chinese to cover at the top. No Salomon, Goldie, Merrill and JPMorgan to the rescue. No Warren Buffett. This wasn't Long Term Capital, rescued by the big boys and held together long enough for them to not only recoup their investment but to profit handsomely. Just bankruptcy and lots of egg of the face of the Chinese. Egg, too, on the faces of the bankers who are left holding the bag but, heck, they are rumored to be foreign too, so who cares? At any rate, energy names look poised to recover.

Hats off, while we're at it, to the Ukraine, that will redo it's Presidential election the day after Christmas.  Have you been to the Ukraine? Do you know how much vodka is consumed on Christmas? Can you just imagine what the turn out will look like, both literally and figuratively? Maybe they want Palm Beach County to send Theresa LaPore, the voted out Election Commissioner to oversee the vote. I hear she's between jobs, now, until Jeb can promote her to run for the Senate.

Again, this week, the really big economic stuff won't arrive until later in the week. PPI and the UM Preliminary December Consumer Sentiment numbers are out on Friday. That's only two business days before the next FOMC meeting and nearly certain rate hike, so don't look for numbers to spark the market.  Of course, if you think homebuilders have a bird's eye view of the economy and consumers, then you'll want to pay attention to Toll Bros and Hovnavian Enterprises reports. Even more light should come from Bear Stearns Real Estate Conference, The Year Ahead. For a more eye to eye look at consumption, keep an ear peeled for news out of the International Council of Shopping Centers meeting in New York. While this, particular, meeting is IE and Deal Making the biggest deal, KMRT/S is already out of the bag. Then, no doubt, any number of investment houses will hosts Retail Field Trips and weigh in on the prospects for the chains.  Expect less out of IIR's Voice of the Consumer since it's about creating demand and holding customers and isn't strictly a retail event. Other leads on consumers will come from Autozone, Costco, and Movado, which will report earnings this week.

I know a lot of people are sleeping a lot better with Intel's mid-quarter put to bed but there's more from tech this week. Cisco, Hewlett Packard, and Intel all hold analyst meetings this week, while Oracle World is an opportunity for analysts to get a feel for its quarter, which will be announced on December 16^th.  Seagate, Xlinx, Avnet, and Altera are supposed to offer up their own mid-quarter updates, too. Meanwhile, the last of the year's investment conferences are on tap. Bear Stearns hosts Semiconductor & Capital Equipment, Raymond James Global Wireless Data and IT Supply Chain, on two separate days, while First Albany Capital gathers a mishmosh of presenters at its Annual Growth Conference, which features a whole lot more than tech. As if that didn't make the tech news schedule sufficiently busy, Lehman Bros hosts T4, the "T" in this case for Technology, the number for the year, so don't confuse it with T3 earlier in the year, which includes entertainment, cause this one doesn't. Earnings are expected from National Semiconductor and Ciena, as well.

Just as the meat of the movie blockbuster season gets underway, CSFB hosts its 32^nd Annual Media & Telecom Week, often a reason for media to end the year with a flourish, sometimes outperforming the last week of the year.  Name the radio, TV, newspaper, or publishing company and they'll present at CSFB.

Also meeting with analysts, Safeway, Citigroup, and Navistar, while Citigroup also hosts a Chemical Conference. Speaking of Navistar, which reports earnings as well as hosting an analyst meeting, ASTA's, the American Seed Association, holds its Annual Corn, Seed and Soghum event in Chicago. How about that Journal article about farmers spending big this year, on the back of record crops and prices? Must be making for a very good year at Berkshire Hathaway's Borsheim's, donchya think? Toro also reports.

The healthcare calendar heats up, too. Harris Nesbitt Gerard hosts a conference, while the 9^th Conference on Infectious Diseases meets in GA, at Kimberly Clark headquarters, so obviously not THE International Conference on Infectious Disease. There's also a Breast Cancer Symposium in San Antonio. While we're on the subject of healthcare, Eli Lilly meets with analysts, too.

The defense sector could be source of news, too. A combination of Aircraft Finance in NY, as well as Space & missile Defense in El Paso could make an already hot group sizzle or top.

A surprisingly busy schedule for so close to the end of the year. At least the earnings schedule shrivels. Besides the companies already mentioned, earnings are, also, expected from ShuffleMaster and DreamWorks Animation, its first since the IPO.

I don't expect the markets to make anymore upside progress for the next two weeks. In fact, the markets could end a percentage point or two lower over the next two weeks. Go back and look at your December charts. For years, the weeks ending the 10^th and 17^th have been flattish with a downside bias, even overlooking the ugly post-bubble  years of 2001--03.   Obviously, portfolio managers will need to do less tax loss selling, now that the markets have staged such dramatic rallies since October 25^th. And fund managers will have very little reason to do selling to meet end of year redemptions--of the retirement or dividend distribution kind. Not only are inflows sufficient to provide liquidity but the cash distributions from Microsoft and AT&T Wireless' takeover by Cingular have provided tremendous added liquidity. Still, the Santa Claus rally so frequently follows Christmas, and only after a rocky mid-December stall, there's little reason to expect this year to be different. Not with the data coming in a bit tepid; not with the uninterrupted run we've seen that's inspired most to pause hoping for a pullback before they buy the next run up.  Then, again, chain store sales were more disappointing than usual, while the FOMC is poised to raise rates, again, on December 14^th. So, aside from an energy rebound, I think P.M.s will largely sit on the sidelines. They'll mostly let their winners consolidate, trim what few losers there are, and wait for retail investors to do their tax-loss selling and do some nervous selling. The next leg of the rally is unlikely to arrive before Christmas.  Meanwhile, options keep getting cheaper. Is there any reason not to consider hedging some of your riskier bets? Maybe looking out to June or even LEAPs for January '06? Don't know about you but I see yellow flags all over the field. For now, seasonal bullishness will carry the day but, come March, the story could be very different. Be careful out there, and don't chase 'em.

Happy Chanukah!   

So, what kind of top is it? Well, that will depend on the mid-quarter updates but at least one company has weighed in. Intel was recently quoted by the Asian press as saying the quarter is going a little better than expected. Should that become a trend, the rally should resume the first week of December, and put in a another short term top, until the last few days of the year.

I am as mindful as anyone that Microsoft will distribute $32B to shareholders on December 2^nd. While a good chunk of the cash will go to Gates and Ballmer, as well as charities they both have funded with shares, that still leaves plenty of cash. Even if only a third of it is reinvested in stocks, that would still be a substantial chunk. In combination with the cash distributed to AT&T Wireless holders, that's a nice chunk to offset a very active issuance calendar, lately.

