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 service, including internet access was disrupted for 6 days thanks to Frances, another 4 thanks to Jeanne. And each time I think life can return to normal, something else hits. Last week it was learning my roof needs to be replaced, Saturday, it was power lost, again, at 4:31pm, while I was at the mall trying to research for a mall report. Of course, I left, only to face a very long trip home, as traffic signals around the mall and on the main road were, once again, knocked out of commission. As a former retailer I can tell you, sales lost for a weekend like Labor Day weekend can never be replaced. Since residents here didn't need a reminder of the recent upheaval, Saturday's power outage was just another knock against sentiment and efforts to return to "normal."

As for Friday's Unemployment Report, there's a possibility that it could be better than some expect. First, those workers in hurricane areas who temporarily lost their jobs don't apply for regular Unemployment benefits but, instead, qualify for special "catastrophe" unemployment and, therefore, are not counted in regular unemployment numbers. Second, the areas worst hit by the hurricanes are home to a disproportionate number of unemployed retirees and migrant workers. The latter is an atypical group: some of them won't apply for benefits because their immigrant status leaves them afraid of authority while others, surely, found ready employment as laborers cleaning up the massive debris left by the storms. Furthermore, the late Labor Day means most schools weren't scheduled to start until nearly a week later than in some years, which means teachers could easily be called back to duty in September, instead of the usual August. Therefore, the "jobs added" numbers could show a disproportionate number of municipal employees, all teachers or school-related workers, which could tip the report into positive territory even if business did. In retail, there doesn't seem to be much hiring going on here, yet, so it would have to be different in other parts of the country for retail to add significantly to the jobs picture. In manufacturing, auto sales snapped back smartly in September but I can't imagine jobs were added because of it--not only has GM already talked about cutting production but the surge in auto sales came largely from deliveries of the new '05 models that would have been built, anyway, and clearance of the aging '04's, most of that accomplished with another round of incentives. Since business expansion leads to more jobs, and only the school calendar greatly contributed to making September, this year, different from past years, the job picture could look more robust than some expect without the employment picture really changing much. Still, the headline could be supportive to the rally.

Headline earnings, this week, come from Apollo (APOL), the private education company and its online appendage, YUM! Brands (YUM), Costco (COST), Marriott (MAR), and GE. By the time Costco reports, on Wednesday, so will have some of the chain stores reported their comps. The hurricanes, of course, assure that even if selected stocks are sold off on weak numbers, the bulls will have their excuse to ignore the data as NOT indicative of a change in consumption trends. Marriott may have evacuated coastal hotels during the storms but more than picked up the difference, not just from those displaced but from the emergency workers brought in for the restoration. Elsewhere, foreign tourism has been helped by a weak dollar, while travel, in general, has recovered, even if business travel is not as strong as it was pre-9/11. As for GE, a number of its businesses that were the biggest earnings drag, including aerospace, are recovering nicely, now. CEO Jeff Immelt was recently quoted dismissing talk of a second dip into recession--heck, even Boeing said it took orders for 65 planes last month, off the 75 number in July but nothing to sneeze at.

As for trade shows and conferences, the latter slows down, as earnings season is imminent. Trade Shows include TechXNY, the former PC Expo, which just isn't much of a factor, since PC-like functions are showing up in other devices. Even Comdex, originally scheduled for this November, has been postponed until spring. There's a Microprocessor Forum but it's a Geek event, not the kind of trade show that gets analysts tweaking numbers. RBC Capital, KeyBanc & McDonald Investments host seperate "Consumer Growth" conferences but none should be meaningful, except to the extent chains jump the gun on Thursday, and release their September comps early, in advance of their presentations. In fact, some chains have already jumped the gun, Guess! (GES) reporting a strong 13.6% gain in comps, with Chico's (CHS) and J.Jill (JILL) both warning of shortfalls. Obviously, none of the warnings mattered, since Friday's gains were the strongest yet. Furthermore, Bear Stearns hosts it's first of weekly Mall Outings, while Merrill Lynch is in London for a global version of Consumer Products. Except for warnings released by companies presenting, I don't think the market will focuse on those events. With over 50% of recent trade program trade, and the Unemployment Report and GE earnings at the end of the week, in between, trading desks will be doing nothing but watching trechnical levels, which have been ruling trade.

Goldman Sachs holds its annual Communicopia but, as I said to open, if Mt. St. Helens starts spewing ash in a full-fledged eruption, the companies presenting will have a lot of "splaining" to do, just as they do down here in hurricane central, where neither hardline phones nor cellular networks proved worth a dime for days during and after the storms. Ironically, Telecom 04 meets at the same time, in another city, so comm names should be a hotspot.

New York will be host to a Toy Industry Holiday Preview which is strictly a media event--designed to get editors to plant articles about hot toys in advance of the holiday shopping season and, more immediately, the toy buyers' pilgrimage to New York to write orders, next week.

Aspen Technology (AZPN), Siebel (SEBL) and Citrix (CTXS), host DevCons, this week, while analysts will meet with Medtronic (MDT), National Semiconductor (NSM), Dollar Tree (DLTR), Manugistics (MANU), International Game Technology (IGT), and Wal-Mart (WMT), which hosts 'em for two days. IGT's meeting is coincident to G2E, a large gaming event, which has already drawn pre-trade show comments from Merrill Lynch and G2E host sponsor Deutsche Bank (MER down, DB up).

Of course, looking at the busy schedule this week, I can't stop thinking about Friday's rally, and it's source. Was it because Bush didn't do anything to really deep six his re-election? Was it because Kerry looked statemanlike or, at least, didn't look as bad as some who fear him assumed? Was it because the bond market finally stopped pricing in stagflation, or worse, and reversed, sending rates higher? It certainly wasn't because oil prices eased, since they made a new closing hi. Was it as simple as the start of a new quarter, and money getting re-allocated to equities because bond yields had sold off so strongly? Of course, the latter gets my vote, which means there are, atmost, another couple of days of rally left before the money is deployed, and support for equities dries up again, especially since fund investors have had it hammered into them that investments, at this point, should be postponed until October ends, to avoid exposure to tax liabilities finds earned earlier in the year.

With oil broken through resistance at $50, and rates starting to reverse to the upside, potential for more warnings from retailers, another debate at the end of the week, a possible ruling from the SUpreme Court that could be extremely destrimental to lenders, and possibility Mt. St. Helens may blow her stack and disrupt transportation and communications, I don't think Friday's rally signals the all clear sign but the first step to the last leg of a blow-off top that will reverse--probably before Friday's Unemployment Report is even released. Of course, I'm aware of the many bulls who see the entire move down from January as a "normal" pullback from the '03 rally, which, having ended with Friday's strong move, following last Tuesday's strong snap back from last Monday's decline, is now ready to take off to the upside in search of January's high's sooner, rather than later. I could be wrong. Then, again, I could be right, and the markets could be making their last fling to the upside before a serious correction hits. Given market history, even allowing for those who'd tell you the markets often march straight up through presidential elections once they bottom in the summer, I'm sticking to a call for a reversal and fairly stiff correction--starting as soon as this week. Of course, my perception may be skewed by a month of hurricane-related hardship and disruption. It's just that, in the past, my personal situation has rarely impacted by viewpoint, and I see little reason to believe this time will be different. Not after Intel already warned. Not after Morgan Stanely missed by a mile. Not when the week is likely to bring additional warnings, and one by one, some pretty big and supposedly steady names have been taken out and shot--Merck and Colgate to name two.

Until proven otherwise, it's my story and I'm sticking to it: the markets have embarked on a blow off top that should reverse this week, and lead to a sizable correction.   

© 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

September 27, 2004    CHARLEY, IVAN, FRANCES, JEANNE, OIL   Another week, another storm, another day without power or phones at the offices of Wall Street In Advance. With lights flickering, and winds howling, Friday, night, I ran through the charts Friday night, and sent them to all the back up e-mail accounts I have for use tonight and, wanna know what? Good Ole’ Bellsouth failed me once, again. Not one of the three accounts received the message sent, and that was 24 hours before the storm hit—24 hours before the weather was anything but ahowling.

Ya’d think with all the trees that went down in Frances, there’d be none left to take down power lines when Jean winged by but that turned out to be wrong thinking. So it’s back to dial-up and the inevitable hourglass and "timed out," which can bring a grown man or woman to tears.

Years ago, I owned a small chain of retail stores on Columbus Ave in NY, in Woodbury and Great Neck, on Long Island, so I know a thing or two about retail that most economists and retail analysts don’t, so excuse me if I wanna brain Alan Abelson for poo-poohing retailers’ claims that the weather caused ‘em to miss numbers. Granted there’s many a time when the weather is merely an excuse but this time, mark my words, Florida has the ability to shave quite a smidge off GDP. Ya shoulda seen the Big Three’s ads in the weekend paper, this weekend the last chance to push ‘em out the door for end of month. Guess what? Most Florida dealers were closed not only Sat. but part of Friday and Sunday to boot. Where the storm here, the power was gone, but plenty of counties prepared for the storm to arrive initially, or in the turn up the coast the weathermen all predicted. Of course, AAA forgot to send Jean a triptik, so she took a different path, right back towards Tampa, the Gulf and other parts. Meanwhile, as it was for Ivan, stations were sold out of Gas by early Friday, supermarkets were cleaned out, the sound of saws and power drills were heard as people reinstalled their shutters and plywood or installed them for the first time. By light of day Sunday, many who’d only recently spent hundreds of dollars restocking their refrigerators after prolonged waits for the return of power were looking at tossing all those foodstuffs out again.

I know an excuse when I see one, and, likewise, a reason when I see one. So trust me please, there are a lot of exhausted people down here, a lot of business who’ve been creamed in September, a lot of retailers who’s wares are way down on the list of priorities, and a lot of warnings to come. You can’t make your numbers if the power and phones are down. Can’t show a late movie that’s gotta end in time for people to get home before 8pm curfew is enforced—and trust me, you’ve never seen as many cops anywhere as we’ve been seeing for curfew enforcement. Granted, those warnings my be NEXT week’s business, not this week’s, since Comp Store Sales for September are not out until October 7^th, the September Unemployment Report until the 8^th, but it’s not just tech that will be howling like Ivan & Jean’s winds. It’ll be widespread, with homebuilders, perhaps, about to learn that there’s something that can stop even their torrid growth in the retirement capital of the world—Mother Nature, as many of us begin to wonder why we stay for it.

So about this week, let’s start off reminding you that three rate hikes have often been the market’s undoing. I won’t argue with the message of the charts, which suggest stocks’d rather hold around this area than decline for the time being. They sure look like they’d like to uphold the status quo—through the end of the month, at least. But the seeds of disappointment have already been sown. True, most of the country isn’t feeling quite as frustrated and despondent as we are down here in the south but just who are those economists who expect both the Conference Board’s and U. Michigan’s Consumer Confidence/Sentiment numbers to tick up? Who are the economists who think Q2 GDP is gonna be revised all the way up from 2.8% to 3.4%? As they the same economists who’ve never owned a retail store, who sit up in New York and Boston and think the retail misses about to arrive are just latching onto the weather because they’re lousy operations—displaying an incredible ignorance typical of only someone who hasn’t weather a hurricane or two, back to back, or hasn’t owned a retail store?

Now here’s what’s funny, though: Suppose all the numbers are weaker than those brainiacs up north expect? The market could rally anyway, on the presumption that the FOMC will have to stay it’s hand. Just remember, those are the same economists who said, recently, that the FED will hike only once more this year, despite the Fed’s clear message that it’s determined to "steadily normalize" rates. Ironically, the Fed’s Schmidt Bies is one of this week’s many Fed speakers—the first to propose the Fed has no set schedule but will respond to incoming data, which everyone though meant slowing down the hikes if necessary but might, instead, mean accelerating 'em if the "traction" and "improvement" talked about in the recent FOMC post hike statement are reality instead of FOMC fiction, which it’s looking like from where I sit.

Yeah, so that’s it—the data will arrive below expectations but the market will hold it together anyway this week, which the media will say is because everyone’s starting to believe the Fed will have to go on hold. But in fact, of course, it’ll be end of month shenanigans going on—with some manipulations that are sure to send the quarter’s greatest momentum story—the energy complex—to revisit recent highs. Just trust me, automakers weren’t even open to suck wind down here, many days this month, so incentives or not, the numbers shouldn’t please. Aug. Personal Income & Spending? Well, ya know, another downpayment on school tuition gets paid in August so spending could snap back smartly. As for the Unemployment Data out a week from Friday—the hurricanes shouldn’t have much impact. There are businesses who paid employees despite being closed, and few businesses that closed permanently because of the hurricanes. Much of the state worst impacted by the hurricanes are home to retirees, who weren’t on payrolls anyway. Those suffering temporary lay-offs while roofs are rebuilt or offices are moved don’t apply for regular unemployment but, instead, for catastrophe unemployment which isn’t counted in the regular Unemployment Report—a neat way for the US gov’t to make sure bad weather doesn’t skew the story it’s trying to sell.

As for earnings, Pepsi takes the spotlight, perhaps a winner at Coke’s expense. I know many think sales of salty snacks took dive during the lo-carb craze but summertime, ball games, and raking after hurricanes—or even merely sweating in front of the radio powered transistor radio—tend to trump lo-carb or any other kind of diet. The number of food companies that blamed Atkins and South Beach for weaker sales the equivalent of retailers who blame the weather—even though they don’t have a single location in Florida or Georgia. Micron Technology will report, too, and whaddya know? It'll actually have earnings, this quarter, a rare event in its multi-decade history.

As for trade shows, this week, let’s just say they take a back seat to Medicare’s release of reimbursement schedules for the next year, which will impact pharmaceutical, health insurance, HMO’s, Hospitals—and every other corner of the medical complex—due October 1. Thomas Weisel host a Consumer Conference, about which I’ve learned little specific, though, typically, it’s retailers and restaurants. Merrill Lynch hosts Media & Entertainment, which may be reason for yet another newspaper warning. Disney World, of course, suffered it’s first in history weather related closures this month, while theater ticket sales have been dismal—remember what I said about curfews, though, for some of the reason. Speaking of movies, Shark Tale opens at the end of the week, in all likelihood DreamWorks’ last release before it’s IPO, and what a release it promises to be: Godfather and Goodfella’s wrapped in scales, with a shark the capo di capo. Looks hysterical on the trailers.

A long list of companies host analyst meetings this week, Boston Scientific (BSX), Lowe’s (LOW), Chicago Mercantile Exchange (CME), Clorox (CLX), Intuit (INTU), CVS (CVS), and Flextronics (FLEX), just some of the names.

But forget all that cause it’s Medicare and oil that will hog the spotlight, the likelihood of Lisa, finally, skirting Florida but wiping through the heart of the Gulf of Mexico likely to keep a fire under crude. With end of month overriding what should happen until the end of the week, when October will arrive and traders will start wondering how much they have to fear from next week’s Chain Store Sales and Unemployment Report. Don’t be surprised if they decide there’s more to fear than fear itself.   

© 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.

First up, are earnings from Lehman Bros (LEH), Morgan Stanley (MWD), Goldman Sachs (GS), and Bear Stearns (BSC)--the first time all four have synched up for earnings in many quarters. While none of the other three have the retail exposure of Morgan Stanley, that doesn't mean their earnings weren't also hurt but less volatility, less volume, or a market that's whipsawed on nearly 2-month cycles, creating gymnastic opportunities for trading desks. Each, in its own way, has issues, with all sharing a lack of issuance as one of the hits to fees. After huge earnings a year ago, none are expected to match or exceed comparisons and, oddly, all tend to trade down after their reports--even when they trump estimates by a large margin. Other earnings of note with come from homebuilders, Lennar (LEN) & K.B. Home (KBH), while retail will be well represented by Nike (NKE), Bed Bath & Beyond (BBBY), and Conagra (CAG). Fedex (FDX) reports this week too, but it has consistently upped guidance, and led the transports to highs. What's most notable about this mini-earnings season preview is the regularity with which stocks have traded down with these reports--no matter how strong reported earnings were.

Some weeks ago I mentioned the maxim, "Buy Rosh Hashana, sell Yom Kippur," so it came as a surprise, this weekend, to see the Fall Equinox, on the 22^nd, mentioned as a day most likely to coincide with the fall market turn to the downside. Yom Kippur starts at sundown, Friday, which means the halls of Broad and Wall will probably empty early, Friday, but the Jewish Gregorian Calendars don't synch, so the timing is mere coincidence, with Yom Kippur sometimes falling as much as two weeks later than it does this year. Maybe that's why so many traders seem confused, with "Sell Rosh Hashana, Buy Yom Kippur," often cited as the maxim--it was the Equinox, all along!

Ironically, just as earnings pick up this week, so does the conference calendar, jammed with even more conferences than we've seen in a very busy schedule since Labor Day passed. That's a result of the number of investment houses trying to provide clients with an "insiders" look into consumers, both for the just ended Back To School shopping season and in front of holiday shopping, while others are trying to preview drug development, and tech's fourth quarter, which traditionally has seen a flush of spending. Meanwhile, all the investment houses are trying to pull together well attended conferences before earnings season, and the post-earnings release conference call season keeps everyone close to their desks. That means there'll be plenty of opportunity for earnings revisions and warnings--as a pre-presentation press release has become SOP under Regulation FD--Full Disclosure. Therefore, just as the street will be digesting some notable actual earnings, it will be getting more guidance on coming earnings, which very well may be another opportunity to trim outlooks and stocks. Bank of America will host the biggest conference of the week, in terms of sheer numbers, since more than 200 presenters will be the norm. But BAC doesn't have an exclusive, Forrester Research hosts a Consumer Forum, Merrill Lynch hosts Canadian Mining, Oppenheimer holds a one-day even called "Future of Home Entertainment, while Merrill also hosts Drug, Biotech & Medical Devicies, Jefferies hosts Communications & Media, JM Dutton hosts Small-Caps. PeopleSoft (PSFT) holds Connect, a devcon cum analyst meeting, while Eastman Kodak (EK) and Halliburton (HAL) hold straight analyst meetings. As if that weren't enough, a new conference, concentrating on Long Island,-(NY) based companies, called Long Island Invests, debuts this week, while the FOMC is probably the top and smallest meeting of them all.

It's clear, the week holds out a lot of opportunity for surprises, the biggest of which could be the FOMC tempering its post-meeting language, to allow for a pause in rate hikes, as some of it's members have hinted in the past two weeks, Schmidt-Bies, most notably. As an almost funny aside to the all the above, it happens to be AdWeek, from the 20^th to the 24^th, just as three newspapers have warned of earnings misses. AdWeek will culminate with an award to the brand mascot chosen on the "net."

As for economic releases, August Durable Goods should be lower, after Boeing's (BA) delivery of 75 planes in July--something Industrial Production already hinted at. As for August Existing Home Sales, July came in much higher than I expected--since there's NO inventory around here, and hasn't been for months. Most homes/condos in the $150--600K price range are on the market no more than 4 days than they go to pending. However, August has traditionally seen a surge--sometimes on contracts written as early as May, since most parents strive to move before the school year begins. Therefore, weakness might not show up until the next report.