It's a holiday week, which means not only low volume but the potential for a few choice programs or futures trades to pull the markets along. Question is, along to the downside or upside? For the record, the Bond Market closes early Wednesday and Friday, while equities close early only Friday, at 1pm, an hour before the bond market closes. Because of the holiday, Wednesday promises a slug of data, including October Single Family Homes Sales, Durable Goods, and the final read on Consumer Sentiment, for November, courtesy of the University of Michigan.  Since October Existing Home Sales are scheduled for Tuesday, there's promise of a lot of data on homebuilders and those who supply them, who also supply homeowners redoing a house purchased from a private party. I'm not concerned about the New Homes data because a lot of closings postponed after four hurricanes blew through the south are likely to have been rescheduled during October, which is, also, when school finally started in a large portion of Florida's most populous areas. Likewise, some resales would have closed in October, also, since they couldn't close in September, when insurers temporarily stopped writing policies. However, the south aside, October is often a slower month than August or September, not only because many homebuilders' quarters close September 30^th, an incentive to close but because school starts around Labor Day in most parts of the country, making a convenient time to move prior to the start of school.  What? You're surprised homebuilders try to push through closings before their quarters end? Then you haven't bought a new home in awhile or don't know anyone who has. Public companies are public companies driven by the same quarterly patterns.

Normally, Mondays after expiry attempt a move in the opposite direction that the expiry took. That means there should be an early recovery attempt which I think will fail. I know the day before a holiday often makes for bullish trade but I'm not sure you'll see that happen Wednesday, before 1pm and I'm pretty sure a late rally will wipe out morning losses, unless Monday and Tuesday get a heck of a lot uglier than I anticipate.   Friday, of course, is usually good for all but retailers as the market focuses on Black Friday--formerly the day of the year many retailers went into the black for the first time.  In recent years, many retailers have learned to be at least marginally profitable every quarter.

The big event Monday will be figuring out what Oracle does next, now that it's won 60% of PeopleSoft's shares while PSFT's board insists the bid isn't good enough.  You'll probably hear some talk of which software companies might be next, while others will be playing a fools game: trying to figure out where the Microsoft billions that come back into the market get invested. Many talk of other tech companies being the top candidates but I think they'll be surprised. Some of the people getting dividends might have learned the lesson of diversification. Others might be filling their gas tanks, looking at energy names and thinking they might as well make money off the companies taking such a bigger slice out of their income.  In short, I don't think tech will be the beneficiary to the extent others do. And I don't think Microsoft looks likely either. Dividends aren't likely to be reinvested in either Mr. Softee or other old tech at all. Meanwhile, word of Google's founders' plans to sell some shares has got to give some fans pause, a possible negative for other internet companies, as well.

Sunday provided the debut for Nintendo's new dual screen portable game player, so data about pre- and first day sales could make news. The Blockbuster movie season should also be on the minds of reporters, with Spongebob and National Treasure debuting last Friday, Mattel bringing American Girl to TV on Tuesday, and Alexander set to open Wednesday.

Cellphone number portability celebrates it's first anniversay on Wedndsay, too. If you signed up for a new annual contract first chance you had to port your number, you should soon be receiving a rebate for resigning with your provider. Needless to say, activity at phone stores will pick up from now through the end of the year.

Monday, Merrill Lynch hosts a Specialty Finance Conference in London, while Xerox meets with analysts. Likewise, IBM hosts Secure World in Berlin. I mention the two overseas events as a reminder that the rest of the world doesn't celebrate Thanksgiving. That means Forex, metals, and oil traders will be working while we're gobbling--despite US exchanges closing and shortened trade 3 out of the 5 days this week. That means some will be looking to square their books Monday and Tuesday, to avoid shocks to their portfolio while they're away. Additioanlly, the month ends a week from Tuesday which means portfolio managers who settle with T-3 have to finish up no later than Wednesday.  That combination weighs in favor of continuation of Friday's selling since profit taking seems more prudent now than it did when the markets were notching an uninterrupted rise.

The earnings calendar is light but still promises some well known names like Krispy Kreme, Toys 'R Us, TiVO, Analog Devices, Sports Authority, and Hormel Foods. It's Brown Forman, however, that's most likely to have a product on your holiday table. With Constellation Brands so acquisitive, lately, I wouldn't be surprised if analysts ask BF.B if it has anything up its sleeve.

In sum, the markets look like they started to break for an intermission, Friday. Because December starts mid-week, and will be followed by Chain Store Sales Thursday, December 2^nd, and the November Unemployment Report on Friday, the 3^rd, Act II probably won't get a strong boost until those numbers are out.  Additionally, with Chain Stores like movie studios, any pop on the 2^nd won't last, as analysts ask "what have you done for me lately?" and worry about Christmas sales--especially if oil continues the advance it started last week. (See November Outlook: Energy shares usually experience strong seasonal upside from late November through March, when the top often arrives.)  You might also tune into the two WEEKLY retail sales reports issued  Tuesdays. 'Tis the season, after all and, as such, the market pays more attention to Redbook and the ICSC-UBS releases, both out before the markets open. Still, with both the Softee distribution and Intel's mid-quarter update on the 2^nd, there's at least a shot at some anticipatory buying. As for November's Unemployment Report, it's usually a seasonally strong report, as retailers and other service companies, like ski resorts, airlines, hotels, restaurants, ctalog companies and other call centers, caterers, etc. ramp up hiring to full strength. On the other hand, there are many portfolio managers eager to buy dips, right now, so a 3% correction may be the worst seen this week and early next. The really big correction shouldn't arrive until next year though, as I've said, there's usually one in mid-December that isn't reversed until the last week of the year.  

© Sandi Lynne 2004 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are the author's alone and are no substitute for more complete due diligence.

First, the FED is raising rates, which is already impacting variable rate credit, which will crimp a large number of consumers. Then, aside from spending for Sarbanes-Oxley compliance, companies are spending only enough to get by--NOT really making major investments.  Third, both the Budget deficit and Current Account Deficit are time bombings waiting to detonate. Third, the October Employment Report, which I correctly predicted would be unusually strong, does not a trend make. Granted, retailers--physical and virtual, resorts, restaurants, caterers, hotels, and other service industries are likely to continue hiring in November but that bump up will start reversing in late December and, especially, in January and February. By then, of course, the FED is likely to have raised rates, again, pushing variable rate loans and revolving debt even higher.