So, with a busy week ahead, and the potential for some earnings misses and warnings as well as a rate hike, what's got my attention most? The charts, and the trouble the indices are having at the downtrend line that connects the 2000 highs to today's prices. Can the indices break the downtrend when rates and oil prices are rising, at the same time earnings estimates are moving lower? I don't think so, but there are many who think that's exactly what's about to happen--Fall Equinox or not. Believe me, I question myself nightly, when I look at the charts, wondering if the market is anticipating stronger growth after the New Year and each time I come to the same conclusion: the bond market is smarter than the stock market, and bondland is not seeing the renewed growth the stock market has begun pricing into stocks. Granted, bonds have undergone such an enormous rally they could reverse at any minute but that wouldn't change my outlook.

So, whatever the date, be it coincidence or cause, my outlook hasn't changed: I think we see a blow off to a top early this week, before the nearly traditional fall decline commences. It's foolish to believe funds won't be rebalancing their portfolios, taking profits and losses before their fiscal years end, October 31, raising cash for dividend and profit distributions and generally dressing up their portfolios before year end statements have to be fixed. The fall sell-off often ends towards the end of October or early November--election day, November 2^nd, probably arriving a few days after the end-of-year reversal to the upside already starts getting priced in. As I've said many years running, October 25^th has usually been a convenient date for buying to start stemming the decline. Except for biotechs and internet retailers, which have usually weathered the fall decline better than most sectors, I'm positioning for a broadbased decline, and will look next to bricks & mortar retailers for bargains, since they usually stop falling before other sectors do, as traders start looking forward to holiday sales which happen no matter what--war, rates, and new Presidents included. Since the markets tend to an upside bias in advance of the FOMC statement, then gyrate before choosing a direction late Thursday or Friday, I expect the blow off top to come no later than Wednesday, coincidentally, the same day as Autumn Equinox. 

© 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
September 13--17, 2004   IVAN the TERRIBLE   Floridians on the West Coast and Southern part of the state are breathing a collective sigh of relief as forecasters become more sure that they're safe from Ivan's wrath. We're also happy to be known for Charley, Frances, and Ivan watch instead of hanging chads but don't for a minute believe life down here has returned to normal--it hasn't, with shortages still the norm, whether it's gasoline, fresh produce, playwood or stakes to right fallen trees. Everyone is pretty shell-shocked, while too many remain without power or phone service, though most of those reside in St.Lucie and Martin counties, rather than counties to the south.  W. Palm Beach remains under a curfew, with pockets still lacking power but, otherwise, we survivors are trying our best to clean up and move on.

Clearly, FPL and BellSouth managed to mystify customers and government leaders as it became clear their emergency management plans left plenty to be desired.   Hotels and airlines will take months not weeks to recover, as travel plans have been cancelled in great numbers--as Orbitz let the markets know, shortly after the bell rang on Friday, while US Air filed for bankruptcy, again, this weekend.. Movie theaters and restaurants suffered from power outages followed by curfews, while supermakets threw out spoiled food and worked overtime to restock.  Retailers and restaurants never make up for lost business and Labor Day weekend was one of the worst times for Frances to arrive, not only because of the sales planned but because of the tourists and snow birds who otherwise would have popped down for the long weekend. There's almost no sector that won't warn except those involved in telco and cable construction, as well as paving, roofing, lumber, batteries, and bulbs for all the replacement traffic signals. 

Oddly, Coleman is one name that pops up often as a beneficiary, since it's products include solar powered water heaters and showers, battery operated TV's, fans, and refrigerators, along with a bunch of electrical products that work off car outlets. Heck, Coleman even makes battery operated radios, with solar power as an alternate that can even be wound up: 30 second winds yields 35 minutes of play time for it's Outrider AM/FM Radio--if solar power is insufficent to run it. For the extreme, Coleman offers a Portable Toilet of self-contained high density polyethylene which some found a need for as power to sewer pumps weren't restored and back-ups were common. B-B-Q grills and charcoal are a hot commodity, along with memorial candles, which lit many a household for a week.  You'd think people who survived without such things wouldn't want them, now that Ivan is taking a different path but you'd be wrong: most people want to be prepared for next time, which makes them dangerous, buying 3,500 watt generators to power mutliple appliances, including 12K BTU room airconditioners just in case the central air is knocked out again.  One of the funniest things I learned this week was how many people who've long used cordless phones don't know old fashioned, non-electric phones will work if plugged directly into the wall when the power goes out.  The saddest was seeing the Obit pages triple as soon as Sunday, the hurricane's death toll not fully accounting for the ripple effects, and deaths from stress.  Hats off to Tribune for getting the Sun-Sentinel delivered everyday during the storm.

This week ends with a Quadruple  Witch Options Expiry, one that's often been a trigger to sell so, as usual, I expect a rally Monday, with a Wednesday/Thursday reversal that continues into Friday.  Thursday's OPEC meeting could raise quotas and it wouldn't add supply because there's no spare capacity, either in the field or in tankers or at refiners which are running at 97% capacity, so oil is likely to remain a factor. I read a lot of bullish commentary, this weekend, including a correlation between Bush's standing in the polls and the movement in the indices, with the indices rising and falling with Bush's percentage lead.  By the time Expiry rolls around, the street will already be looking ahead to the FOMC meeting and another quarter point rate hike on the 21^st, as well as the Jewish Holiday, Yom Kippur, which has often seen some wicked sell-offs--though this week's Rosh Hashana holiday is more often bullish for stocks.

Let's just say I'm not as bullish as others are: not only have there been warnings from tech but, now, others should chime in as the loss of Florida business impacts many consumer businesses. Chico's was the first to suggest it's business suffered thanks to Hurricane Charley but the combo of Charley and Frances over Labor Day weekend should yield many more retail and restaurant warnings. When retailers and restaurants   warn, the street starts worrying if the consumer is tapped out, that hardy group representing 67% of GDP. I don't think the consumer is anywhere near tapped out when credit is still historically easy and cheap but, down here, we've got bigger issues to straighten out, putting another Abercrombie or Gap t-shirt way down on the list.

I don't expect much market reaction to either Tuesday's August Retail Sales or Thursday's CPI--since we already know where both should stand. CPI will reflect lower gasoline prices while Retail Sales will see the effects of Charley but, especially, weaker auto sales.  That should, instead, focus more attention on Manpower's Q4 Outlook, due Tuesday, as well as Wednesday's August Industrial Production and Capacity Utilization, both of which could be down, auguring next week's Durable Goods. 

As for earnings, this week, it's a short list, with Campbell Soup a winner in the hurricanes, which should bode well for it's outlook--when it finally gets the reorders, which may not have arrived, yet.  Carnival Corp, Friday, was disrupted by Frances, it's ships out the week it arrived finding themselves on extended floats while those expected to board Sept 4^th unable to get to port, even if the boats had arrived on time.  The company has already made comments to that effect without necessarily quantifying the losses, which it should expound upon in the post-earnings conference call. Otherwise, the only big reports will come from Best Buy and Circuit City, with Intel's comments about slower consumer sales more a CC problem than BBY's, since the latter sells a more diverse product mix, since CC dropped major appliances. Oh yeh, Oracle also reports, on the 14th, but the stock often returns to the pre-report price quickly, no matter the reaction, and it's the P-Soft merger that dominates thoughts on ORCL.

As for Trade Shows, the week after Fashion Week belongs to the niche markets, like lingerie, bowling, fishing, and surfwear. Comptel/Ascent is for competitive telco's, a group that's seen better times, lately, ex-BLS, which has done everything possible to alienate customers who lost service in the storms. There'll be word from major discount retaielrs, when IMRA--the Mass Retail Association--meets starting the 12^th while Halloween candy should be on many an analyst's mind as Philadelphia hosts the National Candy, GIft & Gourmet show.  If tech is your bag, there's Photomask Tech, Newtork Security, and Carrier's World Europe, while software will be the spotlight at Supply Chain Week. Dell has escaped most of the tech carnage, so bear in mind the update it plans on the 13^th, while GSK will hold an analyst meeting this week, too.   

Healthcare could be in the spotlight, with Bear Stearns hosting it's Annual Confernce, while Cardiovascular Imaging and PharmaTech, also meet. Please see the Premium Calendar for the complete list of shows and conferences this week, then bear in mind it's OPEC and Expiry that should rule, while Rosh Hashana is likely to slow trade starting Wednesday afternoon, as traders rush out the doors early, to eat and get to synagogue before sundown. IF any shows or conferences make waves, my vote goes to Bear's Healthcare and, possibly, the Paris Auto Show, where new models are set to debut, Porsche the source of most speculation as analysts wonder if it's first 4-door will arrive in Paris or later. Recall that healthcare has often outperformed in September, though big cap pharma is likely to be pressured on RX costs no matter who wins the White House. Still, Bush's refusal to allow importation or price negotations by the government, except the V.A., provides better sentiment for Pharma as long as Bush leads in the polls, which he has, significantly, since the Republican National Convention--a standard reaction that Kerry didn't manage as well after the DNC.

 In sum, expect the bulls to keep control early in the week but don't count on them holding on as bears should get a lot bolder about shorting as stocks continue rising from current levels.  I see no reason to expect a rally straight through to the election and still expect a reversal to arrive at any time--with the end of this week as good as anytime, next week, perhaps, even better. By the time Ivan the Terrible hits the panhandle and rips through Georgia and out into the Atlantic, I think we'll be filled with nostalgia for the recent rally, wondering where it went.

L'Shona Tova 

© 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. While Sandi or affiliates may hold positions in the some of the stocks mentioned above, those positions could change without notice at any time, and does not influence, in any way, the comments provided.

September 7—10, 2004   INVESTMENT CONFERENCES RETURN FROM VACATION   I’ve restarted this week’s outlook half a dozen times. It’s hard to think about the markets and worry about direction right now. I’ve only just come through Hurricane Frances and have so much on my mind. Please balance your need to read about the week with my need to share with you some of what we’ve just been though.

The county has shut off the water pumps. Last night and this morning I worried about the rising lake, water 6 inches deep on the patio, and braved 75 mph winds to reverse the pool pump to let some water out of the pool. Now, suddenly, I have to worry about not getting any water at all?

Wide sections of the county are without power, which means supermarkets will remain closed. But, then, what would they sell since there’s no diesel or gas in the state, to help delivery trucks get around. Gov. Bush admitted, this morning, the state was down to all of 1,200 gallons—the reason the water pumps would have to be closed down. That wouldn’t have happened if he hadn’t ordered the ports closed on Wednesday at noon but why quibble.

I went to Mom’s, where the power stayed on for the duration. When comics make jokes about Boca and Palm Beach there’s always mention of the landscaping and gated communities hidden behind 10 foot ficus hedges. It’s all that vegetation that took down the power lines. The 115 mile an hour winds were noisy and scary, and did substantial damage to trees which were snapped in two like wood matches, or lifted out of the ground but there wasn’t much of the kind of roof and building damage that characterized Charley.

The roads were deserted until the rains stopped this afternoon. By then, cops were everywhere ticketing people who didn’t observe a 4-way stop at intersections that lost their traffic signals—the most frequent damage to infrastructure. Throughout, I’ve been driving home 4x a day to take care of my cats, until tonight, when I was stopped at a roadblock. Boca Raton is under a curfew, like some third world country or war zone. Tonight there are even more cops enforcing the curfew but I’ve yet to see a single FPL, BellSouth or Adelphia truck out to survey the damage, let along start repairs.

T-Mobile’s cellular service was useless in the storm—it was out by 7am Saturday. AT&T Wireless performed fairly well, until BellSouth residential/wired service went out in many areas by 10am Saturday. Once that happened, calls were interrupted with an offer from one of those vulture companies that offers to connect the call for $2.99 a minute—the modern day equivalent of the outrageous charges sometimes assessed at payphones before cellphones all but killed them.

It appears, the biggest problem in getting the east coast of Florida back in business will be a combination of restoring power and getting fuel deliveries. The only ones doing bang-up business are the hotels away from the coast, where occupancies are running anywhere from 75—99% capacity. The airlines planned on resuming flight in Miami, beginning Sunday night, but it will be Monday before Palm Beach and Ft. Lauderdale airports reopen their runways. If you read news articles that said those three airports were open Friday after noon, you were probably misled. The airports were open but there were no flights. Cruise lines had to postpone planned returns this weekend, as Frances took her sweet time clearing off the east coast of the state but they will be hard pressed to board new passengers upon return. Some people are bailing out their homes while others had no way to fly in.

Restaurants that didn’t lose power must still deal with spoilage, since people weren’t out for dinner and deliveries aren’t happening. Now, with curfews in place in multiple counties, it’s early dinner or nothing, assuming power is restored and food is delivered—and you can assume power won’t be restored in most places until near the end of the week. As for gasoline, stations were sold out last Thursday. The only fuel left in the storage tanks at Pt Everglades were supposed to be police escorted to make deliveries to the emergency command posts but that never happened either. Keystone Kops are running the show, using everything they learned from Hurricane Charley to make precisely all the wrong decisions during Frances, a much slower moving storm. Mostly, I think about how unlucky it was for CVS to close on it’s Eckerd acquisition less than two weeks before the chain’s operations were significantly disrupted. On the other hand, I’ll tip my hats to the staff of the local CVS which manned the fort all night Thursday so they could accept emergency deliveries of batteries, flashlights, candles, and bottled water for people like me to buy on Friday, when everyone else was sold out. To date, I’m impressed with the speed with which CVS is "marking" it’s purchased Eckerd units with new designs and impressed that it could rush deliveries of, by then, scarce hurricane supplies at the last minute, when others couldn’t.

Most notable this week will be the number of investment conferences, with tech, retail, and healthcare/drug development the stars. PLEASE use the Premium log-in for more complete information on conferences.

Wednesday is shaping up as an interesting day. Alan Greenspan testifies before the House Budget Committee, the Federal Reserve will release it’s Beige Book, in preparation for the FOMC meeting on the 21^st, plus, the Bank of Canada will make another rate announcement, and there’ll be word on July Consumer Debt—a month that saw vehicle sales rebound off June’s tepid results.

Speaking of results, the earnings calendar is almost on hiatus. Tuesday promises Adecco (ADCO), the largest global staffing firm in the world, which has implications for Robert Half (RHI) , ManPower (MAN) and Monster. Wednesday should yield Car-Mart (CRMT), a used car dealer, as well as Fleetwood (FLE), and Hovnanian Enterprises (HOV), a large homebuilder. Thursday will bring Neiman-Marcus (NMG.A), a luxury retailer whose comps have been outstanding, as well as Korn-Ferry (KFY), which should be benefiting from the move to make fund directors more independent, as well as the trend that’s seen the job of CEO and COB split in two. During the day, Thursday, National Semiconductor will report but, after Intel’s warning last week, there’s little NSM can do to convince anyone that the bottom is in. After the bell Thursday, video game developer, Take Two (TTWO) will report, after a couple of high profile warnings in recent quarters. There’s not an earnings report coming that has the power to move the markets.

The event of the week outside the investment conferences mentioned above is certainly New York Fashion week. Of course, last week’s MAGIC stole some of that thunder, since we’ve already heard about many of the new lines, like Anna Nicole Smith’s foray into fashion. For some, especially betting and fantasy sites, the highlight of the week will be the opening of the NFL’s regular season, on the 9^th. You know the Philadelphia Candy Show won’t move the markets. IMRA, the National Mass Retail Association Marketing conference is in Dallas, where it’s been common for majors, like Wal-Mart to make comments but, clearly, WMT’s comment this week won’t be very bullish. Frances is fuel on the fire of recent weak comps caused by Charley. Trust me, I was in WMT before Frances hit, looking for package tape and batteries but it was sold out and wasn’t even busy with people looking.

Home Depot and Lowe’s did fabulous business, especially with lumber, prior to Frances’ arrival so shouldn’t have trouble making up for lost days in the storm. I wouldn’t be surprised if Gillette (G) boasted of how well Duracell is doing this quarter—with two hurricanes to thank. The company should present at Prudential this week. Of course Energizer (ENR) and Rayovac (ROV) may have done just as well as G but I assure you it was Duracells that were sold out first.

The indices ended August strongly but that has rarely happened in September, about which I said more in the Monthly Outlook posted here. In fact, historically, one of the hallmarks of September has been a strong open that finishes ugly. I think that will happen again, and wouldn’t be surprised if the first leg down starts this week. I know the markets just gave a buy signal under Dow Theory but it’s the warnings that should turn that signal into a false one. With so many investment conferences this week, the potential for warnings is high, especially out of Smith Barney’s Technology Conference, which starts Tuesday, and Texas Instruments’ (TXN) mid-quarter update, scheduled on the 9^th. The accelerated pace of warnings should be too much for the markets to bear.

When I looked ahead to write about the month, I realized the schedule of events allows for a sell-off this week, some strength mid-month, coincident with Rosh Hashana, followed by a sell off to end the month. I think the most recent relief rally remains just another bear market rally like so many we’ve seen this year. I expect it to reverse strongly this week, with some outperformance by consumer non-durables—all names that will appear at Prudential’s misleadingly named Back to School Conference which is more about what you eat and drink or put in your school lunch box than the retailers that often come to mind when the name of the conference is tossed about. Be careful out there. If the rains don’t get you, the bear could. 

William Poole, president of the St. Louis Federal Reserve Bank said, over the weekend, in Jackson Hole, that the "soft patch" will be history by the time the leaves start falling from the tree. He said "a pause in not abnormal. It is a feature of a recovery…" He also doesn't think the current pause is "extreme," though I'd venture to guess another week of low volume trading like last week will seem most extreme, to anyone left in town to man the desks.  In discussing the household and payrolls survey, he gave the nod to payrolls but said divergences are "not the time to draw conclusions," which is what a lot of technicians are saying about the multi-week rally on low volume. For those who think the K.C. Fed's annual confab in Jackson Hole is early this year it's not: Labor Day is simply late this year. The Fedheads are meeting when they always do--the last weekend of August.

Let's cut to the chase and go right to Friday's Unemployment Report, and economists' expectations of 150K jobs added. For those wondering how Hurricane Andrew, bigger than Chuck, impacted employment, the tally for newly unemployed was 10K the first week, 8K the second week but 45K jobs added six months later, mostly in construction and reconstruction.  Since the worst hit area of Charley was populated by many retired seniors and "snow birds" who reside in their homes winters only, the net effect will actually positive for Florida, and insulate it from any additional weakness the economy might suffer, while assuring a vibrant construction trade even if the rest of the country slows with higher rates. I don't surprise anyone to learn I think the number of jobs added will be far fewer than the 150K estimated by economists--especially if teachers are removed from the mix.  Normally, government employment rises in August, as teachers are hired or rehired for the school year but a late Labor Day enables many districts around the country to postpone employment until September, this year, so there'll be a calendar oddity to add to the hurricane's impact. Likewise, the many college kids who apply for jobs as soon as they get back to their dorms will be delayed, this year, because many colleges also adjusted their schedules for the late Labor Day. Add in an economy that weakened as far back as June, and there's little reason to expect a "normal" curve to the August Employment Situation. Hence, weaker than expected numbers are likely.

Needless to say, the calendar shift should have impacted retailers, as well, causing August comps to suffer from less back to school shopping than normal. Applebee's has already said casual dining suffered from both the hurricane and Olympics, as people stayed home to watch, which may mean Domino's (DPZ), Papa John's (PZZA), and the rest of the food delivery space picked up some orders. Problem is, they also absorbed higher commodities prices, from cheese to electricity to fire up the ovens, so good sales aren't likely to translate into equally robust earnings. Ironically, the Chicago Pizza Expo meets starting the 31^st.