Oil, which has backed off is likely to reverse to the upside any minute now, and probably would have even without Barron's very stern warning this weekend.  The light snow and cold weather in the Northeast, itself, would have been enough to trigger drawdowns while crude has twice this year corrected by about 15% before reversing to new multi-year highs.

Another thing that's bothering me is the rise in utilities, stocks, and gold simultaneously.  That isn't usually the way it plays out.  Of course, gold mining shares that have risen may very well see outflows this week if the long promised gold ETF actually debuts, as scheduled. Trading under the symbol GLD, the ETF is supposed to hold bullion, making a proxy investment in mining shares less necessary for small investors looking to play gold.

Then, from here on in, earnings are expected to rise at the slowest pace in 2 years, while workers are not only NOT sharing in the robust earnings of the past 18 months but, instead, still getting laid off or forced to accept salary cuts, as Delta pilots just did. 

I'd be happy to endorse the rally if the news out UBS' Global Communications Conference or Wells Fargo's Annual Tech Conference includes company saying business has not only picked up but is ahead of plans laid out when earnings were reported last month but I don't think that's happening. One reason it's unlikely is because orders shipped in November and December are often placed in September and October, visibility that wasn't expressed when companies reported last month. With little business done Thanksgiving week and, for all intents and purposes, the last two weeks of December, companies either have their quarter locked up in orders by now or they don't.  The SEMI book to bill report is likely to offset even a strong report and outlook from Applied Materials, something I don't think is happening, anyway.

With four DOW stocks reporting this week (WMT, HD, HPQ, and DIS), there's room for disappointment. While Tifanny's disappointing earnings were largely overlooked last week, reports from Big Lots, Ross Stores, Zale's, and TJ Max could drive home a point I've made to institutional clients all year: While the luxury retailers are cleaning up customers benefiting from tax cuts and healthier markets, the low end is struggling, and that's the end that drives the economy cause there's a lot more of them then there are of the Britney Spears and Donald Trumps of the world.  When crude rises to recent high's just in time for the meat of Christmas shopping, as it's likely to do, I suspect prices at the pump will rise faster than they did this summer, when crude rose to $55 but pump prices never got within 20 cents of the highs seen in the spring, when oil managed nothing more than $41 a barrel. Let's just say I think the election had a lot to do with depressing pump prices in October and November--while competition from heating oil demand will work against tempered price rises at the pump in the dead of winter.

One bright spot may be CPI, on Wednesday. With so many analysts predicting a spike, CPI could surprise to the downside. Don't forget, there wasn't much demand for anything but tarps and water down south, after four hurricanes tore through from mid-August through September 28^th.  Options Expiry, Friday, may have been another ditty fueling stock demand last week. Writing calls to goose returns had become the norm as stocks stalled for eight months. Once stocks started moving, there was demand to cover shares represented by the calls. Of course, you won't get any really negative criticism of the economy out of Fed bank spakers Moskow or Santomero, when both deliver comments on the US Economic Outlook but, then, if this week conforms to the usual pattern, a down Tuesday could arrive out of nowhere.  While recent months saw the one-two expiry punch on Wednesday/Thursday more often, now that the indices are rallying, a reversion to the previous pattern wouldn't surprise, which makes Tuesday the likely down day.  Will that be the start of some bigger selling? Are Portfolio Managers as interested in protecting their recent gains as they are in not lagging their benchmarks? This time of year?  You needn't really ask.

Don't misunderstand: I don't think we've seen the highs for the year. I just think the markets are long overdue for some profit taking.  Given the recent run, and the ground covered, sooner seems more likely than later. Last week we really marked time Monday through Wednesday before the markets propelled to the upside Thursday. Otherwise, there hasn't been much consolidation or profit taking since October 25th. If at least a gentle set back  doesn't arrive this week, you can almost bet the house it will next week, once the expiry is over.

© Sandi Lynne 2005 Nothing contained in this commentary should be constured as a recommendation to buy or sell any security. The opinions expressed are the author's alone.

November 8--12, 2004  PSYCH 101: UNDECIDED MEANS STATUS QUO   Memo to pollsters and the coastal intelligencier who were busy predicting a tight race or, even, a Kerry win. Undecided voters, especially in times or war or severe stress, vote the status quo. So throw out all that crap about "values." For every Bush fan who voted for his values, an undeicded voter checked one for the status quo.

So what have we here? The rally started on schedule, on October 25^th, just as if often does, each and every year. Just as expected , Bush won and the markets rallied. Check that: NOT as expected because I didn't think the indices had such a HUMONGOUS rally in 'em. I thought we'd see some hesitation at higher prices by Friday. Look at market breadth and you'll see, Friday was nothing to write home about, but the headline indices posted the points--points I think we're about to give give back. No silly! Not all the points, just, at least, the points added Friday for good measure.

First up, earnings, which will come from Cisco Tuesday, Dell Thursday, which just about takes care of tech earnings, since Computer Sciences is more service and defense, then straight tech. Insurer Progressive and broker Marsh & McLennan report, too, the latter target of Eliot Spitzer, as you all know, the former recently praised to the hills in Barron's. The rest is almost all consumer, from Fair Isaac of FICO fame and homebuilder D.H.Horton, to notable retailers Abercrombie & Fitch, Starbucks, Federated, Whole Foods Market, Target and Tiffany, to give you the highlights. Bear in mind retailers often rise into earnings then sell off on the news, unless the earnings far exceed expectations. Then, again, the selling on the news is often mild, as traders reposition for holiday sales with a group that often outperforms.

The economic data is skewed towards the end of the week, again. Wednesday's Trade Deficit for September is sure to be another lopsided report, what with 2005 model cars, holiday goods, and high priced oil landing here. Friday it's Sept Wholesale Trade, which includes Business Inventories, Retail Sales for October, and the preliminary November University of Michigan read of Consumer Sentiment which is sure to have improved, with the election over and done. Minutes from September's FOMC meeting wil be released Friday, too. As I went to press, there were no Fed speakers scheduled but that could change by the end of the week, if the market reaction to Wednesday's FOMC meeting causes an extreme reaction. The market expects a quarter point, though I find it curious, after the big rally and Friday's Employment Report, that no one suggested the FED could go half a point Tuesday, then sit on its hands through the end of the year. A very cocky Wall Street is convinced it'll be a quarter point and gives good odds that there'll be no other hikes through the end of the year. Ah hmmmm. Call me a dissenter. I think the FED moves now and in December and could justify a half point to get it over with but won't because it hasn't prepared the street for that when it kept saying "measured." In fact, to the contrary, at least two recent Fed speakers, including Schmidt-Bies, said the FED could hold off hikes if it chose, as long as inflation stayed tame.