Of course, some will say the Republican National Convention, in New York, is the top event this week--unless you happen to be trying to get to Macy*s Herald Square, where I'm told protesters have the area tied up in knots--Macy*s two blocks from Madison Square Garden, for those who don't know city geography. Any concierge in Las Vegas will tell you the biggest show of all is out there, MAGIC, where apparel and shoe manufacturers introduce their cruise and spring lines. Once restricted to Mens and boyswear, MAGIC has become the be all and end all of trade shows for the apparel trade. It's an opportunity for analysts to evaluate the spring lines as well as meet with manufacturing executives, so it's not just Thursday's Chain Store sales that will move retailers, this week. Of course, any retailers or manufacturers who want to stretch MAGIC into some time off, can hang around Vegas for the Exotic Dancer Fan Fair--a major event for Gentlemen's Clubs I've mention past Labor Days.  

For shows that are likely to move stocks, especially some smaller biotech names, there's Best of ASCO, a follow up to ASCO, with Clinical Oncologists getting updates on clinical trials.  TREXPO is, officially, a meeting of police acquisition departments but, also, an event known to make trading in smaller Homeland Security names especially active, especially ones like Taser (TASR), that seem to issue a press release at the slightest hint of an order.

 MTV's Video Music Awards are known for spurring sales of music. Though it follows closely on a music show last week, that saw Apple reach an annual high, and Microsoft announce it's ready to offer downloads, MTV's cable distribution allows for plenty of Janet Jackson-like accidents, and is sure to be water cooler talk come Monday--Olympic closing ceremonies, or not, as competition. Since a good part of the Olympic closing is a nearly endless parade of athletes into the stadium, there's plenty of time for channel flipping. I can't say I was surprised to see music retailer FYE (Owned by Transworld Entertainment, whose symbol I can't find) so busy at the mall this weekend. Armed with lists of nominations, some might have forgotten it was videos, not music, that was being rewarded, tonight. Meanwhile, Apple (AAPL) might not be done providing news this week: Apple Expo Paris gets underway Tuesday, in Paris. You'd think we're done with consumer electronics here but you'd be wrong. EMX, the Entertainment Media Expo meets starting the 30^th, in Hollywood, while the IFA: CE Europe meets in Berlin. We're not done yet: ECTS: Interactive Entertainment Expo meets in London--billed as "Where games mean business," and includes all the game and game box developers in a Euro equivalent to E3.

Of course, some will say the most anxiously awaited event of the week, aside from the report on the Employment Situation is Intel's Thursday mid-quarter update but I'd differ: Sentiment on the group is so bad, even Novellus' less than thrilling update couldn't stop the group from mounting a small relief rally, last week.

Adobe's (ADBE) Photoshop World will meet starting the 1^st, the same day Boston Scientific (BSX) is scheduled to update the street on Taxus stents--recalls and replacements.

But forget this week, with low volume expected to continue, and the street unlikely to be manned by more than skeletal crews as people who normally escape New York for Labor Day weekend join those who sought to escape gridlock caused by the Republican Convention. Rest up for the week after Labor Day, when the investment conference schedule kicks off in earnest--as many firms look to meet with institutional clients as soon as summer "ends" but before earnings season starts.  With two-thirds of the quarter over, and many recent earnings reports accompanied by word of "cautious" customers, there's risk of a many more warnings than the street's been used to for the past year.

The indices are at resistance but look likely to hold recent levels if not drift up, melt ups more typical of periods when the "big boys" are away and retail investors are in charge. Just prepare for the possibility that the bulls' rein could end as soon as September 7^th, when portfolio managers return and realize stocks are at levels that offered profitable shorts for the most of the year. I know, many "gurus" are saying the markets often rally into the election but they told you that in July, also, which didn't spare the markets another sell off. I know the lack of selling pressure, recently, has encouraged the bulls--who'll spare not a word talking about how much cash companies have, how much better their balance sheets and earnings are than they were a year ago. I hear everything you're hearing--read everything, too--and still don't believe the markets will be spared another stiff sell off before the election. In fact, while I think it may very well hold off this week, believe the indices could even notch slightly higher levels this week, I don't believe this year's bear sell off is a thing of the past. On the contrary, I think the bear has only been on vacation, like much of the street will be. Like most traders, it should be back after Labor Day. In fact, if another weak employment report gets the street talking about the Fed holding back on another rate increase, September 21^st, when the FOMC is next set to meet, you can be almost sure the Chairman will dissuade the street of it's delusion, on September 8^th, when Greenspan testifies before the House Budget Committee and answers questions. 

Orange Juice futures, you're thinking? Think again: The citrus industry survived mostly unscathed--though at least 35% of citrus farms fell within the storm's worst path. It was landscape companies, with their fields of palms, ficus, and ixora that suffered the most losses. And while citrus canker could have been blown through the state on wind, that was more likely from a storm passing east to west, than one taking the westernly track Charley chose.

If there's one thing I can say for Charley it's that the storm has given new meaning to "weather-related" impact that retailers are famous for using. Walgreen's, for instance, has 79 stores in the effected area, an area unlikely to return to anything near normal for weeks, as water, power, and phone lines have to be restored. Home Depot and Lowe's, might have done a bang up business in plywood, tape, and tarplin prior to the storm and since, but some of their stores lack power, phones, and water, which means they'll pay now for the good business done prior, at best a wash. How long will it take? No one knows yet but schools in and around the area have already been closed for the next two weeks.

Oil companies evacuated some Gulf Coast facilities, in anticipation of the storm but quickly put them back online, by Saturday. Ft. Meyers, which has become the weigh station for relief vehicles heading to the devastated area is selling gasoline, to minimum hour long lines of vehicles. Sam's Club was first out, donating $50K in store credits to the relief effort and collecting donations of food and water. Home Depot offered in-store credits to relief workers, too, but H. Wayne Huizenga stepped up with a check for $1M--a long way from the $15B estimate but a start. Ya know that Federal Budget Deficit that's ballooned to half a trillion dollars? Figure another $10B or so from Charley, since it's FEMA that will pick up a large part of the tab. The Federal Emergency Management Agency--though even at $10B, a pittance against what the Fed's have spent and intend to spend rebuilding Iraq.

Incredibly, the west coast of Florida never upgraded it's building code, after Hurricane Andrew, to the same standards the east coast of the state builds to. A roof blew off a fire station completed less than two years ago. Built 10 withstand 100mph winds, while out east, here, it's 140mph winds buildings must withstand. Think they're gonna rethink those standards, now? Does it not boggle the mind? Why would any municipality think it's immune from Mother Nature's fury, just because it's been spared to date?

Meanwhile, down in So. America, the oil minister in Venezuela was out assuring oil thirsty countries the recall referendum on President Chavez will not impact it's exports, no matter the outcome. Even casual observers believe oil is heading to $50 a barrel before it tops. And why shouldn't it? Wasn't that the number economists told us was the "inflation-adjusted" equivalent of the 70's oil crisis? As if spending $20 or $30 more a week to fill the tank isn't something anyone notices, until crude gets to $50 a barrel. Of course, inflation adjust this: Higher pump prices arrived along with higher prescription, health insurance, tuition, and book prices. But heck, inflation isn't a concern--the FOMC keeps telling us so. The Organization of Petroleum Exporting Countries--otherwise known as OPEC--will be out with it's monthly oil report on Wednesday. As events go, that would be a coincident date for a top, donchya think?

Fast forward, to Friday, a double Witch Expiration--one that's been down so often, a contrarian could almost believe it's overdue to be an up day for the markets--except it happens to be a Friday two weeks before Labor Day weekend, which means a Friday of great exodus, as traders soak up the last of summer's rays and lazy days, which often makes for more non-event than anything.

As for trade events, IBM UserBlue, Sybase Techwave, National Instruments NIWeek, and Hewlett-Packard's HP World top the list of company events, devcon's, all, often attended by analysts. Seybold hosts it's annual digital publishing event, while IASTED hosts Geeks in Hawaii, for Internet & MultiMedia, along with CGIM. Washington, D.C. will be host to BioMEMS & Nanotech World, immediately followed by BioDefense, itself concurrent with Microarray Data Analysis. Get a life, I tell ya! It's oil they'll all be watching, cause the economists at the Fed have told us the rise is "transitory" and reason for the economy weakening in the quarter. Oil and consumers, that it.

Which brings us to earnings, what with consumers representing some 67% of GDP, since it's almost all retailers reporting this week, with names like JC Penny(JCP) , TJ Max (TJX), Ross Stores (ROST), Barnes & Noble (BKS), Limited (LTD), Home Depot (HD), & Lowe's (LOW) on the schedule. In a world of "what have you done for me lately," retailers often sell off despite good earnings, as analysts and traders fret the Back to School shopping season, a season well underway on the east coast of Florida, where Palm Beach and other counties started school last Wednesday, only to have classes cancelled at the end of the week for Charley, while Broward and other counties start this week. My sense of the B2S season? It's still building, with malls, this weekend, even busier than they were last week--though very promotional, many stores offering coupons good for future purchases offered on today's purchases. But heck, when hasn't retail been promotional?

Of course, Applied Materials, Network Appliance, and Hewlett-Packard are just a few of the tech companies scheduled to report this week but that won't help tech sentiment--or reverse the downtrend, though a technical bounce is overdue, reason I think Monday starts with a bounce.

So, with a week that ended nearly flat for the major indices last week, ex-NAZ, which finished down, there's oil, retail earnings, and the Expiry--the event almost certain to control trade Tuesday thru Thursday, just as it always does. Let's call it up Monday, since the charts suggest they'll at least try, at the outset of the week. Then look for a wild ride, Tuesday through Thursday, before Expiry closes the week with a whimper. For the fun of it, let's watch treasuries, too, since rates backed off last week, to levels that might trigger a reversal. But it's the reversal in oil we all must wait for, since the markets have correlated negatively to the price of crude. And let's all hope we're not talking about oil not topping until it hits $60 a barrel in the coming weeks, because the economy may not be able to withstand such a run. Buckle up! The roller coaster's still headed down. But at least I can be grateful that Charley didn't touch my side of the state. Of course, it's still early in hurrican season, which ends November 1st. I'm not dropping my guard, anymore than you should, in the markets. 

© 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.

WHERE WERE THE BULLS TO BUY?

 August 9--13, 2004             To a man and woman, they've been bulls. By Friday, in the thick of ugliness everywhere they were claiming that stocks are the only marked down merchandise people don't want to buy; anywhere else there's a sale, people buy hand over foot except on Wall Street. And there they were, telling one and all to buy, buy, and buy. Sell, everyone else did, until the indices closed on their lows of this year.

 The charts are amazing for the lack of volume--a key ingredient necessary for a bottom which suggests anyone who wanted to sell did. That wasn't the case Friday, which suggests that any rally will get sold, with lower prices yet to come. You know I look for catalysts, which are hard to find this week. There are Olympic Games opening ceremonies on Friday, which often stirs some patriotic feelings but the divide between Democrats and Republicans speaks volumes about "patriotism" not being as cut and dry this year. In fact, the Republican administration is on the record as saying opposition to the war in Iraq is unpatriotic, making Baby Boomers remember back to the '60's, when the opposition to the Vietnam war was also considered unpatriotic. Go into the malls, not an Olympic logo to be seen. Checkout Kodak film or disposable cameras, again, no signs of the sponsorship EK has paid dearly to claim. The Olympics are swiftly looking as the biggest non-event NBC has ever sought to tout. 

Which brings us, of course, to Tuesday's FOMC meeting, hardly the stuff of a catalyst to the upside, with the Fed poised to raise rates again--that much Greenspan's made clear, bad timing be damned. Think the post-meeting statement can assuage? I may have thought so before Friday's market action but, now, I can't imagine there's anything the Fed could say that would soothe the beast in the market. Take a look at retailers that reported strong July comps and raised earnings guidance--didn't do any good. I mention the retailers since they're the group that take the earnings spotlight this week--names like Wal-Mart (WMT), Kohl's (KSS), May (MAY), Abercrombie & Fitch (ANF), Target (TGT) & Tiffany (TIF), to name just a handful.  

Of course the earnings the media will talk about ad nauseum will come from Dell and Cisco (CSCO), though Dell has already raised guidance to $0.31 a share, so there's little left to surprise, there, while Cisco isn't exactly the market. Heck, Microsoft (MSFT) still is for many and it wasn't spared the carnage, despite the pending $3 a share dividend.  

Think Friday's first look at the U.Michigan Consumer Sentiment survey can do it? You know better--sentiment surveys may be the excuse the headlines hang on market action but they're not good for more than 10 minutes of conversation. Anyway, who are those people they've been finding who are so optimistic on the economy? I don't happen to know any of them, do you?  

Trade shows and Conferences aren't likely to be much help, either, since it's too early in the quarter for most to raise guidance, yet deep enough into the quarter for mid-quarter updates and warnings to start trickling out. Halfway there, by the end of the week, even if you'd rather not think about it. Of course, since much of software's quarter closes in the last two weeks, when the deals get biggest, CIBC's Enterprise Software Conference in New York (URL for Premium Subscribers onlyl) isn't likely to yield warnings but, clearly, isn't likely to offer upsides, either. Not at this point in the quarter, despite one software company's announcement that it had signed the biggest deal in it's history, with Mexico, last week.

Of course, you can count on your neighborhood analyst talking about Back to School, and how well their favorite retailer is positioned to have a good season, especially with earnings out this week, and the big retail show season just around the quarter, with the International Gift Show arriving in New York on the 14^th, just one of a blanket of shows that meet for every retail niche you can name, with every major city home to a satellite version of the big New York shows. Oddly, August 14^th is also the anniversary of CEO Certifications, the part of Sarbannes-Oxley that requires top executives to certify the financial results offered. Last year brought a flood of restatements in advance of the 14^th, though this year they've trickled out, as earnings releases are followed by federal filings, and the little fibs and errors are restated on the fly.

SunTrust is holding one of its UNconferences, in Atlanta, to feature Financial Services, this week.; Knock yourself out at this URL if you want to know who'll be presenting.  (URL for Subscribers Only).  Or maybe you hold high hopes for Pacific Crest's Technology Forum, in Vail, featuring names like Symantec (SYMC), Sandisk (SNDK), Qualcomm (QCOM), IBM, EBay, McAfee (MFE), Palm (PLMO), Novellus (NVLS), PMC Sierra (PMCS), and dozens of other names, including Paul Kwan, an analyst from Morgan Stanley. Of course, if Semiconductors are to lead the markets out just as they lead the indices down, you might hold high hopes for the Schwab Soundview Semiconductor Conference, in San Francisco, found at{}URL  for asubscribers only}   (Nevermind that Schwab is rumored to be looking to scuttle Soundview, at a big loss.)  Then, again, the Harvard Club will host Online Advertising for Maximum Impact, which promises many of the names you'd expect, which provides some overlap with Pac-Crest's conference. The meeting details are at (URL for sbscribers  only).

To quote a politician: IT'S THE ECONOMY STUPID! I don't think there are any earnings, trade shows, or conferences that are going to heal this wounded market--no FOMC post-meeting statement that's gonna do it, either. The problem isn't industry or product specific but, rather, the economy, which is clearly slowing still, despite the best guesses by economists--including those at the FED, who just so happened to get on the rate tightening bandwagon precisely when the economy started faltering. A near halt in hiring? Is that so surprising when productivity has been the Fed's key metric of success? Do you think that will get better, when it's machines replacing humans, and the White House rammed through Congress a bill that allowed companies to accelerate the write off of capital equipment, by allowing fully half the price to get written down in the first year--a year in which the Federal Reserve made borrowing so cheap only automakers could top the deal by offering zero percent financing? Do you think companies are going to pick up the pace of hiring, when excess cost them so dearly in 2000-2003? When returning cash to shareholders is so much more stock supportive than returning it to employees, or adding employees? How about that excess capacity the FOMC often talks about? Ever hear them detail the excess, and differentiate between excess current capacity and the excess that's antiquated or mothballed and never destined to return to productivity? Of course not, anymore than you heard the economists come on and say their job gains data is voodoo, impossible to justify by any method, cause that would prove economics worthless, and to do that saps the FOMC off any shred of credibility it retains--economists all, to a man and woman.

Funny thing about the FOMC is its position between a rock and a hard place. Not only has it all but promised to raise rates Tuesday but not doing so would signal concern about the economy so grave the selling would accelerate after the first knee-jerk surge to the upside--nevermind an acceleration is just what the market needs to wash out the last of the bullish hold-outs, a requirement for a lasting bottom.  

So I say again, the pros will be selling rallies. The bottom is NOT in. It may not come until OIL gets hit, as well--since bottoms are hammered only when nothing is spared, and oil is overdue to see the most crowded long get smashed--especially since late summer and early fall has always been when prices recede. The oil service stocks, along with some E&P's, were already starting to crack by late last week but oil must follow for the longs to get really shaken. Think it won't happen? Find your local gold bug and ask him if he felt the same, when Gold got back to $450 an ounce.

There's precedent for bottoms in August but that doesn't mean you have to load the boat on the first reversal. With Presidential elections not until November, the end of October is likely to be the best time to buy with least risk. Any bottom we finally get--this week, next week, or in September, will be tested at least once, which means the black boxes that rule the trading desks on Wall Street and at hedge funds are going to be the only ones buying the first touch of the bottom, probably selling as soon as the masses try to ride their coat tails. Patience. There are points more to go on the downside--for all the indices. And weeks of repair and tests after that still to come. 

 © Sandi Lynne 2004 Nothing contained in this commentary should be construed as a recommendation to buy or sale any security. The opinions expressed are the author's alone

August 2--6, 2004   WHILE YOU WERE OUT     While most people were out Sunday afternoon, Homeland Security Agency top dog Tom Ridge held a press conference detailing buildings believed to be near-term targets of Al Qaeda terrorists, and raised the alert level in Washington, D.C. and Northern New Jersey to Orange, the level New York has remained on since 9/11. In a first, Ridge named the targets, including the IMF and World Bank, in D.C., as well as Prudential's Newark New Jersey offices, the New York Stock Exchange, and Citigroup offices around the city.  I don't think the list surprises anyone, except for Prudential, which struck this listener as an almost comical punctuation point, perhaps because her Mom's long owned shares. If you're gonna hit poor Newark, why not the airport? Even the most inexperienced terror speculator could have listed the rest as likely targets, especially since C's buildings on the east side, and in Long Island City gained visual prominence, after the Twin Towers disappeared from the landscape. 

After looking at the charts, Sunday, I felt fairly certain August's open would repeat July's, when a June rally ended as if a bell rang in a gap down at the open on July on July 2^nd. Even now, though possessed of less conviction, I still think the markets want to recover more ground before the selling resumes.  In a perfect world, Friday's Employment Report would, again, reveal fewer jobs created than the economists expect, sending the markets to a higher level that would then be reversed, ending the bounce that began last week--ending it for the month, by the way.  

Maybe it's a function of speaking to so many traders but I'd sure like to know who the University of Michigan and Conference Board are interviewing that feel so upbeat about the economy and the future. I don't feel it; my friends don't feel it; no one I talk to feels it. If you feel it, please let me know--I'd like to make friends with some of these incredibly optimistic people.  Surely, they're not the same ones who told us the markets were going to put on enormous rallies on June 30^th, when the Iraqi handover and FOMC first rate hike took place.  They're not my pregnant neighbors who just found out how much of the delivery their insurance won't cover. They're not the neighbors who don't know if they can afford private school tuition for the whole year--or the ones who took a home equity loan to pay for their kids' college.   So if it's you, by all means--let me know. 

Retail and apparel manufacturers' will be focus this week, as New York hosts FAME (Fashion Avenue Market), FFANY,(Fancy Footwear), Children's Club (kids fashions & Accessories), Intimate Apparel Market, and awaits July comparable store sales, officially scheduled for Thursday, with many likely to release Tuesday through Friday, while both Wal-Mart (WMT) and Target (TGT) should have their weeklies out Monday, the former prior to the open, the latter after the close. Down here, in Palm Beach County, school starts on the 11th. Florida restored the ten day sales tax holiday it had suspended for two years but it didn't seem to matter as much to shoppers as the word "Sale" did. Add in storms that made outdoor activities out of the question, and the stage was set for busy malls. Unfortunately, busy malls often spell weakness at destination stores, like Wal-Mart and Target, so there's a downside to every upside.  Retailers Coach (CO), J.Jill (JILL), and CVS (CVS) are scheduled to report, none of which should offer up a bomb shell. To round out retail, eTail will meet in Ft. Lauderdale, with back to school on participants minds.  See the August Monthly Outlook for more on the group, which tends to outperform in August. That doesn't mean the group won't go down, only that it will decline less, if it doesn't rise. World Shoe, the premium footwear event in the world, starts in Las Vegas, on the 5^th.  

While we're on earnings, Procter & Gamble (PG), RJR (merger tobacco assets with BAT of the U.K.{RAI}), Tyco (TYC), CIGNA (CI), Univision (UVN), Sara Lee (SLE), Clorox (CLX), Calpine (CPN), and Maxim Integrated Products (MXIM) are some of the more high profile reports expected, offering a broad cross section of the economy, With the exception of PG, a member of the DOW, none offer the kind of leadership that could spark widespread rallies or selling. Ironically, Orange Alert member Prudential (PRU), is one of the companies on the schedule.  

Aside from the fashion shows, which will be augmented by analyst lead Mall Tours as the month wears on, the investment conference and trade show schedule takes a mini holiday. One of the biggest events of the week will be the 135^th Correction Congress, with two members of the group reporting this week. Both the National Medical Association and Nat'l Dental Association meet this week but neither are as big as their counterparts that being with "American," instead of "National."  

LinuxWorld meets in San Francisco, starting Monday, but may not inspire any more enthusiasm than Microsoft's analyst meeting did last week.  Until someone starts winning consumers with a Linux based desktop operating system and suite of applications, there's not much new about Linux--except the companies adopting it. I'd expect VoIP Developer to attract more attention, as every telco announces plans to compete with VoIP, and after some surprisingly strong earnings reports from equipment vendors. However, note the conference is a Developer's conference, NOT a trade show. That means orders don't get written at the show, even as new technologies could be introduced. If it's a more conventional trade show you're looking for, you'll have to wait for October. 

Since I mentioned telco, let's not overlook Pre-Paid Markets, in New York, a profitable niche in wireless telco, where some vendors, like American Movil, are minting money, despite some dirt cheap rate plans.  

The oil & gas industry will meet at EnerCom's Conference in Denver. With oil reaching a high above $43 a barrel, and the terror alert level raised to Orange, there's little reason to expect the group to back down, even as my calculations suggest OPEC's higher summer output has to soon show up in the stockpile data released Wednesday's, by the Dept. of Energy and the American Petroleum Institute. Given the level of uncertainty, and still lingering questions about Russia's position on Yukos, one of the few groups with momentum, in a market devoid of momentum, could continue rewarding even if the rest of the market punks out again. A passel of companies in the group are set to report this week, though none will match ExonMobil's report from last week, though few companies can in any industry. The Depts of Energy and Defense, along with the GSA, hosts a big conference starting the 9^th, but it may not be a stock trigger, since security is one of the topics, the still faulty grid another, even as the anniversary of last year's big black-out approaches. 

Adams, Harkness, Hill holds it's Summer Conference, the rare exception.  While it wouldn't provide a list of this year's presenters, you can get a good idea from last year's list at the URL provided in the Premium Calendar. If this year is like last, it will be a hodgepodge of healthcare, tech, and consumer names. 

Of course, Friday's Unemployment Report will be the carpet under the market's feet, all week, since another weak report will make the FED's rate move timing even more questionable than June's report did, while back to back weakness will cast doubt on the Fed's claim that June's weakness was temporary.  We can guess that July Vehicle sales came at the expense of margins, since the deals have rarely been better, though that's fairly typical this time of year, when '04 models have to be cleared out to make room for the new '05's, and we already know inventories are higher than they should be.   

So, assuming the raised terror alert doesn't derail stocks for more than a few hours, Monday, I'm looking for more modest gains through Thursday, when pre-employment report hesitation should cause some hesitation. Should the Employment Report cause euphoria, Friday, I'd use the opportunity to lighten up on longs. As the August Monthly Outlook states, I'm looking for lower prices later in the month--prices lower than they reached in July. 

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

July 26--31, 2004    DEMS TAKE CENTER STAGE      It's been an ugly few weeks capped but an uglier one last week as good and bad earnings reports were largely rewarded the same way--with sellers rushing for the exits. Amazing how the pundits still march onto the financials channels, one by one proclaiming how the markets will rally in Q4, to end the year with gains--someone still seeing 15% worth of gains. Of course, once it was the second half that would be strong but that doesn't cut it now that we're firmly into the second half. Bottoms don't arrive when everyone's so optimistic, which makes it hard to get too encouraged by the smatter of voices of doubt. For instance, last week I read one article online that questioned whether the post-Iraqi war was nothing more than a rally whose bear has resumed control, while another recommended selling every rally because lower prices were ahead.

Unfortunately, those voices are few and far between which places me in the precarious position for seeing lower prices ahead in the intermediate term while expecting a rally by the end of the week, after the Democratic National Convention is largely complete. Wall Street prefers Republicans and knows Kerry is likely to rise in the polls during the convention--as Bush will during the Republican convention--which makes the apparently tight race untenable to those who buy the futures which pull the strings of the indices.

To me, the larger question isn't whether the bear market has resumed but whether the economy can continue expanding at all. From 2000--2003, companies invested the minimum while concentrating on cutting costs, be they employees, plants, or outdated equipment. By the time the Iraqi war started, and the markets took off, corporations slowly returned to spending, but did so like the children of the Great Depression, mindful of how bad things had been and determined to remember, husbanding their finances as if it could happen again. However, what investment was seen was enough after 3 years of parsimony to create an economic rebound the was a mini echo of the spending in advance of Y2K--all the while supported by a short-term tax code that rewarded companies for their capital investments, by allowing them to depreciation the expense much quicker. If software firms are the example, the rebound off 3 years of parsimony has come to an end, which may make emerging countries, which lag our technological investments the best hope for U.S. expansion. Of course, that goes back to the issue of outsourcing, where members of the FOMC are on the record explaining that those overseas jobs are creating the future consumers for U.S. goods--no explanation for the lopsided trade balance that suggests other countries are doing a better job, right now, of sating overseas demands.

Now, throw in the uncertainty of a change in the White House, where the Dems are sure to at least attempt to undo some of the more favorable legislation, and it's easy to imagine the big question mark floating above the economy and markets. With John Kerry set to take center stage, this week, he really must communicate his vision for this country's future and stop running against President Bush by claiming to be everything Bush isn't. He must seek to get the voters to join him, not join against Bush, or his likely to meet the same fate as Gore, who won the popularity contest but lost the electoral college.

All of which brings me to this week, when I think the hundreds of earnings expected will mean little to the markets. Ironically, oil names dominate the coming week's earnings, and that's one sector which should be seeing continuing earnings expansion. If there's strength anywhere in the market, that's where you'll find it, even as the sector isn't immune from selling on the news, since that's the M.O. of the market, right now.

Trade shows? No one will care anymore than anyone's cared for the good earnings that were released in the past two weeks. Microsoft holds an analyst meeting? Again, who cares--less than ever, after the company spilled it's distribution beans before it reported earnings and it's outlook, on Thursday, which most found a way to fault.

Data, this week? If the rest of the country looks like my area, June Existing Home Sales will be way down on a lack of inventory, more than falling interest. There's so little for sale here, realtors have nothing to show. We can all imagine June Durable Goods, due Wednesday, since company after company talked of a June slowdown, while housing is cooling just a drop, and it's the military, more than anything, that's often been instrumental in making Durable Goods huge in past months when it was strong--a let up in defense spending responsible for some punky months, in the always uneven series. Which takes us to Friday, when the July Michigan Sentiment is unlikely to match the Conference Board's version out Tuesday, and the datapoint that will be most watched--the Advance reading of second quarter GDP--a number that's sure to be another in a series of decelerating numbers, since last year's Q3 (03), which printed above 8%. The outlook has come down to 3.6%. Then, to complicate the issue, Friday, for all intents and purposes, ends the month, when stocks tend to put a punctuation mark on the month, despite some sleight of hand in selected stocks--usually thinly traded--that see some window dressing.

Richard Lees, upon whom I depend for the data on the FOMC window reports that Greenspan "punctuated" his recent testimony by withdrawing more liquidity from the system. What Greenspan made clear last week was how wrong the pundits are who are claiming that continued weak data would stay the Fed's hand and even suspend the tightening by the September FOMC meeting after an August hike. While the Pollyannas were focusing on Greenspan's insistence on "measured" moves I was hearing him say he'd "normalize" rates no matter what, which means interest rates are bound to match the rate of inflation before he takes a rest--and that means 2.5%, a full 1.25% above the current Fed Funds rate.

This all spells, to me, more pain for the bulls--with last October's lows my near-term target despite some rally flutters before we get there--with the possibility that the October lows may not be the end--we'll see when we get there. That makes me bearish on the intermediate term, even as I expect a flutter to the upside this week, between the Dem convention and Friday's Advance GDP, most likely Wednesday and Thursday, with a late Tuesday turn up not beyond the pale. So I say, again, sell the rallies unless I’m grossly mistaken about GDP, and it prints above 4%, which would be enough for get traders optimistic again—as unlikely as I think that is. I’m more concerned about GDP missing the lowered estimate and coming in at closer to 3.2%. 

© 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.

My musing comes after running through 750 charts tonight, where there isn't any strength, anywhere in the market, outside energy. Event here, some service names were sold Friday, though it's hard to call it a trend, especially on expiry. Some consumer non-durables and food packaging names remain relatively strong but saw some selling late last week, too, and haven't been able to add to their summer gains in days. We all know markets tend to bottom when sellers get to everything but we're not there yet, and probably have a ways to go when a group like homebuilders can rise against the market, the way they did Friday. Panic? Don't hear or see that either. On the contrary, the pundits keep insisting the second half will be better, insisting the indices will see a fall rally that closes the markets with gains for the year. That kind of talk doesn't mark bottoms. 

There happens to be hope, this week, though I think it's hope for the declines to stop--not necessarily for a rally. Alan Greenspan will be offering his semi-annual report on the economy to Congress, Tuesday and Wednesday, formerly called Humphrey-Hawkins testimony.  (With FOMC meetings on Tuesday, two-day meetings Tuesday and Wednesday, anyone else wonder if he works just two days a week?)  I'm as interested as the next person in what he'll say--he's BIG DADDY (B.D.), after all, who can fill or drain the punchbowl, many times with mere words. With his legacy dependent on a growing economy and stable prices--his legislated mission, by the way--I can't imagine he won't do his best to reassure the street and try to put a floor on the market.  A couple of years ago, pension shortfalls and weak sales were all the worry in corporate America. Greenspan doesn't want to see that happen again, which a weak market would cause. Weak sales, weak confidence, and corporate America pulls back--as software companies hinted happened in late June, just as weaker data was piling up.  Don't think Greenspan won't play Big Daddy? He has no choice. His legacy, after all, depends on it. And bear in mind B.D.'s m.o. when he speaks back to back: if he over inspires or disappoints on day one, he tends to temper the reaction on Day 2.

This week is also the biggest earnings week of the quarter, with Thursday the biggest day of all. From 3M (MMM), to Ford (F), Ebay (EBAY), Amazon (AMZN), Microsoft (MSFT), to Gap (GPS), Shlumberger (SLB), Fannie Mae (FNM), JP Morgan Chase (JPM), General Motors (GM), Amgen (AMGN), Merck (MRK), Starbucks (SBUX)--name the company outside retail that hasn't reported and it's likely to report this week.  Almost every airline is on the list, too. Still, given how little even strong earnings have done to support the market, Big Daddy's the last hope for many. 

Up north, the Bank of Canada will meet on rates. OPEC is set to consider new production quotas as of August 1^st, while the only economic stats of note, at home, will be Housing Starts and Building Permits but all that's after the SEMI Book to Bill is released on Monday. If you don't think any of these hold a candle to B.D. I'm with you. 

Which leads us to Trade Shows and Investment Conferences, where cable will own the spotlight, thanks to the CTAM Summit, starting the 18^th. In healthcare, Alheimer's researchers started meeting Friday, while the International Congress on Immunology and Antibody World Congress will meet. Absent an abstract that unveils a drug in development that no one knows about, I don't see either sparking buying heat.   More important could be the FDA's consideration of a Schering Plough/Merck combo, Zetia and Zocor, which would extend patents for both. Since neither is a market leader, even a favorable ruling won't mean much to the market, overall. 

You might have noticed retailers embarking on their usual summer swoon. Don't rush to grab your Back to School picks. The group usually goes down more than anyone expects, and could suffer this year more than they should on the perception that rising rates will hold back B2S sales. But, while we're on the subject, take a look at Barron's article on K-Mart (KMRT) this week but not because of it's opinion on the shares. Instead, take a good long look at the chart comparing prices on a selection of products at K-Mart, Wal-Mart, and Target (TGT). The untold conclusion from the chart is smiley-faced WMT's lack of price advantage. In fact, in many cases, Target is either less expensive or so infinitesmally higher there's little reason to tolerate the lack of ambience at Wal-Mart when Target is so much more pleasant--and offers some cool and inexpensive kids clothes, as well.  It's something I've been telling institutional clients for years--the dirty little secret Wal-Mart would prefer no one learn, which it's ads would have you believe isn't even remotely possible.  

The problem with holding out hope for B.D. to put a floor on the market is how ehpemeral his comments are--subject to change as easily as they're subject to interpretation by pundits who arrive at radically opposed conclusions. To expect him to proffer promises is simply silly: he always insists his mind isn't made up until the FOMC meets, and that won't happen, next, until August 10^th. Then, there's the problem of how well his words can work their magic.  In recent weeks, even strong earnings and outlooks failed to spark buyers for more than a few hours or days, if that long, as every rally cued up sellers. There comes a time when everyone has to move on, and stop depending on Daddy to bail them out. Technicals? They haven't offered, support, either, and aren't likely to as long as everyone's watching the same levels--levels that surrendered, last week, on NASDAQ. In many cases, there haven't even been many sellers, just a lack of buyers. In the tradition of event-driven trading, I'll confess I don't see a catalyst on the horizon, this week. Admittedly, in years past, we've often seen equally ugly July action suddenly reverse late in the month, as if a proponderance of strong earnings suddenly meets with lower prices to create the spark that tempts the buyers out of their foxhole. But, then, more often than not, we've seen those rallies reversed after the first week of August, and sometimes not reappear, again, until October is almost over. That pattern will encourage sellers to keep taking advantage of any whiff of a rally--so you might as well do what the smart money will.  Sell the rallies until sentiment and the charts improve--or until the markets either put in a classic, capitulatory, high volume bottom, or have a genuine catalyst for a sustainable rally.

The earnings season kicks off with Alcoa, GE, and Yahoo atop the list of the reports, this holiday-shortened week. While nothing should match Friday's Unemployment Report, Thursday's Chain Store sales follow four very strong months of comparable store sales. Many wonder if there's a trend in the dip in June auto sales, along with Target and Wal-Mart admissions of slower sales that missed plan. I think that will depend on who the store serves since the high end is still doing well, and less likely to see spending dry up because of a quarter point hike in rates or sky-high prices at the pump. On the other hand, if kids went to a department store instead of Wal-Mart for their Dad's Father's Day gifts, I don't think that makes a trend but I do worry about inflation inpacting the low end most, since that's the segment that lives from paycheck to paycheck, and can least afford to pay more for food, energy, or to fill the tank.

While the FDA is set to consider one of Teva's drugs, and the FCC is expected to offer some spectrum for sale, this week will be very much a 'Tween week, with investment conferences on hiatus, earnings not quite in prime time, and industry events skewed towards retailers who have their choice of regional buying events, the biggest of which is Transworld's Jewelry, Gift and Apparel, in Chicago. But that event will be repeated on a smaller scale in Orlando, Atlanta, Dallas, Houston, Los Angeles, and elsewhere, this week, and throughout the month.

The blockbuster movie season continues this week, with King Arthur the headliner, though Sony and Marvel's Spider-Man 2 has set a new high mark, that's unlikely to be beat. By Monday, ShowBiz daily was projecting the movie's take at $180M, topping even Shrek 2's spectacular open. If retro but not renaissance is your movie preference, Will Farrell's Anchorman: the Legend of Ron Burgundy might be more your thing.

Now, you might wonder why I'm taking time to mention Arthur and Anchorman, since it's so much unlike me, and I'm not proposing a trade from either. That's just indicative of a short week that'll be slow and thin, Since both the AIAA and IASTED meetings are engineers' events unlikely to lead to much tradable news. Otherwise, The meeting of General Dentistry is as good as it gets. Just as well, since some analysts and traders aren't expected back for Tuesday's reopening of the markets.

Next week will be a different story, with many more earnings, SemiCon West, MacWorld-Boston, and Cisco's Networkers' event, as well as @d:tech but this week--pshaw! Potential for boredom, even if the markets succeed in reversing some of last week's decline with a tepid rebound, as often happens after a long weekend. Someone please wake me when we break out of the recent range--something I don't foresee until August, as the July Monthly Outlook posted here should make clear.

© 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

Some would have you believe that June 30^th or July 1^st should see a lift off in the markets. Excuse me if I disagree. IF every Portfolio Manager and his uncle were planning on shoveling funds into the indices for the seminal events supposed to occur on June 30^th, don't you think the markets would have seen some foot prints by now? Just as everyone knows the S&P will be rebalanced on the close of trading June 30^th, or the Russell Indices were on Thursday, causing Portfolio Managers to begin positioning in advance, don't you think you would have seen evidence of positioning before June 30^th, if every PM planned on being invested to take advantage of the massive rally some of the most vocal gurus have sought to expose? On the contrary, the DOW had a terrible day on Friday. Thirty measly stocks and even those couldn't jigger to the brainwashing.

So what's up? The market is moving like it has a regulator on the gas pedal, a condition unlikely to be alleviated before Friday--not in advance of a 3-day weekend identified by the Secretary of Defense as an attractive weekend for terrorists. That doesn't mean the market can't lift next Friday, after the bond market closes at 2 pm. When the pros are away, the lack of selling pressure has often lead to a rally but the nature of that rally, should it come, won't attract more inflows. I'll also allow for a rally after the markets return from the Independence Day holiday, since inflows tend to arrive early in the month. But there's, also, a likelihood of some companies sneaking in warnings after the market closes Friday, with warnings likely to feel like they outweigh upsides in the coming weeks before the earnings season really finds it's swing.