Since the FOMC meeting is clearly the game this week, it hardly seems worth mentioning trade events but I will because some could move sectors. For instance, Lexmark will host an analyst meeting on the 9^th, which may provide some insight into Dell's printer business before Dell steps to the plate Thursday. CDW hosts an analyst meeting the same day. As one of the largest tech distributors and value added resllers, it could very well set the mood in tech, at least more than Microsoft will at its shareholder meeting the same day, since that crew is excited by the $3 bucks the company will soon distribute. Goldman Sachs plans a Software Retreat starting Monday, though I wouldn't expect much there. Not only hasn't there been much generated by similar meetings in recent months but almost all the companies presenting have so recently reported there isn't likely to be much new they can add to their post-earnings conference calls.

I like the name of Harrris Nebitt Gerard's Conference, Playtime, even if I'm not much of a video gamer. With a slew of new video games debuting for holiday, the video game retailers are already busy if a little overcooked, GameStop especially because it was just spun off from Barnes & Noble and added to the S&P SmallCap 600. Coincidentally, the 3^rd Annual I-Gaming Congress meets in Spain starting the 8^th though gambling is more the topic there.

SunTrust Robinson Humphrey hosts its annual Business & Technology Services Conference, in NY, while Salomon Smith Barney hosts Global Transportation, heavily weighted to airlines. Meanwhile Deutsche Bank hosts Semiconductor & Semi Capital Equipment while AMD hosts an analyst meeting of its own on the 12^th.

Bears, who must be feeling very wronged and left out this weekend, meet in New York the same day as the Fed meeting, hosted by Grant's Observer, so you can imagine who'll be one of the guests on the business shows that day. Uber bear Grant, himself. Bears who are goldbugs, coming off a strong showing last week, are nearly giddy with visions of a return to $800 an ounce for the shiny metal. They're meeting n New Orleans, for an annual event.

Meanwhile, the medical community is busy as ever. The American Heart Association gathered as of Saturday in New Orleans, the same day Healthcare Execs held a summit in San Diego, with speakers from nearly every company you can think of, along with analysts from Wm Blair, AIM Investmens, Citigroup, ABN Amro, and others.

Given the sudden reversals in eBay, Research in Motion, and Google, last week, you might keep an eye out for other NASDAQ stocks to follow them down. Also watch for news out of @d:tech, in New York, the "Event for Interactive Marketing" and the granddaddy of internet marketing events.

One of the oddities, this week, is the FOMC meeting closely followed by Thursday's Veterans' Day holiday, when treasuries will be closed but equities will trade. Of course, that makes the likely path of the market very clear to me: We should see some profit taking Monday through Wednesday but could see a lift come Thursday, when the bond market is closed, on light volume, of course. And let's acknowledge that none of the major indices have broken the downtrend off the 2000 high's, which is where the S&P 500 was bumping at Friday's close. A logical place for profit-taking, donchya think? For now, I'm not calling for a steep pullback--more running correction that gets bought as portfolio managers rush to hop aboard the train that left the station on the first stop. Performance anxiety is a powerful motivator. I think there are a lot of managers suffering performance anxiety this weekend. Expect them to drive the markets a little higher from here but not until we've seen some rationality in the form of profit-taking--most likely in the early part of the week. 

© Sandi Lynne 2004 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

Which brings me to the possibility of lawsuits even if the contest is not as close as some polls would have us believe. Down here, we've had weeks of early voting at selected locations around the state, as well as record mail-in ballots. The vast majority of the mail-ins and early voters are the same aged people who waited on five hour lines at Publix for flu shots. What happens to those votes if the voters don't survived until 12:01am Tuesday? Does their vote count? How can you disqualify the votes cast by touchscreen at the local library, if you have no way to match the selections to the voter? It jams my head and seems ripe for litigation. What's with early voting, anyway? And waiting on 5 hours lines to vote early when I've never waited more than 10 minutes at my precinct on election day, here or in New York?

SO here's the deal: There's an election Tuesday, Chain Store sales Thursday, and another Unemployment Report on Friday. Biggies any way you cut it. But then, on the flip side, traders proved their eagerness to get long on October 25^th--the day I've mentioned for years as the first potential day to get long for the end of year rally. How strong is the urge to get long--as if it isn't clear from back to back triple digit gains last week? The proof seems in the way they didn't take any off the table Friday, when GDP was a disappointment at 3.9%. Yeah, yeah, yeah, 3.9 was up from Q2's 3.3% but still way off the "consensus." So, will they take any off the table if the "Employment Situation" disappoints, again? Maybe not, if they decide that will keep the Fed on hold in December.

Is it fundamentals, seasonality, or technicals running the show? For months we've heard how the markets are hostage to oil but, then, oil did a big turn down and equities stalled. Program trading has represented more than 51% of all trading in recent weeks, with the technicals pretty much running the show. October 25 saw a textbook technical turn around after the DOW had, once again, pierced it's 200 day m/a unconfirmed by the other indices. Third time that happened this year before a rip roaring recovery rally. Now with the upper reaches of the technical bands all but reached or exceeded, it seems pretty clear: we either bottomed on October 25^th or we'll see one more rip roaring celebration on the 3^rd before the indices crap out again. GAP & CRAP, as my friend and collegue Mikey so succinctly put it.

Why expect a surge followed by a steep reversal? 'Cause companies haven't spoken with such caution after their earnings releases since late 2000. It's been years since companies complained of such severe margin pressure due to higher costs they can't pass on to consumers. Just take a look at Proctor & Gamble's chart and recent comments, cause there's hardly a better poster child for a company dealing most directly with consumers. Then, just for fun, let's throw in the fact that the bond market can hardly take rates any lower. Bonds were as due for a reversal as oil was--with the next FOMC meeting, by the way, on the 10^th, with another rate hike nearly 100% guaranteed. And it's not just PG, the auto retailers have put their foot down, saying they're going to resist taking more inventory in exchange for higher incentives. Maybe even the dollar is due for a reversal, even if Bush is re-elected--the foreign populace's supposed preference for anyone but Bush or not. After all, you've to to go to China to find a major economy growing as fast as the U.S.