Speaking of warnings, we can all toy with the FOMC's post-meeting statement--not just the size of the hike but the future intentions it will hope to convey. I was in the half point hike camp until last week when I realized the FOMC won't do what the street doesn't expect, and the street is so convinced only a quarter point is coming, committee members are unlikely to roil the bond market and cause tremendous dislocation by moving half a point this week.. So, assuming the hike is only a quarter point, it's the statement that will take on outsized importance.

Will "measured pace" be part of that statement? Will mention of building signs of inflation be part of that statement? Sure as tootin' should be, donchya think? Can the FOMC raise rates only a quarter point and claim the risks are balanced? Can't do that when the bond market, and everyone else fully expects a series of hikes, which means another on August 10^th, when it next meets. Will the statement pull up the new mantra, of a Fed prepared to accelerate it's hikes if conditions warrant? This is a FED on record saying it wants to avoid surprises. Bernanke devoted a whole speech to the subject so you know the statement has to lay the groundwork for the future--a future that includes, by the way, Alan Greenspan's semi-annual appearance before Congress, prior to the next meeting. Can you conjure any number of sentences that could spook the rosy scenario smeared around by the talking heads? I sure can.

Now, in addition to the index rebalances, the end of the quarter and half year will also be the perfect time for some of the more conservative PM's to rebalance their portfolios, which may mean trimming equities and taking advantage of higher rates in bond land. Selling stock to buy bonds is something the smearers aren't talking about but, surely, that's been happening, since the major averages aren't far from where they were when the year began.

As for the economic statistics expected this week, I suspect the May Employment Report was a high point, and the June report is likely to show fewer jobs added., possibly a tick up in UNemployment, thanks to graduating college students who'll flood the market and not find it as easy to snag a job as some earlier graduates did. The cream of the crop was spoken for by May, before graduation. Many of the rest are still looking, according to parents and students I've spoken to. We can assume the May Construction Spending data will be strong, after the numbers we already heard about permits and starts but don't be surprised if Japan's Quarterly Tankan Survey sounds more exciting than either of the ISM's. Japan is actually expanding after a decade of contraction. The U.S. is hardpressed to better some of the data from last year, when GDP came in above 8% one quarter.

DOW theorists surely watched the Transports make a new high last week and have to be concerned about the Industrials non-confirmation. Throw in a teamsters strike on the west coast, with potential to go nationwide, and it's hard to see how the Transports can stay at the top. Of course, there's still time for the Industrials to confirm the new high in the Transports, a chance for a nationwide strike to be averted, but there's little reason to count on a Dow Theory confirmation until it happens. Certainly, the action in the DOW Friday seems to suggest another false break out under DOW Theory.

As for Trade Shows and Conferences, the nod goes to health care, with the National Association of Health Advisors, Health Underwriters, and Healthcare Financial Management Association meeting in separate cities, as well as RFID, Tracking Barcode in Healthcare. Oracle Partner Network meets in London, while the Government holds a Symposium on Information Sharing & Homeland Security, in Orlando. The financial community meets for Big Apple Institutional Investing, where e-mail, instant messaging and real-time collaboration are the themes, followed by I.D. Theft/Financial Series. Despite the recent arrest of an insider at AOL who stole customer data and resold it, it's hard to see how these events will trump the FOMC meeting or the Employment Report. Hard, even, to imagine how well attended the events will be, given the number of traders who'll have a foot out the door for the long weekend, if not their bodies out in the Hamptons. My guess is the O'Reilly WWDC Apple DevCon is better attended than any of the above, and more likely to be filled with gossip, rumors and news.

As for earnings, those are few and far between, the next two weeks, without even the headline brokerage reports of the last two weeks to look forward to. Clearly, tops on the list--and lips of the media--will be Research in Motion's report scheduled for Tuesday after the close. But General Mills and Constellation Brands have rarely summoned the same interest.

To wrap it up, the widely assumed rally that's supposed to coincide with the June 30^th FOMC decision and Iraqi handover isn't likely to materialize the way it's been advertised. The coming data may begin to build a case for an economic slowing after some stupendous numbers reported in earlier months and quarters. Call it a leveling off after a coiled spring rebound that played catch-up until it caught up. The S&P rebalance is likely to cause the same spikes in selected names seen Friday, when the Russell Indices were rebalanced but those spikes are short-term. The break-out in the Transports has yet to be confirmed by the Industrials, and isn't likely to be this week, despite what others may have you believe. Monday, the Industrials should make up some of the ground lost in the last 20 minutes Friday. Since the markets tend to rise gently in advance of the FOMC announcement, that's likely to happen again, this Tuesday and Wednesday. Come Wednesday, it's the FOMC statement, not the rate hike the street will react to but any reaction should be short-lived--not just because they're on some traders whose entire discipline is fading the first reaction but because Friday brings the Employment Report, which is unlikely to match earlier reports and may very well show a slight uptick in Unemployed. Thursday, of course, will be the lost day: not only will traders hesitate taking positions in advance of the Employment Report but many will be packing it up for the long weekend--if not a week or more off. Think volume has been slow recently? Shudder to think how slow it could be in the coming days, with the vacation season officially here.

Looking ahead, July has often been down the first few weeks, as warnings spook traders, with the so-called summer rally often a no-show until the third or last week of the month. Come the third week, the sell-off often creates a short-term opportunity in tech, financials, and major drug names. Leisure companies often post their best revenues in summer, as families go on vacation but retailers, in clearance mode, often see sell-offs. The Chain Stores report comparable store sales on July 8^th. I think they'll, again, surprise to the upside but that hasn't usually saved them from selling after the numbers are posted. Think short-term. Stay opportunistic. Tune out the talking heads and their rally noise until the Industrials confirm the move in the Transports. Instead of a big rally, consider a 5% correction a possibility if for no other reason than the markets' tendency to frustrate everyone. Prepared for a correction, as much as they'd have you prepared for a big rally, you'll be comfortable if the market continues doing what it's been doing--holding up but getting nowhere. Stuck, which is exactly where it should be in periods of transition where the outcome on the other side remains unknown.   

© 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.

Summer officially started Sunday, which means the investment conference schedule will soon give way to earnings, and the potential for earnings to have already peaked. Earnings this week from Walgreen, Morgan Stanley, Goldman Sachs, Fedex, Micron Technology, Nike and Apollo Group may not reflect it but it's likely to be true. That always happens after a rebound off depressed activity. This time, with rates set to rise, the bond market has prepared better than stocks have, so there could be some rude awakenings ahead. Of course, to hear some tell it, the election guarantees a rally. That didn't happen in 2000, the year of the hanging chad, but why quibble with conventional wisdom? The more opinion is lined up on one side, the more opportunity there is for either contrarians, or those on the other side, who believe the widespread belief in the strength of an election is sufficient for a self-fulfilling prophesy. Needless to say, I don't believe things ever work out as neatly as some expect, the reason I held last year's rally in suspicion for longer, perhaps, than was wise.

The economic calendar doesn't hold out as much as some will try and make of it. The 3^rd revision to Q1 GDP and corporate profits rarely make anyone shake in their boots. The University of Michigan will offer up the final June Consumer Sentiment but there's another, next week, from the Conference Board. I don't think anyone is going to decide to buy or sell homebuilders based on the New or Existing Home Sales numbers due out, since both reflect May, somewhat ancient history with rates first set to officially rise in 10 days. Federal Reserve officials are in their quiet period, prior to their June 29 & 30^th meeting so there won't be more of the party line--measured hikes unless faster hikes are necessary. The Philly Fed's Santomero is the sole speaker, Tuesday, but his topic, Education, doesn't open itself easily to policy comments.

The week is notable for the number of media events, with NEXPO (Newspapers), the International Advertising Festival, and mid-year updates from across the sector. The whole shebang wraps on the 22, when the Classified Conference ends, in D.C. No sooner does Classified end than the Radio Symposium beings, in New York, while Circulation Management then convenes.

For some, the headliners will be International Conference on Communications, in Paris, as well as SuperComm, in Chicago. Not me. Aside from a bounce, I don't foresee tech finding it's groove until well into July, and then only for a short while. The "summer rally" is the weakest of all. In fact, the better trade has been long the last few days of the month and into the first few days of a new month--any month. Of course, if you're listening to the election year rally crowd, then you should be long July into November. Be my guest but count me out--at least for August and September, selected retailers the exception. But, if I were betting, I'd bet VoIP names get the most attention with respect to communications, if for no reason than that every incumbent telco and cable company has announced it's intention to begin offering phone service over the internet.

eBay Live is sure to draw the media and their cameras, to New Orleans. It's a fine company, dominant in it's space, with PayPal, literally, a cash cow, not only skimming a tithe off ever sale but, frequently, collecting other fees to warranty the sale. But it's a little bit expensive, here, no?

Meanwhile, the investment community is all geared up for one of the last crowded weeks before July 4^th and summer escapes, along with earnings. ThinkEquity Partners offers ThinkBig, which might give a boost to some microcaps you can check out by using www.thinequity.com/about/conf_ThinkBig.html. Then, William Blair offers its 24^th Annual "Growth" Conference, a hodgepodge of old industrials, small caps, restaurants, retailers and healthcare providers that range from GE and Goodyear to Wal-Mart, Royal Caribbean, Renal Care, Harley Davidson, Best Buy, Ethan Allen, Moody's and Motorola, to name just a few. Wachovia Securities 14^th Annual Nantucket Conference is a mishmosh equal to Wm. Blair, with some overlapping names. By the end of the week, Apple's DevCon next weekend should be the source of much speculation, since the developers are first to learn of coming products, or they'd never be able to program for them.

What's most interesting to me about the coming days is the likelihood that stocks will catch from tail winds. The Barron's Roundtable members were bullish this week; one certain, pervasive, goateed columnist is certain June 30^th will mark the end of the market's malaise, which he touts everywhere he can, which is everywhere; historically, stocks have performed well from July through November during election years, except when the incumbent is clearly about to be ousted; many agree with the goateed one, certain that stocks have been basing and consolidating a nearly year's worth of gains since the Iraqi war started and that the July earnings will provided the fuel for the next leg up. In other words, the collective wisdom is so certain that stocks will go higher, the number or people willing to sell or short will be few, and even those will be hesitant. That may not, yet, load the boat to the upside but it clearly protects against the downside. Since the best trade as been end of month thru the first week of the month, not just this year but many years, with one discipline devoted exclusively to it, that may very well be the trade this time.

So pick your spots carefully. But lean long. That's not something I've said in quite some time. It surprises me to say so so bluntly but, after moving to negative March 24, and neutral in late May, it does feel like the natural progression. Personally, I favor big, multinational financials, which seem battered worse than they should be in advance of the most loudly telegraphed rate hike in history. Minutes after the Fed ups rates, bank after bank will announce they're raising prime rates for their best credits. Just as the prices at the local pump rise when crude does, banks have no restrictions against raising rates they charge as soon as borrowing becomes less costly. ARM's are already rising, because the bond market upped rates before the FED did. I don't think the financials are behind the curve at all but, instead, will make as much money as they usually do after rates rise. Plus, the shenanigans of the last few years are behind them, or will be soon. I don't think there are other shoes to drop. Doesn't mean I like banks that rely on mortgages for their profits but the big money center banks? They suit me just fine and, at least, they're not trading at high multiples, while some offer decent yields.

I happen to think the FOMC could raise rates half a point at it's June meeting and stocks would celebrate but someone smarter than me thinks the Fed has been hinting that it might do it just to spark a celebration when it doesn't, and instead opts for a quarter point June 30^th, saving the half for August. Either way, you see, stocks win. Half point, the market celebrates that the Fed has decided to catch up to the curve; quarter point and it celebrates having worried about half to get only a quarter but either way, the end result is the same. A celebration ahead, short-lived though it might be.

© 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.

Expiry weeks usually see an up Monday, followed by a down a Tuesday/Wednesday mirror image twosome of up/down activity that levels off Thursday and results in an anti-climactic Friday expiry. For a number of months, Thursday was the big down day, until last expiry, when suddenly, Thursday joined Friday as a non-event. With Greenspan's reconfirmation hearing rescheduled for Tuesday, and the possibility of May's PPI on Thursday, it becomes more likely that Tuesday will be a down day. Should PPI see release on Thursday, it'll represent another wildcard that could make Thursday a negative as it was for many recent expires. In addition to having to digest Fed banker comments on Monday, there'll be May's Retail Sales, immediately followed by Tuesday's May CPI and the postponed U. of Michigan preliminary June Consumer Sentiment. While we're at it, let's mention that in addition to Greenspan's hearings, which are sure to include pointed Q&A, on Tuesday, and the UM and CPI, Wednesday will see the Federal Reserve's Beige Book, a compilation of surveys of the 12 Fed districts prepared in advance of the coming FOMC meeting--a document that recently acknowledged consumer pricing pressures, raw material pricing pressure, better employment, and a host of other datapoints which suggest an economy so along on it's recovery, the lack of necessity of the extra point of insurance the FED took in cutting rates down to 1%.

Perhaps it's fitting, in light of the funeral that closed the markets on Friday, that I point out "it’s the economy, stupid," which will dominate trade, for once, despite a quarterly expiry. So, it may not matter that Oracle and Bear Stearns are reporting, and that both could exceed estimates. Nor will it, necessarily, matter that Bear Stearns is holding it' big Tech Investment Conference. Likewise, it may not matter that CIBC is hosting a Consumer Growth Conference, or that CSFB will field Retail, Apparel, Footwear, . Drug stores and Restaurants. Likewise, Thomas Weisel's hodgepodge of presenters at it's Growth Forum in Laguna beach may fade into the background, as could CommunicAsia, NYSSA's Semiconductor Industry Conference, S&P's Insurance, Countrywide Financial's Analyst Day, as well as Merrill Lynch's Global Transportation and Needham's biotech Conference.

Trade in recent weeks has baffled: Ridge held a news conference to specify the heightened dangers that faced the country during Memorial Day weekend, the political nominating conventions and the Olympics, and the markets rallied. Greenspan sounded more hawkish in a televised speech to central bankers in London, and the markets rallied. For the first time, ASCO met and dazzled with the promise of cures and biotechs collapsed, though some of that was because news on Avastin and Tarceva had been well documented before ASCO convened. Still, the markets have been just a little too complacent for my taste--VIX has been ridiculously low for the risks that bombings in Saudi Arabia-for the assassination of the presumptive leader of a self-ruled Iraq posed. Suddenly, with voting members of the FOMC sounding less like reassuring grandpaps and more like the bankers charged with price stability, the message is likely to get through.

Which isn't necessarily a bad thing: no one wanted hikes by a thousand moves--a long, drawn out period of regular hikes that let prices continue spinning out of control. The market had come to demand hikes and would have demanded accelerated hikes sooner rather than later, With the Central Bankers no aboard the hike train, there might be more volatility but it won't be without a silver lining: the economy is in repaired mode, ready to check out of the hospital and return to active duty. They've forgotten the three years of complaints about all the stimulus having no effect. Now, clearly, it did. it just took a little longer than it should have. Because of the delay, things got a little overheated, demand, even for employees got a little backed up, which was seen in the last few employment reports. I think we'll see the catch up wane; see that May might have been the peak or a least a turning point. Pent up demand creates a surge but it always levels off. With millions unemployed and extended benefits expired last December, it should have come as no surprise that many finally found employment, even if it was at lower power and station.

In many ways, the economy and country are first closing the post-bubble chapter. The great unwind is finally coming to an end, just as the carry trade now, will accelerate it's great unwind. Soon, the country's attention will turn to the elections, and every economic datapoint will mean less, as traders start seriously worrying if Kerry can win, and that means some of the more market-friendly tax benefits passed by Bush are toast.

In sum, the Federal Reserve is signaling a more drastic course shift, which the markets should now begin discounting. While it feels like there's one more impulsive surge to the upside lying out there, sometime, which may very well come as July opens, the market needs another adjustment. Sooner or later it will, though it's unlikely to come against a background as lacking in volatility and filled with complacency as the market's seen lately. Take advantage of low cost options, now. Stop believing it's the financials that will get hurt the worst. On the contrary, they'll be quick to raise the rates they charge while being very slow to adjust the yield they offer. And stop counting the consumer out--that's been the wrongest trade of all the last 4 years. In fact, there's a whole sector of consumer, seniors, who've fallen behind the last 3 years who are likely to benefit most. That may mean teen retailers aren't the only hot chains in the future. Will homebuilders collapse? Depends where they're building, I'd think. But one group I'm sure is going to boom is assisted living--that became clear from talking to my focus group, who are filled with stories about the hotel-facilities their grandparents are moving to, a story I hear, too, from friends, and classmates I haven't spoken to in years as my high school reunion draws near. Point is, there may be different winners in the next six months but there'll be winners, while periods of transition have usually been kind to food, beverages, and other necessities. If you're still watching the same stocks you were watching in 1999, or when the bull run began in March '03, it's time to join the Fed and shift course.  

© 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.

Monday's delayed trade should be all about biotechs and major pharmas involved in cancer research, as ASCO--the American Society of Clinical Oncologists--started meeting on Saturday which released all the abstracts to be presented through the eighth, when the meeting ends. Oil, of course will stay a focus, more so, as the Senate plans hearings on prices starting Thursday. Of course, that's all political--a side show to the MERC but a group to watch. Sir Alan speaks twice this week, on Tuesday via satellite to a London based meeting of central bankers' attending an international monetary conference. He'll also take questions but fhegedaboudit cause it's his reconfirmation hearing, Thursday, before the Senate Banking Committee, where the tough questions will get lobbed. Of course, he won't come out and say rates are going up June 30^th in such blunt terms but he will say enough about the strength of the economy, returning employment, and pricing power reviving. I may be alone but I don't think a half point hike in June and a move to neutral is not out of the question. BUT, with more data to come and the Beige Book out the week after next, I'm sure Greenspan will say the committee will make up it's mind at the meeting and deny his mind is already made up

Monday also promises some wild action in the casino companies after MGM (MGG) made a monster offer to acquire Mandalay Bay. Talk about bad timing: MBG was up huge last week after earnings exceeded estimates. As it happens, there are three regional gaming events coming up, Caribbean, Rocky Mountain and New York Gaming, while November's ballot may add a new member to the Southern Gaming Alliance as Miami/Dade and Broward Counties won the right to put a slot referendum on the ballot, which would allow slots to join poker tables at Racinos. You can imagine how hard Governor Jeb Bush fought against the measure even making it onto the ballot, losing in the courts.

Russell Index Rebalancing should be another feature this week, with some of this year's techs losers moving down a notch but, then, representing top positions in the smaller index which will make them must buys for many small cap managers.

Industry events include the Brocade DevCon, CIBC Communications & Technology Food Chain, where I'll mention most of the EMS charts look like the want to try higher, while one analyst published extensive research on the channel and concluded inventory levels are normal and, perhaps, below where many assume for this seasonally weak quarter. Texas Instruments will offer a mid-quarter update. After Intel's more positive comments on it's flash and comm. divisions, it'll be interesting to see if it was at TXN's and other suppliers' expense. Hewlett-Packard holds it's analyst meeting a day after TXN, on the 8^th, the same day Aventis and Teva will have NDA's considered by FDA advisory committees. Likewise, Goldman Sachs holds a Healthcare Conference while Pacific Growth holds a Life Sciences Growth conference. Combined with ASCO, that means the drug developers will be on news overload, with research and potential earnings comments equally likely. Also scheduled to meet with Analysts is EMC, while the NTP vs RIMM and ORCL vs PSFT trials are set to open Monday. There's more in the Analyst Meetings section of the Premium Area of the website, available through the Industry/Sector sort.

If the schedule isn't packed enough for you, there's a VON (Voice over Internet) Europe Conference & Expo in London, precursor to a similar event in the U.S. Licensing meets in New York, coming off back to back megahits for sequels, with Harry Potter likely to challenge Shrek 2's numbers, with Spidy yet to come, and the movie docket filled with other big budget films.

Coming off last week's big auto sales numbers, there might be news from NIADA, the Independent Auto Dealers Association, which meets in Dallas, though, given the rebates and discounts that made those sales possible, I wouldn't count on good profit margins for the automakers. The dealers, on the other hand, should see a bonanza in bonuses and incentives, as well as busy service bays after downpours in farm country. Also, you've gotta wonder what the discounts will look like this month, when the past year's models are cleared to make way for the '05's. If you're in the market for a car, and thinking this month will be the right time, wait until the end of the month when the offers will escalate as end of month pressure usually makes for the very best deals.

With the big Bear Stearns Tech Confab coming up the week after this one, expect analysts to step in front of the Reg FD press releases and presentations, touting their best picks and pans. Just don't pay much attention to them: the money flows will be elsewhere this week, while the outflows may very well be from energy names, as traders begin to realize that trade started to look long in the tooth weeks ago--ex- the tanker companies that will be able to keep boosting prices.

Last week I mentioned the Coke bottler in Athens in advance of the Olympics. I didn't mention Hellenic Telecom (STET Hellas symbol STHLY) because it's up so much in the past weeks but I realized that was an oversight after hearing about the traffice on SBC that made Fantasia a winner. You might want to keep an eye on it in case it experiences a pullback between now and August. If American Idol can nearly overload SBC lines in four hours, imagine what tens of thousands of athletes, news media, officials, volunteers, coaches, security personnel, and visitors can do to the Athens telecom incumbent. Be sure and read the June Monthly Outlook which calls for the indices to end the month about where they started, with rotational rallies throughout the month. You've got this week's focus, and a hint at next week's with the upcoming Bear Stearns conference, situated just two weeks before the quarter ends, which makes it a perfect time for affirmations, upsides, and warnings. Why not stay away from groups with potential to warn and stick to groups where optimism and a distant earnings (quarters that don't end in June) are attracting flows? 

© 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.

So here's a news flash: I met with my focus group and talked myself silly to everyone who'd agree to be engaged at the airports, on lines at movies, while waiting for valets to retrieve cars, as well as with friends. The overwhelming take away was that jobs were easier to snag in March or Aprl than they've been in May. Students and newly minted graduates who interviewed and accepted jobs in March and April mostly got exactly what they wanted while those who waited until May found doors closed. I'm not going to jump to any conclusions--it's possible the johnny cum latelies were seen as less motivated and, therefore, less desirable job applicants but this was the first time in months I heard anyone express exasperation with the shortage of jobs. If, in fact, what I heard is part of a bigger trend, then May's Employment Report, out Friday, may be the peak for awhile--something to ponder when you're deciding whether it's wise to go long when the FOMC raises rates, under the assumption that higher rates are proof of a sustainable economic recovery.

Thursday, the majority of Chain Stores will report May comparable store sales which, again, should suffer a calendar shift, as they did in April. Not only was Easter earlier this year, pushing sales into March but Memorial Day was as late as it can get, postponing sales in May. Surely some will see back to back moderating monthy sales and declare the consumer dead. Mind you, I don't think he/she is. In fact, early May, prior to Mother's Day, was strong, it's the tail end of May that was weak, with unseasonably cold weather in the Northeast, the middle states flooded, and, as far as this past weekend goes, the south so beastly hot records were set in many cities the last two days. Then, consider some of the hottest styles--flip-flops instead of shoes, for instance--and it's clear SKU's will come in at lower price points, which also impacts gross sales. The bright spot is the end of sloppy, hip slung sweats as a summer fashion, which means there've been lots of sales of flippy, tiered skirts, and off the shoulder knit tops for women. Unfortunately, few of the tee fabric mini's are priced as high as jeans or designer sweats, so the additional pieces will accomplish nothing but save comps from being really dismal. Still, don't be surprised if you hear grumblings about consumption.

While we're talking about Thursday's Chain Store Sales, let's also mention Intel's mid-quarter update and, as an addendum, a mid-qtr from Flextronics, out of Singapore. Last week, Novellus surprised to the upside after two quarters of disappointment thanks to pushed out deliveries. I doubt Intel will be as bullish since we know there was a glut of laptops for more than a month while, currently, screens are in shorter supply, which is delaying deliveries. Since many are predicting Intel will narrow to the top end of the range (not me, mind you, since I expect the middle, at best), you know the bar is set high, a recipe for disappointment.

Computex starts in Taipei on the Tuesday, which should be a much happier affair than last year's was since last year's was thrice postponed due to SARS. Still, the screen shortage has to impacting one of the brightest spots in tech--LCD and Plasma TV's and monitors, the latter actually rising in price since October, instead of falling and spurring demand, as is customary for tech products.

The defense technology sector is eagerly awaiting the first of a purported $15B in awards from Homeland Security to set up a state of the art terrorist tracking network. Accenture, Computer Sciences, and Lockheed Martin are the lead competitors, each working with partners, Unisys and IBM two that could benefit depending on who wins, which could be announced as early as Tuesday. I give Accenture little chance, thanks to it's Bermuda domicile, despite it's protests that most of it's workers are in the U.S. Exactly the point: incorporation in Bermuda is chosen for tax reasons, and reason enough for Accenture to lose, at a time when the budget deficit is a canyon and there's a backlash against offshore outsourcing.

As is fitting in advance of the big summer get away, Investment Houses are trying to fit too many conferences into June, while analysts and PM's are still around. This week, Sanford Bernstein hosts a hodgepodge at Strategic Decisions, Banc of America hosts Education & Business Services (with a definite corporate training bent), while Friedman Billings Ramsey hosts it's own hodgepodge--it's 8^th Growth Investor Conference. Some of you might remember how many of FBR's "growth" presenters were still shrinking at last year's 7^th. That's less of a problem this year. Sanford Bertnstein's presenters are as diverse as Colgate, Pepsi, and Washington Mutual but at least it does no investment banking and, therefore, has no conflicts to report. Oddly, both CSFB and AMR Research plan to host Supply Chain Conferences. You'll note how little has been heard out of recent investment conferences. Expect more of the same this week, with economic data and Intel looming. Truthfully, all sector and industry conferences or expos are likely to badly pale in advance of the hoopla and leaks attendant to ASCO, the Cancer Research Meeting that starts on the 5^th. As if that weren't enough, of course, OPEC is meeting the 3^rd, in Lebanon, with lower oil prices, last week, responsible, in large part, for the back to back rally days and gains booked for the week.

Meanwhile, in the real world, rallies on the first day back after a long weekend have been typical though may not be as easy this week. Not only is the market coming off the best week in months but Saudi Arabian unrest is getting more serious. With Saudi Arabia the most "loyal" and largest oil supplier, and promising to lift production while pushing other OPEC members to do the same, a disruption in S.A.'s supply lines would send crude to $50 a barrel or worse, which would have the potential to stop the recovery in it's tracks. I'm not ready to say U.S. markets are going to fall Tuesday, because of what happened in Saudi Arabia over the weekend. It didn't stop Europe from gaining slightly Monday, and lacks the immediacy it might have had if Monday had not been a holiday. BUT, I expected profit-taking last week which never materialized, which makes it long overdue. A big, celebratory opening, Tuesday, might be just the trigger necessary for some profit taking. Honestly, the complacency last week, even in the face of Ashcroft's warning about tempting dates for terror attacks on our soil, seemed quite troubling. With the indices higher, now, and many stocks reaching or approaching resistance, this rally may be getting a little long in the tooth.

So tread lightly. For now, the charts suggest there are slightly higher targets to reach but there's nothing to say they won't be reached and set off a reversal any time over the next few days before Friday's Unemployment Report. Be careful out there--they can hit the sell button as suddenly as they hit buy--and just as often. 

© 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 coming long weekend will be the dominant theme, this week, keeping everything else in the background. That means, both the Conference Board's and U.M,'s May Consumer Confidence reads won't make for more than 10 minutes of action. We'll get April Existing Home Sales and New Home Sales Tuesday & Wednesday respectively but that doesn't mean anyone's going to change their mind about homebuilders' prospects in advance of rising rates--not even after Barron's made them a feature this week, with a flattering portrait that may allow for a bounce Monday morning, but not much more.

Wednesday's Durable Goods report for April is likely to be down after two strong months in February and March but there isn't anyone expecting differently. Of course, if it's up, again, instead, that could make Wednesday interesting but shouldn't change the course of the week--the 3-day weekend likely to stay hands on second thought. I expect no large revision to Q1 GDP on Thursday, while Friday's April Personal Income and Consumption seem a foregone conclusion, since we already know consumers pulled back a bit in April after three strong months, March boosted by the early Easter. Auto sales, especially, are likely to pressure consumption, for obvious reasons.

As for earnings, there won't be any leadership names, with Campbell Soup, Heinz, Krispy Kreme, Williams-Sonoma, Ralph Lauren, Brown-Forman, Chico's FAS, Costco, and Novell some of the better known names. Of course, Novell is holding it's annual DevCon, so it will likely get more attention than normal and, quite honestly, could outperform, as those looking for Linux trades jump on what they hope will be the bandwagon. We've seen that video before and there's little reason to expect it won't end the same way--with Novell's 15 minutes of fame ending after traders quickly move on. BEA Systems holds it's developers conference, starting Monday, but I don't expect fire works there, either.

The Saudi's called for higher fuel production in advance of the International Energy Forum's meeting in Amsterdam, which was enough to take some of the froth out of crude prices but no official decision will be made until OPEC meets after Memorial Day, so there's little reason for the market to get too excited, or anticipate lower prices at the pump, which would help consumers tremendously. Quite honestly, the energy complex saw it's highs some weeks ago. The stocks have been anticipating a peak in prices for weeks.

@d:Tech in San Francisco arrives right after the broadcasters finished previewing their fall seasons. The sorry schedules I read about may make for better allocations for online advertising, so that conference could turn out to be one of the week's highlights. Some will certainly be studying the group thanks to Barron's interview, this weekend, with Mary Meeker, the so-called Queen of the Internet.

Lehman Brothers holds it's Annual Global Wireless Conference this week, the same week smaller markets must start porting cellphone numbers. You'll recall, portability was available in only the top 100 markets last fall, when portability first became available. With the other markets eligible, there should be more action in handsets, which had slowed in recent months. Lehman isn't alone: UBS hosts Software & Services, CSFB hosts Semiconductors & Equipment, while Pru will be in London for European Tech, and CSFB will host Small Caps. Meanwhile, BMC Software holds an Analyst Day, in Houston, while Novellus will issue it's mid-qtr update on the 27^th.

Don't know about you but, to me, it seems like a lot of companies and investment houses are trying to squeeze far too much into the schedule before the summer vacation exodus starts but it's all being squeezed into what's traditionally been a slow week--which means I don't expect any of it to change the course of events. With the Middle East a tender keg, Iraq a disaster, and this week, no matter what, the end of the month, the drift should continue, with some downside bias as longs are lightened in advance of the weekend.

One stand out event this week may turn out to be the prosaic Beverage Forum. Not only have beverages often done well in summer, when the temperature rises but the group is often reached for as a defensive play. With rates about to rise, defensive plays have been sought, this time, too, proving traders are more predictable than they like to think. My favorite beverage play is not one of the ones listed at the conference. I'm thinking Olympics in August, so thinking the Coca-Cola bottler in Greece, symbol CCH, as a triple winner. Summer heat, defensive, and a special event that should provide a good catalyst--Yeehaw!

In sum, while the week should have a bias to the downside, I think there's a possiblity the markets will finish the week virtually unchanged. With June ahead, and the early part of every month often biased to the upside, the June 3^rd OPEC meeting may very well be the catalyst the markets need to end their malaise and mount better than a one-day spike. That means any severe pullback this week might be the first long trading opportunity since the March 24^th low. As for next week, the Weekly & June Outlooks will not be posted until Monday night, and then only if planes flying the east coast are somewhat on time. Hurricane season begins June 1^st, which will make me victim to weather and communications connections from now through November. Please be patient if I can't post on time. 

Have a Happy & Safe long weekend.

© 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

EDITORS NOTE: Hours after this was posted, the head of the Iraqi provisional government was killed, which might even throw a monkey wrench into US plans to transfer power on June 30th. So much for an exit strategy!

Hard as it is to believe, the markets have entered summer--with volume likely to fall even more, especially on Fridays, as traders head out to their summer cottages in the Hamptons. Given the lackluster trade in individual issues, that's more bad news. Pull up your ticker of choice, last week, then compare it to volume in the index substitutes, like QQQ and SMH, and you'll see how the big money that isn't playing the futures is playing the markets--making stocks mere cogs in a bigger wheel. Throw in an Expiry at the end of the week, and the set up for continuing whipsaw action exists. While Tuesday/Wednesday were the down up days for many months, lately, Thursdays have been the wild card, often undoing the prior three days worth of trade. As for the expires themselves, they've been mostly anticlimactic--hardly straying from unchanged by the time Friday's done.

The earnings spotlight moves to retailers, with Toys 'R Us, Home Depot, Lowe's, Limited, Saks, Nordstrom and others reporting. However, tech names outside the usual cycle include Applied Materials, Autodesk, Brocade, Intuit, and Hewlett-Packard will also release. Hard to see how the coming tech earnings help, while retailers now suffer the homebuilders' scourge of skepticism, thanks to rates set to rise. However, retailers will also compete with sky-high prices at the pump, with the lowest scale of earners sure to find their disposable income diverted to filling the tank. In short, a recipe for trouble, no matter how good earnings for the quarter just ended. And they should sound terrific. January through March were three of the best months in years, while April, though slower, was slower, in part, because of the early Easter that shifted many sales into March. Of course, to see the stocks react after April Comps were released, one would have thought the stores were about to go bankrupt. Let's just call that a head-start: filling the tank has become a sorry task, with prices here twice what they were two years ago, making all those uneconomical SUV's a fortune to keep filled.

The upfront ad sales campaign gets started this week but it'll be two weeks before substantial news is available. The biggest advertisers will review all the network and cable offerings before committing, with some of them allocating budgets to internet advertising too--perhaps more than originally planned when they've had a chance to review some of the sorry offerings and renewals offered by broadcasters. Based on Nielsen's, the only two unqualified hits are American Idol, on Fox, and The Apprentice, on NBC--neither of which can get me to tune in but, then, I'm not an advertiser's ideal audience, either: I'm not 18--35, and I don't spend most of my money on sweets, salty snacks, fast food, jeans, or tee shirts.

Fed Speakers will be out in force, this week, with Fed Governor Gramlich's talk on GSE's a little late, thanks to Barron's complete look at Fannie Mae. The market is likely to pay most attention to Governor Bernanke, who'll speak, Thursday, on Gradualism, as in moving Fed policy gradually--in this case raising rates.

The biggest even of the week might be DDW: Digestive Disease Week, thanks to the way Imclone, Iressa, and Tarceva captured traders' imaginations. Not to link the two but, Waste Expo meets in Dallas, an event that covers medical waste, HazMat, and the local landfills that are quickly filling to capacity. If you thought Barron's said all there was to say about e-prescriptions, than just wait for TEPR--Electronic Patient Records, where no hospital or agency is as technologically advanced at the Veteran's Administration, which, also, pays far less for prescription drugs than anyone, and upon which Congress would have done better to base it's Medicare RX plan. What is it about the U.S. government that prevents interagency sharing? Wasn't that one of the problems the 9/11 commission faulted for overlooking some obvious signs of pending problems? Think I'm wrong? The V.A. pays $20.67 for 10mg Lipitor when, seniors, using the Medicare Discount plan of choice, can expect to pay no less than $67, when the same drug is available from Canada, for $47. Of course, a senior who chooses a plan that includes Lipitor might have to give up a discount for some other drug but, heck, you've got to live someplace like Florida, where seniors are numerous, to get the full scoop.

The SEMI Association releases it's book to bill Monday night but that'll be dwarfed by earnings from AMAT, and an analyst Day, in Paris, for STMicroelectronics. Put RFID on the list of focuses, this week, Distribution and Warehouse meetings have become RFID forums of late. With Military & Aerospace Electronics, and Homeland Security Solutions, as well as AS3: Aviation Services & Suppliers SuperShow on the calendar, this week, the defense complex should have news. Likewise, a ComptelAscent VoIP Workshop could make that group breathe heavier, Comptel the Competitive Telecom Association, for those who don't know, and a group that's lead the deployment of VoIP., though there isn't a RBOC that hasn't announced plans to join, while none other than T has said it's readying a business service.

Piper Jaffray holds it's Annual Tech conference in New York, though don't hold your breath for good news from it. Qualcomm's Analyst meeting and raised guidance did nothing more than allow it to hold ground, while the Analyst meetings held by Texas Instruments and Intel did little to inspire longs. I don't think that'll change in the near-term but you're welcome to disagree. Let me ditto my doubts about IBM's Spring Analyst Meeting doing more than merely postponing still lower prices. What is, is. I call the charts the way I seez 'em.

Speaking of Investment Conferences, Bank of America holds it's 32 Annual Investment Conference, in Las Vegas, which might give healthcare a pop but, then, the group has benefited from some defensive trading, while pharmaceuticals, anyway, have failed to really break out as a group.

Speaking of charts, the financials managed some recovery the second half of the week. Ex-FNM, knocked in Barron's, there looks like there's more room for recovery on Monday, at least. The energy service names look terrible for a group that should be enjoying crude at record prices, while E&P's managed a late in the week recovery that was unimpressive and may not have a lot more to go.

When running through the charts I noticed some defensive names found buyers late Friday, which may be related to Goldman Sachs' Consumer Products Conference. Of course, it might just have been plain vanilla defensive action, too, but either way, the group is holding up better than the market, with the stocks trading naturally, since there's no actively traded ETF that covers the group.

Shrek 2 is something you may hear more about than anything, this week, given the success of the original. Even the website is winning kudos. No doubt about it, if we're talking blockbusters, summer is already a distraction.

In sum, Monday looks like it'll skirt selling, but Tuesday through Thursday are Expiry wildcards, with the downside likely to show it's vicious head at some point. Friday should be a non-event, so it'll all be mid-week, with a reminder that Bernanke's speech on Gradualism comes Thursday, which might allow for some recovery if Tuesday and Wednesday are especially negative. Otherwise, it's a light week for data, with little ahead that should provide a catalyst for a strong rally. Yeah, I heard Byron Wien on CNBC talk about his technical friends saying the markets are as oversold as they've ever been so a sharp, steep rally could come at any time but I see it differently. As I run through 750 charts, every night, I see rotational relief rallies off very oversold levels: first it was the SOX, last week it was financials and gaming. With so many retailers reporting, it might just be the retailers' week to mount decent relief rallies but all the natural buying seems to be going into packaged foods and other defensive sectors--action that may very well prove immune to the rotational declines and rallies of the rest of the market. 