Oh, yeah, we've got earnings this week, from the likes of Humana, Tyco, Maxim Integrated, BJ Services, Clorox, Priceline, Dean Foods, Estee Lauder, Netease.com, Polo Ralph Lauren, Fox Entertainment, CVS, Teva Pharmaceuticals, Univision, Nvidia, & Beazer Homes, to name just a few representatives of the cross section of reports expected this week--some of the best known names, if you will. Excuse me if I don't think they'll matter much.

And, yes, there'll be the usual smattering of investment conferences, analyst meetings, and trade shows. For instance, Morgan Stanley will host Software Services, Internet & Networking. Deutsche Bank does Hospitality & Gaming. The former could be a snooze 'cause it's a little early in the quarter for revisions up or down, and too soon after the earnings conference calls. The latter, on the other hand, involves a group that's been hotter than a pistol, thanks to strong casinos and smartly recovering hotels--two groups still seeing upward revisions, at least, with the possiblity for more widespread gambling if any of the referendums in a coupla states pass, on Tuesday. The launch of Sony's PSP2 in Asia, THQ's release of Slap Down vs Raw video game, and the spin off of GameStop from Barnes & Noble could offer more interesting opportunities. Ditto the debut of Pixar & Disney's The Incredibles, since neither has reported earnings yet and the movie opens in the shadow of newly public Dreamworks' smash hit, Shark Tale. Devcon's from Cisco, Macromedia, Microsoft, RSA Security, Business Objects or an Avaya Analyst Meeting? Pshaw! Fhegheddaboudit!

Watch the security plays, like Digital Recorders (TBUS), Mace Security (MACE), Ipix Corp (IPIX), Magal Security Systems (MAGS), and American Science & Engineering (ASEI) on a new tape from Osama bin Laden released over the weekend. Of course, if Kerry wins Tuesday, the stem cell companies could take off on a run that would put the security plays to shame. Watch oil, since the sector found plenty of buyers Friday, on the dip, while Kuwait's oil refineries were shut down over the weekend, because of a country-wide power outage. I say watch, too, the beaten down pharmaceutical companies that could catch a tail wind if the President is re-elected, while they still could get uglier if Kerry manages to win, which would put the wind at the back of generic drugmakers of which Teva, reporting this week, is the biggest.

As for trade shows, there's Nextgen Networks but, also, WiMax World, and Network Decision, not to mention ISPcon. Oh Puleeze! Enough already. Watch, instead, ILM: Interactive Local Media, which starts on the 3^rd, in Joizy City, New Joizy, cause that's one area of the web that's still nascent, still source of fresh deals, with the newly pulic Google acting like it's 1999 all over again. Is it ironic that the Securities Industry of America convenes in Boca Raton, Florida, also on the 3^rd? Must be, because the conference is subtitled Commitment to Clarity, United & Connected," with the "united" an invitation for another Spitzer investigation, since there are supposed to be Chinese walls on the street, and an industry "united" is invitation, as well, to anti-trust charges.

So, let's call for hesitation if not a mild pullback on Monday that lasts through most of Tuesday but expect some to start laying down their rally bets before Tuesday closes. Then, if we have a winner come Wednesday, expect a rip roaring rally that fades by Thursday's close in advance of the Employment Report. Just suppose, for a minute, a combination of factors provides a much better EmploymentReport than the last two: Some retail hiring, say, and a fall off in financial service firings, thanks to low mortgage rates that allows the housing- related industry suspend the lay-offs for now. Then, say, after September's hurricane displacement, the builders gear up to finish the units stalled in September, while FEMA and landscapers ramped up hiring to deal with the aftermath of Jeanne, which hit at the end of September. Then, add in hiring of polltakers and monitors at polling places, along with other government hiring, which is often the case when the new Federal year starts, October 1^st. So, on a better Employment Report, even if not it's not a strong one, you can see how we might take off for the races, again, on Friday, which is right on schedule, anyway, since the first week of every month is often the strongest.

In sum, assuming the election leads to an undisputed winner, look for the indices to be higher Thursday than they are today, with potential for even higher prices Friday, if the stars align for the October Employment Report, which I think could happen. But don't buy the pundits' porridge about a rally that could last into the end of the year. That hasn't usually happened. Mid-December often takes back some of November's gains by Christmas, before giving them back, again, between Christmas and the New Year. Of course, if there's no undisputed winner Wednesday, you can check the 2000 charts and see for yourself--Chinese water torture. Then, again, there won't be chads to check--just lawyers lining up at courthouses and at Health Department offices, checking if all those mail-ins and other early voters survived until November 2^nd. Just bear in mind, if the technicals still rule, any post-election rally will quickly reverse, driving the indices down for another test of the lower band.

Please, get out Tuesday and vote. 

© Sandi Lynne 2004 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 25--29, 2004   FALL BACK   The October decline was a little delayed but, finally, arrived right on schedule. However, this, year, the cautious outlooks accompanying earnings releases are partially underlying the outflows. Sure, the deficit, rising rates--the so-called three hikes and a stumble--as well as roaring crude prices are contributing to investor withdrawal, helping to cause the caution but the subdued outlooks are responsible.  That makes the coming advance Q3 GDP a bit of old news even before it's released, on Friday, and revised twice in the coming months. This week, besides being the last week of the month and, for many funds, the last week of their fiscal year, is also the last week we'll have to put up with the political sniping that makes us sounded just like the ugly Americans so many abroad believe we are. 

Speaking of the election, there are some interesting happenings on college campuses. One sociology department in a very large Pennsylvania school is hosting voter registration for the students. When collegians show up to register, they're asked what state they're from. If they're from a state where Kerry is a lock, they're urged to register in PA, using their campus address (perfectly legal, there), so they can swing PA to Kerry. If they're from a state that needs more Kerry voters, they've been urged to register at their permanent address and use a mail-in ballot. As for me, I'd like to see Congress vote in a pay package the size of Orvitz's exit package at Disney so we could choose between two candidates rather than against one, which is what many voters will be doing come November 2^nd. 