© 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

ANALYST MEETINGS

May 10--14, 2004 With earnings failing to provide any lift to the market, as it looks ahead to higher rates, 4 key analyst meetings, this week, could temper the extremely negative sentiment. Texas Instruments, Intel, Yahoo, and Qualcomm will all meet with analysts, this week, with a sliver of hope for at least a relief bounce.

In sum, there's a lot more than rates on this week's agenda. With stocks down so low, there's reason to expect some sort of lift. That doesn't mean I've turned bullish--I'm talking about a rebound within an ongoing sell-off that should resume again soon. But meantime, the selling got exhaustive in tech, where semi's were able to lift Friday, despite really poor pin action elsewhere in the market. I'd expect the financials to soon exhaust themselves to the downside and find some value investors. While it's entirely possible the market trend will remain down until at least the first rate hike, at the end of June, or even longer, this week should see at least some buying--purely technical but a relief nonetheless, even as Friday should prompt profit-taking, once again. 

© 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. At the time of this writing, Sandi or her affiliates held positions (either short or long) in Dell, Cisco, and Intel, though those positions may change at any time, without an update.

Forget the Semiconductor Billings--those are three month trailing averages with analysts already talking about the peak and beyond, already downgrading the beaten up group as 6--9 months from it's prime, and therefore, saleable. Monday also offers March Construction Spending but homebuilders, after resisting a decline as rates rose, finally succumbed last week--raised estimates and dvidiends be damned. Monday will also offer the first of the vehicle makers' volumes, numbers that will dribble out through Wednesday. With steel makers raising prices, it's the '05 models analysts already worry about, with higher financing costs and raw material costs spoiling what's often a good month for sales, as Mother's Day, Graduation, and better weather often triggers interest in the models being cleared and the news ones ready for pre-orders.

Tuesday, of course, is crucial, since the FOMC is set to meet. We know what the post-meeting statement will say, don't we? Deflation is out of the picture, inflation already on the horizon, but it's the expression of "patience" that the FED members are likely to spend the whole meeting debating. And here's where China sits at the center. It's recently raised loan requirements and is rumored to be planning a half point rate hike when the Golden Week holiday ends on Wednesday. But what experience does China have cooling it's economy? And what will be the unintended effects in the rest of Aisa and near-Asia, which has come to rely on China for so much of it's demand. Of course, China could adjust it's currency, as the U.S. has begged but that doesn't seem likely. For that matter, even a rate hike is mere conjecture. But should China do something to cool demand, it could cool some of the rise in commodities, which would go a long way to stemming some of the global inflationery forces the CRB index reflects.

The week will also offer March Factory orders, Challenger Christmas & Gray's Lay-offs, the ISM Manufacturing and Service Surveys, as well as Q1 Productivity & Costs, the latter about the only big headline in the bunch. Don't be surprised if productivity pales, just as it has the last few months. It's Thursday's April Chain Store Sales and Friday's April Employment Report that the market will be waiting for, once the FOMC has released it's statement. With an early Easter pulling many sales into March this year, April comps should cool from the first quarter's outstanding pace. As for the Employment Report, without the 75K returning striking supermarket workers, migrant laborers are the only group that gets added in significant numbers in April, so expect the March Report to look more and more like an aberration--though it will be premature to say so based on one follow-up month. In fact, look for analysts to try to smooth the number by adding up the year to date jobs expansion, which they'll divide by four to try establish a trend. The trend will still show improvement but it will take the May and June reports to really understand how much of an aberration March was--or wasn't, since I admit I might be wrong.

The FOMC meeting statement has often been open to much slicing, dicing, and interpretation which serves to confuse more than anything. Luckily, almost every member of the Federal Open Market Committee will have a chance to speak this week, after the meeting, nipping some of that speculation in the bud. With Greenspan, Bies, Broaddus, and Olson all speaking at a Conference hosted by the Chicago Fed that starts Thursday, the pundits will be stifled, forced to defer to speakers who will refine and define, themselves.

I have moved from bearish to neutral, after the shellacking the markets took last week. I'm not bullish, yet, but we've seen a few flip flops in the market over the past year, so it's not impossible to imagine a better May than April. It's just not anyting I'm counting on, Google IPO or not. I don't believe there's a slug of money on the sidelines waiting to buy stocks. On the contrary, I think there was a slug of Insitutional money invested in stocks that's found it's way into some bonds, and the higher, safer yields the bond market has provided. Take a look at packaged foods, which have been strong. Take a look at big cap pharma, where even JNJ, which has suffered falling Cypher sales in the face of Taxus competition managed to hit near-term highs as April closed. Take a look at homebuilders and tech, which have been hit hard--none harder, perhaps, than REIT's, as treasury yields became more competitive. Take a look at financials, where reported earnings nearly doubled year ago levels, and the group now looks poised for yet lower prices. Defensive plays are suddenly strong, while everything else is falling apart.

Was the year-long rally a bear market rally which has ended, with the bear about to reassert it's influence? At least some of the pundits will say yes--damaging already injured confidence even more. What often happens when the markets reach junctures like this? Rallies are met with more selling, never getting much off the ground. Could the market respond to upside catalysts? It will be tough--though I'm sure the FOMC members will voice some concern, privately, by the time they meet on Tuesday, since the market rally did so much to raise consumer and corproate confidence.

I'm watching 10K on the DOW, and 1300 on the NDX, as well as the VIX, which stayed way too low considering the drubbing the NASDAQ took last month. And I'll be selling rallies until those levels are reached, and VIX picks up. So much complacency in the face of such severe selling tells me there's too little fear. April showers may bring May flowers but it's been too dry for me. The markets may be approaching levels that will trigger a technical rally, a relief bounce like many we've seen. But the groundwork has not been laid for a sustainable rally--and I have my doubts about whether the FOMC or Employment Report can supply enough ammunition for some real, natural buying. If I had to bet, I'd bet on Friday's Employment Report more than the FOMC--and I'd trust no rally for more than a trade. Think differently? Then look back at where we came from when the late March rally topped. The first week of many a month often benefits from automatic deposits, the inflows triggering rallies. If that happens this month, expect the smart money to sell into the rise. 

© Sandi Lynne 2004 Nothing contained in this commentary is a recommendation to buy or sell any security. The opinions expressed are the author's alone.

Oddly, there's history to suggest that days like last Thursday are often followed by a similar wild rally 4--5 days after the first burst. By that reckoning, the follow-up burst (sort of the after shock after an earthquake), should come anytime between Wednesday and Friday this week, just in time to end the month. Coincidence? I don't think so, especially if you think back to March, and how dismal things looked through the 24^th of the month--dismal enough for me to suggest we wouldn't get the typical end of the month rally. So what happened? The rally arrived right on schedule, ending the month with a big flourish to the upside. No reason to think the upcoming FOMC meeting will stand in the way. In speech after speech, members of the Fed Bank have promised rates aren't rising May 4^th, when they next gather for lunch and a spirited mincing of the English language, crafting the post-meeting statement.

Because it's the end of the month, we'll get two, not one, Consumer pulse reading; Tuesday's from the Conference Board, Friday's from the University of Michigan, the latter a revision of it's slightly weaker mid-month preliminary. Thursday we'll get what used to be one of Greenspan's top indicators, hardly discussed anymore--the ECI: Employment Cost Index, which compiles salaries, benefits, and all the perks, to find out what it costs an employer to keep one body on his payroll. Fhegeddaboudit! No one even mentioned ECI, the last time it was released, in January.

Thursday we get the advancet read on the first quarter's GDP. Sound like something that could spark the animal spirits? To me too, especially since corporate profits and retail sales have been so strong--with the later revisions responsible for shaving it a bit, to account for the enormousTrade Deficit.

March's New Home Sales on Monday, and Existing Home sales, on Tuesday? Well, the homebuilders have been reporting still growing backlogs, and New Homes are counted when the initial contract is signed, even if it's bound by no more than $100, so it should be strong; lower than it prior months but still, historically, high. Existing Home Sales are another story, thanks to rates starting to back up during the month, you'd think, but you'd be wrong, since those are counted on closing, which means the deals were made weeks or months earlier, before rates revived. Which leaves March Personal Income and Spending--with an early Easter a good reason for some late in the month spending of the sort that should confirm the consumer's penchant for shopping. So far, so good, nothing to derail an end of month swoosh to the upside.

Earnings? Well, the schedule is nearly as heavy as it was last week, except all the leaders with the power to derail the market are done, so nothing from the fundamental awaits to derail an end of month rally.

Trade Shows and Conferences, you ask? While, the ISM--the Insittute for Supply Management, formerly known as Purchasing Managers--holds a conference in Philadelphia which promises it's semi-annual Outlook, too. Do ya think there'll be some optimism from the group, after the earnings being posted, and both Challenger's last Report as well as the Fed's Beige Book purported to show a strengthening of optimism and hiring plans? You betcha.

Healthcare is the group with the most notable meetings this week, including World Vaccine Congress, the Neurologists Society, CIBC's Annual Biotechnology & Specialty Pharmaceuticals, as well as the first leg of a big biotech/pharmaceutical research conference that starts the 28^th and straddles it's way straight through the end of th month and into May, covering Recombinant AntiBodies, Monoclonal Antibodies, Microarrays, Genomic & Proteomic Sample Prep, Laser Capture, Structure=based Drug Design and RNAi Pathway analsys, and Phage Display Technology--pretty much assuring word out of every biotech company who've ever heard of, as well as some hardly known, at all. Need I mention biotech is one group that usually does well in May? Are ya newbies, or what?

Satellite Entertainment and GameNETworks sound exciting but may offer less than expected since neither have been major conferences in the past, nothing to compete with, say, the big Morgan Tech Conference the first week in May. By Friday, of course, devotees of Warren Buffet will gather for their annual spring rite usually referred to as Woodstock for Capitalists, what is, after all, nothing so much as an annual shareholders' meeting, albeit the most famous one of all. But that's the season we've entered, the annual meeting season and, donchya know, it often seems even companies that warned or missed have a more uplifting story to tell shareholders in person, just days or weeks after earnings were released.

So what it comes down to is a week between, after the biggest earnings have been reported and a week before the FOMC meets, a week subject to all the usual sleights of hand the trading desks of Wall Street can muster. Word is 46% of recent daily trade has been program trading, so think about what suits those with power and the muscle to jig markets one way or the other. Recall this week ends the month, and use your imagination. What leg do they have to stand on, other than their power and financial muscle to make it happen? A reason and excuse--it's all China's fault. It's not the trade deficit, budget deficit, war in Iraq or Afghanistan, or the fighting between the President and John Kerry--not even with Bush and Cheney scheduled to appear before the 9/11 commission on the 29^th. The inquisition won't be televised as Condie Rice's was--they'll be no embarassing moments for anyone watching at home to gasp over. Corporate earnings are on fire, rates will rise, eventually, but it's China's fault, where it will end badly there, just as it did here and in Japan but we've been there, done that. And it's the end of the month, so why not party?

In sum, some indecision Monday could very well resolve to the slenderist of gains by the end of the day, since that's how it often happens on Monday's that follow inconclusive Friday's that were the end point to huge Thursday rallies. The shorts will lay on some bets in the ahem but, then, when the markets don't collapse by the end of the day, they'll by 'em in and spark a program or two that should push 'em just this side of the upside by the close. Tuesday, the short'll try again and, again, should fail, so by Wednesday, the shorts will sit it out, awaiting an opportunity that shouldn't come, which will get the bulls more aggressive, setting up a rip roarer come Thursday that'll lead to harmless profit-taking by Friday--the day when the media should start putting the coming FOMC meeting under the microscope. Voila! There ya go: it's all China's fault so there's no reason for the markets to go down. Not to end the month anyway.  

© 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.

In sum, look for Monday to reverse some of the worst Expiry action, while financials should improve if the bond market calms down--something I expect. Nonetheless, it won't be smooth sailing. On the contrary, the trend is down, which means headwinds after a year of tailwinds, and the headwinds likely to get even stiffer as retirement fund managers do some rebalancing as the month draws to an end, now that rates are more attractive--even as they remain aware that May is often a terrible month, with an important exception. During Presidential election years, the market has often poked around the first four months, then suddenly strengthened beginning in May, and remained strong until the election. I'm staying mindful of that seasonal/cyclical pattern while looking for this year to be an exception, thanks to Iraq, and the empty barrel from which Bush and Greenspan can no longer draw to give the economy one last pre-election push. The most important tells in my book are the expanding new Low's list, and the break in financials, a group that's often been most important to determining market direction. 

© 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.

April 12--16, 2004    EARNINGS & OPTIONS   This week we'll learn if Wednesday & Thursday's selling in listed shares was about lightening up in advance of a long weekend or something more. If you've looked at some charts, then you realize the recovery since March 24 had taken on a "V-ish" shape which often is worked off with a pullback. Was Wednesday and Thursday's declines enough? Of course, NAZ managed gains on Thursday, and those charts, to my eye, suggest tech has a smidge more to go to theupside before it should be ready for some profit-taking.

Of course, the week is about earnings, but only because Intel and some banks will report. The real meat won't arrive until next week. If anything, as a sector, a goodly percentage of media/broadcast names will step to the plate, newpapers, especially. While no one expects great results, the March Employment Report suggests classifieds, particularly Help Wanted, should have ticked up. With Passover and Easter a little early, retail ads should have seen better placement rates than they did a year ago, when Easter was more than a week later and the Iraqi war discouraged shoppers. Additionally, automakers were heavy advertisers, while states that saw Presidential primaries should have seen more advertising, as well.

But it's hard to imagine earnings having the usual sway, when Intel has already telegraphed median revenues and the slowdown in laptops has been well-disseminated. Then, further pressuring Intel's earnings, there's a charge for the settlement with Integraph. While everyone expects bank earnings to come in strong, it's the future course of rates and bank spreads that are more of a concern--something the multitude of Fed Bank speakers should help alleviate only to a limited extent.

It's well known that north of 40% of trading for many months has been program trades so the week ending Options Expiry possesses more influence than earnings--that and the technical picture, with the "V" recovery and technical resistance not far above Wednesday's high.

As for trade shows and conferences, as you'd expect, a bit of a lull, since the analysts will be attached to post-earnings conference calls, as well as tuning their estimates in earnings previews. The ramp of those will come in early May--not withstanding CIBC's late April Annual Biotech & Specialty Pharma conference.

The Aircraft Interiors trade show meets this week but earnings reports from many of the companies showing there happen to arrive this week, too. In biotech, HIV Research & Vaccine Development meets in Banff, Alberta, Canada, so there's chance for some names to lift. None are close, mind you, not even Merck, who's research was touted a year ago. While we're on biotech, RNA Trafficking, in Snowbird, is a symposium that may leak some news but DNA's earnings, last week, did as much for the group as Yahoo's did for tech last week, so there's not a great deal more to the upside before that "V" will need to get worked off, as well.

ISPcon & Service Networks meets in Washington, D.C. but the talk of that town is Nextel's spectrum swap, and Verizon's plans to derail Nextel's cushy deal with the FCC, that's meant to eliminate interference with some emergency networks, including the spectrum used by police. While we're on communications, Entelec meets--the concept of telephony and broadband access via electric lines again on the horizon, the first time since Enron's collapse that some utilities are evaluating the opportunity seriously, with FPL even doing some limited testing, now.

For tech, there's a product launch from Nvidia, as well as two Human Resource events, one for outsourcing, the other for the companies that make the HR software but neither should roll anyone's sox up or down--unless there are more upsides, like the one from Seibel, recently, which happens to report late next week. Other notable earningws will come from Johnson & Johnson, and Merrill Lynch (Tuesday), Apple, AMD, DH Horton, Sandisk, & Texas Instruments, all Wednesday after noon. Friday, Citigroup, Pepsie, Southwest Airlines, IBM, Netflix, PMCS and Sun Microsystems join Seibel. Friday, as is traditional, is the slowest day of the week, with eGroup and Nokia, which already warned, reporting.

Since March Retail Sales will be released Monday, I'd be remiss if I didn't mention my expectation for some retailers to announce to the upside. With the first quarter stronger than last year, and this past weekend helped by an early Passover and Easter, which meant a long weekend of shopping, those retailers that start their quarters February 1^st should have tremendous visibility into their quarters--and some should be poised to beat their more conservative February outlooks. Since this is a time of the month that often sees retailers trade down through early May, surely some will stem the losses with upside announcements, when that's a viable option. It's cheaper, after all, to talk a stock up than use buybacks for support.

Given the season for spring apparel to be landed, I'd expect Wednesday's February Trade Deficit to be large, again, limited only by the fact that the month was shorter than usual--albeit longer than most February's. March CPI, on Wednesday? It doesn't measure the stuff that's increased the most, like tuition and insurance, so who are we kidding? Anyway, the minute it starts showing inflation, the government decides to rejigger the components. It's done it before and done it more recently with PPI, the wholesale version, which is why February's was just out last week, when March should have been released.

Friday is the promised expiry, as well as the University of Michigan's consumer Sentiment survey, which is generally good for a ten minute response. No idea when the survey was taken but the school was closed last week, so it has to be conducted this week or would have to represent pretty moldy information.

In sum, it looks like tech has a bit more to the upside Monday, while the listed could rebound as well, after the late drubbing last week. However, historically, this is the week the market usually sells off, prompting the talking heads to characterize the sell-off on good earnings as the fault of the run up in advance. If we do sell off this week, as usual, then there's a good shot that "V" recovery will turn into a "W," which would be the perfect set-up for a late April/early May earnings "relief" rally, as is so common this quarter, before the early summer decline that, again, reverses late in July. Should the markets rally Monday, I don't expect the feel good trading to hold. I expect a sell off Wednesday and, possibly Thursday, with a late turn Thursday that sets up a flat to up Friday. Of course, since Wednesday and thursday of Expiry are often mirrors, should we rally Wednesday, then a sell off Thursday should follow. Of course, Yahoo's big upside surprise set the stage for NAZ to power ahead last week, so it's not impossible an earnings report could break the historical pattern but I wouldn't count on it. Not when over 40% of action is programs, which means individual names have to work very hard to outperform the action in the indices.   

© 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 considered only a launching point for more research and due diligence.

While I'm awarding prizes, I'd like to award the booby prize to myself, for being wrong about the rally since March 24^th, and the prize for criminal incompetence to the 3 radiologists who read my MRI's and CT-Scans over the last 5 years, all of whom missed a disk 5x normal size causing multiple (and regular) compression fractures--also missed in their readings.

I won't use my impending trip for surgery that never took place (if you went for a tonsillectomy and didn't have tonsils, they wouldn't operate on you, either) as an excuse for missing the rally. A combination of terrorism (bombings in Madrid), heightened tensions in the mid-East after the leader of Hamas was killed, OPEC threatening to cut production when pump prices were already very high, and a break down in the financials on the eve of my departure suggested a market due more than a 5--6% correction during the opening week of warnings season. I was wrong--so it's 20 lashes with a spaghetti noodle and back to the books for this week and……

I can't say I thought much of Friday's rally. Unimpressive volume and weakness in financials still concerns me. Breadth wasn't terrific. Neither was volume--all of which feels to me like zombies putting in the required show without having their hearts in it. Of course, this week is a holiday week, shortened for Good Friday, so a little profit-taking shouldn't do much damage and may even reverse by Thursday. If I had billions at risk I wouldn't want to stay very long into the three day weekend--or Easter Sunday, when terrorists may choose to make a point. But the guys who have billions under control may simply hedge, play some technical levels, and call it a week by Thursday morning. I certainly don't expect much more volume this week, since many traders have headed out for a week's respite with their kids, schools closed in fewer regions than you might think, this week. Better put, just don't assume this week is spring break everyone--it's the least universal of the holiday weeks, with my district off this week, the one that starts 12 miles away in school all but Friday. Likewise, while all the markets are closed Friday, some banks remain open. Meanwhile, some traders may head for the exits early Monday and Tuesday, to enjoy their Passover dinners.