It's almost ironic that Advance GDP looms during the week when the most earnings releases are scheduled. Obviously, GDP can't be set until all the data for the quarter is assembled and that won't happen for a few more weeks. Of course, The Trade Deficit has a huge impact on GDP, but that's something that is reported with a big lag. While weakness in Europe has pressured our exports, the sky hi price of crude has likewise sent the value of imports much higher. A perfect example is the August Trade Deficit just reported: Despite Japan seeing a 22% decline in exports tot he US, the Trade Deficit was higher only once before, in July, with crude the major factor. Just for the record, economists are looking for 4--4.1% GDP on the first reading. 

Because the FOMC next meets November 10^th, the Federal Reserve will release its Beige Book on Wednesday, at around 2pm. Given the caution being expressed by CFO's, the Beige Book should say no different, with hiring still muted, though boosted, now, by retailers' plans, since most are actively seeking holiday help. Talk whipsaw, why don't we? A Beige that's cautious on Wednesday followed by GDP that's strong, Friday, assuming the economists are correct, which is never a safe bet but, given the strength of earnings, still possible.  Heck, even they get it right, once in a while. 

With Social Security recipients recently informed their benefits will rise only 2.7%, before the huge medicare hike is factored in, it'll be interesting to watch the first TIPS auction since 1997, which is planned for Tuesday. More interesting is the fact that the budget deficit is at the limit, which means Congress must raise the debt ceiling, the first order of business after the election.  Speaking of inflation, which the government claims is tame, despite what you and I know, watch beef prices take off now that Japan has agreed to allow US exports into the country.

 We get both the Conference Board's and U.M.'s read on consumers this week, the former Tuesday, the latter Friday--a nice offset to GDP, donchya think? They should be down, since confidence often tumbles when the markets do, not to mention when politics turns nasty.  Plus, I've always found that confidence takes a dip as parents write big checks to colleges and private schools, reminded of how much their kids education cost them. As for Durable Goods, I suspect they'll be strong, if only because the automakers reported big sales in September, boosted by even bigger incentives. Plus, with many a homebuilder quarter closing in September, I'm thinking there were a lot of houses quickly finished in time to close by the end of the month, which should mean lots of appliances delivered, despite weakness at Maytag. As for aircraft, well, we'll get the full word from Boeing Wednesday, when it reports.  

Meanwhile, back at the ranch, crude seems determined to march towards $60 before the month ends, though the charts suggest the entire universe of energy stocks look vulnerable to some profit-taking. Of course, strong stocks always get hit towards the end of a downturn, during the final acceleration to a bottom--something I think we're headed towards this week. The only uncertainty is whether the continuation of the decline finds a bottom this week or awaits the election. There's precedent for both, with many October sell offs ending between the 25^th and the end of the month, a near equal number of time when the bottom hasn't been seen until the first week of November. Given the number of bullish advisors reported by II, it's altogether possible the bulls will jump the gun and start buying too soon, which would be the least desirable resolution. In fact, despite the break of the 200 day by the DOW and S&P, I still hear a number of advisors suggesting the sell-off is a standard pullback after the 2003 rally. Excuse me if I beg to differ.

As for trade shows, and investment conferences, and other equity events, Adobe, Micron Technology, and GE meet with analysts, while Keynote Systems and Ascential hold Devcon's. Intel does, also, though I think the street is more focused on the number of chip cancellations and push backs. News Corp will conduct a shareholder vote on re-domiciling in the U.S, while Apple has been very noisy about Tuesday's introduction of a new iPod, assumed to be a special issue associated with Bon Jovi and speculated to offer  60gigs of memory and a color screen that might be photo capable. In Asia, Sony will introduce the new PSP2, a hardcover book sized Playstation equipped with a network port not expected in the US until next year. Barnes & Noble is spinning out GameStop. JP Morgan hosts a Small cap Conference, Piper Jaffray hosts Hardware, Merrill Lynch is hosting an India Tech tour, while Johnson Rice & Co plans a Consumer Conference. Speaking of GameStop and Playstation, Take Two Interactive will release Grand Theft Auto: San Andreas on Tuesday, the first of the hoped-for holiday blockbusters to hit stores.

Look for analysts to start talking more seriously about the upcoming holiday season, as Transworld hosts the Chicago Gift & Jewelry Show, and the first smattering of specialty earnings get released.  Healthcare dominates the trade calendar, with Medical Informatics, Opthalmology, Neuroscience, blood Banks, Anesthesiologists, Chest Physicians, HomeCare Expo, Medtrade, Spine Society, Human Genetics, Anti-Aging, Pain Therapeutics, and Gastroenterology all host specialty meetings, this week. It's Anti-Aging I'm rooting for, most, this year, again.

Mortgage Bankers also meet this week, with the heads of Fannie & Freddie scheduled to speak to the assembled.

As for earnings, the street is likely to concentrate on the many phone companies expected to report, including Verizon & Bellsouth. Proctor & Gamble, American Express, and Exxon Mobil are likely to get outsized attention, too, especially with the Dow the weakest link. Also reporting are some big mining companies, as well as a number of energy companies, as well as auto retailers, and major media companies Clear Channel & Viacom.

In short, one of the busiest weeks of the quarter if not the year, with the indices poised to notch more losses that may not end until Election Day. Don't look for the usual rally Monday. They could try but I think they'll fail. Keep an eye on volume, too, since volume should continue picking up and surge, when a bottom is hammered.   As for the NASDAQ, which has been holding up best, expect it to follow the listed down. Then watch the energy stocks that saw some profit-taking Friday. When they start falling apart, the end of the decline, for now, will be around the corner. By the time next Sunday rolls around, we’re going to need the extra hour Daylight Savings Time offers. 

© Sandi Lynne 2004 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.

Enter Elliot Spitzer, right on schedule, to help the markets spiral to a near-term low, right in the window that's often seen the market sell-off, as Portfolio Managers start cleaning up before closing their books on October 31^st. You bet they're taking profits and selling losers, just like they always do in October--action that usually continues until at least the 25^th, often until November 2--7^th, as selling begets selling and election day sort of bounces around.  So yeah, there's more room for the markets to go down but recall how healthy the indices looked well into October; recall how many talking heads were heard saying the markets would go up right into the election cause that's what happens in Presidential Election years--even though it doesn't.  

But, also, recall how many times we've seen a bottom obviously hammered in October and then watch sentiment, cause the same self-fulfilling prophesy that roused the bullish spirits in early October almost convinced one and all they'd pull it off, this year--rally right into the election. So look for "A" bottom to form in the next 2--3 weeks, then watch the top for the move come in late November or early December cause the rally isn't likely to sustain straaight through to the end of the year--No sirree. Not unless Q4 guidance starts getting raised. By companies, not analysts, if you please.

And ignore those who'll tell ya this is the heaviest week of earnings for the quarter or, as Barron's put it, "Peak Earnings Season Ends," Friday, the 22, cause that ain't true, either. The last week of the month promises 20% more earnings releases than this one--though the S&P 500 and DOW may be what Barron's meant, as myopic as most of the TV analysts, who aren't seeing some consumer-related names perform remarkably well, despite the headline declines.

So who reports this week, you might ask? I couldn't even begin to name half the companies, in this space, though the headliners will be IBM, MMM, MO, MCD, F, JPM, EBAY, MSFT, KO, and AMZN--a heady collection by any measure. Please expect most of the companies to express a degree of caution--it's what happens when oil reaches for new territory and everyone is afraid it will have a big impact on consumers and costs.But then, if you will, go back to the 60's, when oil was as big a part of the S&P as tech was in early 2000. Higher prices does damp demand, causing the exits to get very crowded. No, we won't be seeing the arrival of Corolla's and other economy cars, like we did back then but demand will respond to sky high prices but falling, and companies will redouble their efforts to invent and perfect alternatives to the gas guzzlers that became so popular since the first Gulf War. 

As for economic data, this week, CPI on the 19^th should be the farce is usually is, since the core excludes every necessity imaginable. Otherwise, it's actually a quiet week for data, with a duo of Fedheads speaking on Thursday, San Francisco's Yellen the most notable because her speech includes the U.S. Economic Outlook.  Get out Greenspan's recent speeches, throw in a little from Poole (speaking THursday on Business Cycles), and your other favorite Fedheads. Then, cut and paste, the way you used to cram for tests in school, trying to get the answers you'd need cause you could anticipate the question teacher was likely to ask.

On the trade show calendar, there's the American College of Rheumatology, which is likely to mean more about Celebrex, Bextra, and the Vioxx Recall. Actually, healthcare related shows are numerous this week, as they are straight through November, when they go into recess. There's also Frontiers in Cancer PRevention, Reproductive Medicine, Diabetes, in London, as well as the FInancial Times' annual Pharmaceutical Pow-Wow in the same city. There's Drug Discovery Series, India, in India, where else? Then bioLOGIC, in Boston, MD&M, also known as Med Design & Manufacturing. Not done. There's Child & Adolescent Psychiatry, just days after the FDA ordered ALL SRR's to have a black box warning on dispensing to non-adults, Medical Informatics, The Academy of Opthalmology, the Society of Neroscience, the American Association of Blood Banks, and both Anesthesiologists and Chest Physicians, starting next Saturday. With Amgen, Wyeth, Merck & Lilly also on the earnings calendar, there just might be enough noise out of healthcare to compete with talk of Spitzer's most recent bombshell. 

There are a number of Retail niche buyers' shows though Toy Fair is clearly the biggest there, while SunTrust Robinson Humphrey hosts it's annual Consumer Unconference. 

Not to be outdone, tech, per usual, manages a number of conferences that lean towards engineers. There was an Internet Telephony pavilion at Telecom04 last week, which is no protection against two nearly idential events this week. Prudential, part of Wachovia, now, hosts its annual Tech Conference in New York, though it's not an axe on the group, and tech conferences, in general, are not as big a deal right now, since there's little new that can be said in a pre-conference Reg FD Press Release that companies haven't just said in their post-earnings conference calls, in the last two weeks. Top tech analyst meetings, this week, include Computer Associates and an SAP DevCon.

Don't ask me why CE Forum (Consumer Electronics Association) meets in San Francisco starting the 18^th, while the Entertainment Technology Show meets in Las Vegas, starting the same day, even as the Entertainment Technology Alliance meets in New York starting the 19^th. A bunch of show organizers must have let that 2003 rally get the better of their judgment, especially when you consider that the CTIA Wireless I.T. & Entertainment Show starts in San Francisco on the 24^th, co-located with both the Pocket PC and the Mobile Entertainment Summits.

Given all the above, you might wonder what I think is most important, and I'll tell you. It's the earnings mentioned above, along with the November 2^nd Election, followed by the November 10^th FOMC meeting, all of which might, in truth, take a back seat to mutual funds closing their calendar years on October 31^st, forcing all kinds of trades that'll dress up the holdings to put the best possible face forward to investors.

I'll allow for the possibility of a weak rally, come Monday and Tuesday--depending on what IBM and MMM's earnings look like. But after that, you've got to expect this week to look a little like last week, ex-Spitzer's dramatic media show and the whalloping we got.  If anything, the only surprise last week, aside from Spitzer's timing, right in front of an options expiry, was the tepid attempt at strength on Tuesday, after Monday's predictable Columbus Day flight. 

© Sandi Lynne 2004 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 most interesting thing about Thursday's sudden reversal was the release of Chain Store Sales which were largely better than most predicted. Oh, puleeze! Forget the headlines that claimed they disappointed. NOT TRUE! With Florida and other southern parts knocked out by 4 successive hurricanes, some 12--18% of most chains' customers were kept from the malls. Check out the chain store comps in that light and imagine what they might have looked like with Ivan, Charley, Frances & Jeanne. Even down here we heard about NY's subways closed by floods in the aftermath.  Trust me, a former retailer, the chains did find, considering, and would have done much better if not for some wicked weather. I think you'll hear the same, this week and next, as nearly every investment house conducts a Retail Outing, Round-up or similar, schlepping clients to the malls.  

Point is, it wasn't either the Chain Store sales or a punky Employment Report that brought the markets down but pure technicals, just as technicals have ruled since the January highs.  Because of that, the fact that crude is likely to charge straight up to $55 is not the market's problem. An expiry at the end of the week, won't be the issue either. Nor will another Presidential debate--since the markets rallied hardily the day after Kerry won the first. 

Of course, earnings this week, and the outlooks that accompany them could tinge the sentiment, which had gotten a little too frothy for my taste way too soon into October, a usually weak month. Just remember, we're coming off a summer that was weak compared to earlier quarters and a year ago, with tech, especially, suffering inventory overhangs, so tepid outlooks could be the norm. Later in the quarter, if business picks up, as it usually does, the mid-quarter updates could be more encouraging but I don't think the state of business is as good as the markets were anticipating, coming into this quarter's earnings releases.  Leading off this week, the quieter of the next three weeks, the markets will get a day off, Monday, for Columbus Day, before big hitters step in. Included are Intel, JNJ, Merrill Lynch, Apple Computer, New York Times, Bank of America, Citigroup, Dow Jones, General Motors, Southwest Airlines, and Unitedhealth Group.  The newspaper companies have already provided disappointing outlooks, so there's not much they could say to upset traders. GM, as well, offers monthly updates, so check that off, too.  The financial names are more wildcards, C the name expected to offer the most charges since it appears to have had a hand in more than it's share of scandals. Intel's mid-quarter set the stage for lackluster results which may not help it avoid another new low for the year, depending on the outlook.  If you think Intel's gonna offer a bullish outlook, raise your hand. Me neither!

As it was last week, the big data, this week, arrives towards the end of the week, with Thursday's August International Trade Deficit, the appetizer to Friday's Sept PPI and Retail Sales, the University of Michigan's first glance at October Consumer Sentiment, the Empire State Fed's October Manufacturing Report, September Industrial Production and Capacity Utilization, August manufacturers Inventories & Sales, as well as the aforementioned Options Expiry. Clearly, with the week starting off with a treasury market holiday, and ending with a slug of economic datapoints, this week could look a lot like last week, right down to the potential for a Monday rally, not just because of the bond holiday but because the averages are almost due for a bounce after two days of bashing. But, thanks to strong auto sales, the Retail Sales shouldn't be a problem. Since Japan reported a 22% drop in exports in August, the Trade Deficit could surprise pleasantly, for once. Industrial Production and Capacity Utilization have been fairly static for month, in the 74--78% range and there's little reason to expect that to change. Inventories are a wild card since sometimes a build gets the street giddy, with thoughts of manufacturers preparing for expected demand. Other times, builds are seen as a drag, production exceeding demand, so you have to be on your toes, and consider the report in light of at the moment sentiment.  At least, builds at this time of the year, in advance of what's usually an uptick in business activity, is rarely seen as too big a problem.  Since UM's reports are more excuses than reason, and rarely good for more than 10 minutes of trade, we're right back at Expiry, the last expiry before most funds close their books for the fiscal year.

Normally, about, now, I'd be mentioning all the trade shows and conferences but I'll skip Taitronics and KES since Intel's earnings report trumps them both.  That leaves the Gourmet Housewares Show which started in NY, over the weekend, and ends with High Point, the big, domestic furniture show, in High Point, North Carolina, which is often cause for analysts to start looking ahead to the holidays with visions of big time furniture sales following what's been, by any measure, the strongest housing numbers since the post-WWII G.I. bill.

Though telcos don't report this week, I'll mention the group because, over the weekend, Deutsche Telecom decided to pull a Sprint, and announced it'll soon buyback its T-Mobile wireless spin-off. Then, again, last week there was an Internet Telephony event, while this week brings Telecom04, which covers much of the same territory.  As if that weren't enough, days after it ends, there's also a VoIP meeting on the left coast, so you're not likely to be able to avoid the topic.

Close on the heels of Chiron's flu vaccine debacle, the World Vaccine Congress meets, starting Monday, in Lyons France.  Since some biotech names will be prominent at this, I'll mention the fact that the biotech index charts looked like they were close to bottoming by the time Friday ended, and I wouldn't be surprised if it's a group that gets bought early Monday, with more events coming this month and next, and a usually strong season for the group.  In fact, Suntrust Robinson Humphrey decided not to take Columbus Day off and, instead, will be hosting a Biotech Conference, Monday, while Biotechnica Asia starts Tuesday, in Singapore.

So, I'm thinking, we get a bounce Monday, with the bond market closed, and some oversold numbers achieved after the Thursday/Friday bashing last week.   There's bound to be hesitation Thursday, before all the data out Friday. Then, you have a bunch of traders sitting on cash, and thinking how wise it's been to pick spots to get long in October, who probably jumped the gun earlier in the month, and may do so again, this week, at the slightest excuse.  But then, there are mutual funds that have to start putting their books in order for the end of their year, October 31, which may mean replacing some long stock positions with cheap options, especially since, looking ahead three weeks, there's not only an avalanche of earnings to come but, also, that eensty teensy Presidential Election.  In short, I'm looking for lower prices by the end of the week but not until there's been a relief rally, and nothing like the lows of a year ago--just a retracement to the bottom of the range that's ruled for months.

The potential for ash released into the atmosphere to disrupt air travel that could deal the airlines their final death blow, while disruption to communications could even deter National Security. Of course, we need not mention some large corporations based in the state of Washington, Microsoft & AT&T Wireless just two that immediately come to mind. As if the markets weren't climbing a wall of worry, as it is.

Most of the more significant news of the week is scheduled for later in the week, with Chain Store Comps Thursday, GE's earnings and the September Unemployment Situation both Friday. However, one of the more supportive anomalies, this week, is the week-long closure of Chinese markets, which is likely to cool some of the fever in the commodities markets, especially more basic ones like steel, copper, and alumina. IF Chinese demand has indeed been the impetus for hi-flying industrial commodities, then the COMEX should quiet and even pullback while the Chinese are out of the market. The coincidence of the Chinese market closure this week makes an outlook for the week that much more difficult, since declining commodities should support, if not higher equities then, at least, a more neutral environment.

A couple of weeks ago I said I was looking for the rally that started in mid-August to end with a blow-off and, for all intents and purposes, Friday's action to start the new month should have qualified as just such a blow-off. Unfortunately, blow-offs need signs of a top and Friday ended without that component. There was no last minute sell-off--no reversal off a high but, instead, a surge at the open that never, really, let up. So now we wait for the reversal, with a caution to avoid being lulled into pulling the trigger too soon--to avoid assuming a Monday morning open dip is it, since strong Friday's have often seen Monday morning profit-taking before the uptrend resumes for another leg. For their part, the charts suggest there's a tad more to the upside before the reversal arrives.

As for Chain Store Sales, the late Labor Day weekend and start to the school year might have spread out Back to School shopping in such a way that some was already booked in the August comps, while September sales were thrown off by hurricanes, for those chains with a strong southern, presence, especially. As I stated last week, I hate companies blaming the weather as much as anyone but the hurricanes that hit Florida and Georgia were a reason, not an excuse, as I can personally attest. I feel like I lost the whole month, as my office was displaced and moved back twice, power was out for days, and phone