The economic calendar may seem anti-climactic after Friday's Employment Report but it's heavy with the usual early month stats. Monday's ISM Service Index, which lead early in the recovery, has disappointed lately, so maybe it's time for that to see another tick up. Challenger, Gray & Christmas might have fewer lay-offs to announce but April didn't start well, with both Sun and Gateway announcing cuts. The big number, of course, will be the March Chain Store Sales on Thursday, and those should be good enough to provide the markets the typical pre-holiday weekend boost. Since last year's March sales were pressured by the Iraq War and some SARS fear, increased comps should be a cake-walk--which is why you must avoid those who miss, especially, for the rest of the season. Of course, Retailers, which have often outperformed in February and March are usually sales on even strong March comps, since market focus will move to tech, financials, and others that typical report in April, which most of retail does not. (More on April when the Monthly Outlook is posted later Sunday, April 4^th.)

As for conferences and trade shows, NIGA--the American Indian Gaming Congress takes place in Alburqueque, which should send the strong gaming stocks to their short-term peak. Please use the URL in the Premium Area to link to exhibitors since some names you might expect weren't mentioned when I last looked.

Storage Networking World could see more warnings, like the one from Emulex, last week, so you can't assume the meeting will boost the group. Of course, some may be preparing upside surprises, too, so you need to pick your spots rather than make a sector bet.

I expect some news out of ETA, the Entertainment/technology Alliance meeting in Los Angeles, though it's hard to see how the game developers could find fresh fans, up here with so many other groups still depressed after this year's selling.

The SEMI FPD (Flat Panel Display Expo) could be a happy affair. I visited 5 electronic stores over the weekend and learned a monitor I bought last fall now costs twice as much as it did when I bought it. Ironically, hi costs nip sales, so the group may not have as happy a story to tell as you might think. With monitors that were tagged at $179 after rebate now listing for $379 or more, it's not the easy purchase it was 6 months ago. And pardon me if I scream collusion but I couldn't help noticing prices were idential at every store I went to. Where's competition? Want to know which company often benefits most from strong sales? 3M, which happens to be the cover story on this week's BusinessWeek.

Because of the holiday, trade events and investment conferences slow, a little, which won't stop FedEx or Dell from holding analyst meetings. Intel, also holds a DevCon in Tokyo--it's first in two years, since last year's was cancelled by SARS. Craig Barrett is known for speaking up, especially when appearing overseas, so the newswires should be filled with quotes. Speaking of quotes, companies as diverse as DaimlerChrysler and Brocade hold Annual Shareholder meetings, which may, also, lead to comment, now that the quarter is over. But forget all that, earnings season is sneaking up this week.

Alcoa reports after the clsoe, Tuesday, which is always spoken of as the "first DOW stock to report," as if that makes it special. The Dow Jones editors reminded us, again, this week, how little that means. Companies don't sell their way into the index by gaining entry on revenues; they don't get there on earnings, either. They get there on caprice, which isn't the stuff important earnings are made of. Heck! Look what's happened since Intel, Microsoft, SBC, Home Depot and Hewlett Packard made it into the index? BIG SELL SIGNAL, in all those cases. But you'll note extra volume on Thursday, thanks to the DOW changes, as all the ETF's make the necessary changes.

The BIG earnings that will be watched --and rightly so, because each is a leader in it's sector--will come from Genentech, Yahoo, and GE, with special mention to Research in Motion, since no one ever thought it would do as well as it has since wireless phones started adding "Blackberry" like features, including e-mail and data transfer. But RIMM's earnings gain special mention from me because it's a nearly pure play enterprise stock--with most Blackberry's made available by corporations that lease it's servers, which means it's business is a peek into corporate IT spending.

In sum, after conceding I was wrong, I doubt we'll see Friday's market activity spark a roaring rally this week. On the contrary, some profit-taking as early as Monday wouldn't surprise but the week should end with some more, albeit limited, gains--barring exogenous events. But it's those exogenous events you have to keep an eye on, since another bomb was found on European rails, and Easter weekend brings thousands to churches, Spain's bombings and France's warnings making it clear Catholism is no shield from terrorism.

© 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.

Aside from a few names, for instance Qualcomm, the chip and semi equip names look putrid--no other way to say it. Many will claim this is because the EU is about to announce it's decision on Microsoft and I say hogwash!. Microsoft has lagged for a year without impacting semi equip or other chip names until the recent sell-off. Why did most of tech hit recovery highs, even when Microsoft couldn't catch a bid? Maybe it's because Linux has penetrated servers--or because no one believed any EU decision would be so draconian that it would handcuff all of tech. Don't tell me that's suddenly changed--that the EU could possibly impose such drastic penalties, and demand such impossible changes, all of tech around the world will collapse. I don't believe it--though that's what the talking heads are bound to claim, this week. Whatever the cause, most of digital tech is about to take another step down if the charts are to be believed--and that's despite the number of firms that have narrowed guidance to the high end of estimates. As an example, Texas Instruments was the latest to narrow guidance to the top of the range and it just broke to the downside. But what does everyone talk about? Tech. Tech. Tech!

Though financials are holding on here, there could be trouble ahead. On Thursday night I prepared the calendar for instituional clients and by today there were 3 more Fed Reserve Bank speakers added to a schedule already well stocked with Fed speakers. Granted, the Fed Chairman has been determined to reflate the economy, only recently veering from last fall's concern with deflation. So it's possible the minyans will be out in force to soothe the markets but don't count on it. The Fed was accused of causing the bubble at the end of the last century and now seems determined to walk a fine line--sucking out the froth without triggering collapse. While the Fed speakers are unlikely to say anything that will kill the market, they're equally unlikely to say anything that will spur equities back to rally mode. Right now, they've got all to do to keep their eyes on the bond market--with the Bank of Japan suddenly playing mind games with Chicago--some days buying heavily, other days pulling their bids--a new tactic in the effort to keep the yen from getting so expensive exports to the U.S. start to suffer.

This week and next are light on earnings, with Goldman Sachs, Micron Tech, and Walgreen's the most notable names. As for events, The Cellular Telecommunicatons & Internet Association (CTIA) meets in Atlanta, while the International Wireless Communications Expo (IWCE) meets in Las Vegas. Does that make sense to anyone, when companies still haven't restored business travel to pre-9/11 levels? I don't think either event trumps the European Unions final decision on Microsoft for noise.

In healthcare, Allergy, Asthma & Immunology should make for a number of articles in the Wall Street Journal, while Alzheimer's meeting in D.C. will supply others. For biotech investors, a multi-tract meeting called CHI Molecular Medicine Marketplace should bring news--though most won't recognize it without mention of it's previous title--Tri-Conference, and later this year than usual. Retail analysts will be in Chicago, at the International Housewares Show, which the Journal already previewed. (Get me some of those storage containers with tops that clip on the underside, please. Tops are like sox--half the set must walk away and try to make it on their own cause I always find broken pairs.)

Seems Taser International anticipated Trexpo--the police and law enforcement trade show meeting in Long Beach, California, starting the 22^nd. The Aerospace Global Market Outlook, scheduled for San Diego, looks like it needs some strategic petroleum reserves of it's own. Have you taken a look at the airlines lately? Of course, I never understood the big rally the group managed some months ago. Airlines are like Micron--you can count on one hand the number of quarters they've made money in the last decade or two.

Speaking of making money, Game Developers meet in San Jose, after 2 solid years of record sales. No surprise Microsoft cut XBOX prices again--it hasn't made money on them, yet needs to spur sales to sell all the software their programmers have been developing. D'ya ever wonder if Bill Gates see people using their iPods and kicks himself for not getting there first?

Of course, Monday could be a wild day--with some index rebalance on tap, and the Monday after expiry often a reversal of the expiration action, which was down, Friday. While there are 2 Federal Reserve bank speakers on Monday, one, plus Treasury Secretary Snow speaking on Tuesday, 2 more Fed speakers on Wednesday, and 3 on Thursday, one of whom is the chairman. Friday, there are two more Fed speakers, as well as Greenspan, and all of them will speak on the same topic: the Fed's models and policies. As if that weren't enough, Wednesday promises February's Durable Goods--a number that has disappointed lately. Thursday the government favors us with the 3^rd and final tuning of Q4 GDP and Corporate Profits, as well as February Existing Home Sales, which aren't easy to use for thoughtful deductions. The number is derived at closings, but there's no way to ascertain when the original contracts were drawn so little to impute about consumer confidence. Speaking of which, Friday the University of Michigan releases it's final read on March Consumer Sentiment and it's safe to expect another tick down. The Madrid bombings, as well as another rash of winter storms couldn't have done much for anyone's mood.

I already mentioned some anticipation of a wild day on Monday, so let's throw Taiwan into the mix--it's leaders were shot on the eve of elections but snuck out a narrow victory. By Sunday, the government released a statement assuring it stood ready to support the markets--read that to mean the equity and currency markets--since the challengers, after losing by a narrow margin, are demanding a recount, and see a skunk in those shootings. Then, the IRS chose this weekend to announce it would step up audits of the wealthy. Boy! Are we having fun yet?

Next weekend we turn the clocks ahead. If only we could turn the calendar ahead, I'm sure tech, and the markets, in general, will look better come late April and early May but, in the meantime, we've fully entered the earnings warning season. When stocks like TI can't hold their own, even after narrowing guidance to the high end, it's hard to see where strength is gonna come from. TRIN? Put/Call? Oversold indicators? Get over it! It's March. Markets moving in a direction tend to keep travelling in the same direction. The direction has been down for weeks. Buckle up and, if you happen to own tech, keep those flotation devices handy for Wednesday's is the day the EU will pronounce it's sentence on Microsoft. While I believe Microsoft could actually rally once   EU demands and fines to be put on the table, out in the open. Any rally will do nothing but relieve the oversold readings on the way to still lower prices---unless tech can manage a classic, climactic bottom first. Or, unless we actually capture Osama bin Laden-himself--not some second in command. But even then, I think, we'd only postpone the inevitable. The markets look lower from here--just as they often do in mid- to late March, just don't be surprised if tech suddenly finds it's footing and buyers, while stronger sectors continue seeing some distributionbut only because Tech is farther along in its correction. Could tech make a classic bottom between now and Wednesday? Gaps down, much heavier volume, and even worse internals could put tech at the bottom by Wednesday--just don't believe it's because Microsoft finally put it's anti-trust troubles behind it, though that may be the excuse the media chooses to hang on any reversal, if it happens this week. Just know I'm sure tech isn't there yet, and fairly certain it won't get there without more fear and panicky selling--selling we may NOT get this week because so many are counting on the EU decision to spark a rally. Bottoms rarely come when so many people are reluctant to sell--not only still afraid to miss the next run but still so positive another leg up is coming. Furthermore, Microsoft has, on ocassion, threatened draconian measures of it's own, including to stop selling Windows, if any regulatory body tries to interfere with what it feels is it's right to develop software and add-ons unencumbered. The EU release may very well make tech a lot worse--not better, a possiblity that makes sense (to contrarians, especially) because so many people are anticipating the opposite.  

© 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.

Aside from a few names, for instance Qualcomm, the chip and semi equip names look putrid--no other way to say it. Many will claim this is because the EU is about to announce it's decision on Microsoft and I say hogwash!. Microsoft has lagged for a year without impacting semi equip or other chip names until the recent sell-off. Why did most of tech hit recovery highs, even when Microsoft couldn't catch a bid? Maybe it's because Linux has penetrated servers--or because no one believed any EU decision would be so draconian that it would handcuff all of tech. Don't tell me that's suddenly changed--that the EU could possibly impose such drastic penalties, and demand such impossible changes, all of tech around the world will collapse. I don't believe it--though that's what the talking heads are bound to claim, this week. Whatever the cause, most of digital tech is about to take another step down if the charts are to be believed--and that's despite the number of firms that have narrowed guidance to the high end of estimates. As an example, Texas Instruments was the latest to narrow guidance to the top of the range and it just broke to the downside. But what does everyone talk about? Tech. Tech. Tech!

Though financials are holding on here, there could be trouble ahead. On Thursday night I prepared the calendar for instituional clients and by today there were 3 more Fed Reserve Bank speakers added to a schedule already well stocked with Fed speakers. Granted, the Fed Chairman has been determined to reflate the economy, only recently veering from last fall's concern with deflation. So it's possible the minyans will be out in force to soothe the markets but don't count on it. The Fed was accused of causing the bubble at the end of the last century and now seems determined to walk a fine line--sucking out the froth without triggering collapse. While the Fed speakers are unlikely to say anything that will kill the market, they're equally unlikely to say anything that will spur equities back to rally mode. Right now, they've got all to do to keep their eyes on the bond market--with the Bank of Japan suddenly playing mind games with Chicago--some days buying heavily, other days pulling their bids--a new tactic in the effort to keep the yen from getting so expensive exports to the U.S. start to suffer.

This week and next are light on earnings, with Goldman Sachs, Micron Tech, and Walgreen's the most notable names. As for events, The Cellular Telecommunicatons & Internet Association (CTIA) meets in Atlanta, while the International Wireless Communications Expo (IWCE) meets in Las Vegas. Does that make sense to anyone, when companies still haven't restored business travel to pre-9/11 levels? I don't think either event trumps the European Unions final decision on Microsoft for noise.

In healthcare, Allergy, Asthma & Immunology should make for a number of articles in the Wall Street Journal, while Alzheimer's meeting in D.C. will supply others. For biotech investors, a multi-tract meeting called CHI Molecular Medicine Marketplace should bring news--though most won't recognize it without mention of it's previous title--Tri-Conference, and later this year than usual. Retail analysts will be in Chicago, at the International Housewares Show, which the Journal already previewed. (Get me some of those storage containers with tops that clip on the underside, please. Tops are like sox--half the set must walk away and try to make it on their own cause I always find broken pairs.)

Seems Taser International anticipated Trexpo--the police and law enforcement trade show meeting in Long Beach, California, starting the 22^nd. The Aerospace Global Market Outlook, scheduled for San Diego, looks like it needs some strategic petroleum reserves of it's own. Have you taken a look at the airlines lately? Of course, I never understood the big rally the group managed some months ago. Airlines are like Micron--you can count on one hand the number of quarters they've made money in the last decade or two.

Speaking of making money, Game Developers meet in San Jose, after 2 solid years of record sales. No surprise Microsoft cut XBOX prices again--it hasn't made money on them, yet needs to spur sales to sell all the software their programmers have been developing. D'ya ever wonder if Bill Gates see people using their iPods and kicks himself for not getting there first?

Of course, Monday could be a wild day--with some index rebalance on tap, and the Monday after expiry often a reversal of the expiration action, which was down, Friday. While there are 2 Federal Reserve bank speakers on Monday, one, plus Treasury Secretary Snow speaking on Tuesday, 2 more Fed speakers on Wednesday, and 3 on Thursday, one of whom is the chairman. Friday, there are two more Fed speakers, as well as Greenspan, and all of them will speak on the same topic: the Fed's models and policies. As if that weren't enough, Wednesday promises February's Durable Goods--a number that has disappointed lately. Thursday the government favors us with the 3^rd and final tuning of Q4 GDP and Corporate Profits, as well as February Existing Home Sales, which aren't easy to use for thoughtful deductions. The number is derived at closings, but there's no way to ascertain when the original contracts were drawn so little to impute about consumer confidence. Speaking of which, Friday the University of Michigan releases it's final read on March Consumer Sentiment and it's safe to expect another tick down. The Madrid bombings, as well as another rash of winter storms couldn't have done much for anyone's mood.

I already mentioned some anticipation of a wild day on Monday, so let's throw Taiwan into the mix--it's leaders were shot on the eve of elections but snuck out a narrow victory. By Sunday, the government released a statement assuring it stood ready to support the markets--read that to mean the equity and currency markets--since the challengers, after losing by a narrow margin, are demanding a recount, and see a skunk in those shootings. Then, the IRS chose this weekend to announce it would step up audits of the wealthy. Boy! Are we having fun yet?

Next weekend we turn the clocks ahead. If only we could turn the calendar ahead, I'm sure tech, and the markets, in general, will look better come late April and early May but, in the meantime, we've fully entered the earnings warning season. When stocks like TI can't hold their own, even after narrowing guidance to the high end, it's hard to see where strength is gonna come from. TRIN? Put/Call? Oversold indicators? Get over it! It's March. Markets moving in a direction tend to keep travelling in the same direction. The direction has been down for weeks. Buckle up and, if you happen to own tech, keep those flotation devices handy for Wednesday's is the day the EU will pronounce it's sentence on Microsoft. While I believe Microsoft could actually rally once   EU demands and fines to be put on the table, out in the open. Any rally will do nothing but relieve the oversold readings on the way to still lower prices---unless tech can manage a classic, climactic bottom first. Or, unless we actually capture Osama bin Laden-himself--not some second in command. But even then, I think, we'd only postpone the inevitable. The markets look lower from here--just as they often do in mid- to late March, just don't be surprised if tech suddenly finds it's footing and buyers, while stronger sectors continue seeing some distributionbut only because Tech is farther along in its correction. Could tech make a classic bottom between now and Wednesday? Gaps down, much heavier volume, and even worse internals could put tech at the bottom by Wednesday--just don't believe it's because Microsoft finally put it's anti-trust troubles behind it, though that may be the excuse the media chooses to hang on any reversal, if it happens this week. Just know I'm sure tech isn't there yet, and fairly certain it won't get there without more fear and panicky selling--selling we may NOT get this week because so many are counting on the EU decision to spark a rally. Bottoms rarely come when so many people are reluctant to sell--not only still afraid to miss the next run but still so positive another leg up is coming. Furthermore, Microsoft has, on ocassion, threatened draconian measures of it's own, including to stop selling Windows, if any regulatory body tries to interfere with what it feels is it's right to develop software and add-ons unencumbered. The EU release may very well make tech a lot worse--not better, a possiblity that makes sense (to contrarians, especially) because so many people are anticipating the opposite.   

© 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.

March 15--19, 2004    Midweek Madness       After a rocky week of vicious volatility, this week could launch with so much relative calm investors will, once again, start getting lulled into complacency. There's non-financial wrinkle to contend with in the form of St. Patrick's Day, in addition to an FOMC meeting, on Tuesday, and a Triple "Witch" Options Epiry (technically quadruple but single stock futures don't trade enough volume to influence the markets overall).

By an overwhelming majority, the markets have risen on the day BEFORE St. Patrick's Day but fallen ON St. Patrick's Day. Since the Monday prior to this expiry is usually up, too, and equity markets tend to rise the morning of an FOMC meeting, there's some statistical basis for expecting an upside bias Monday into Tuesday morning. Luckily, the charts, also, confirm the probability for a smigden more to the upside Monday. Since St. Patrick's Days are often down--albeit minimally, and the markets often step back after the FOMC post-meeting announcement, and trade down, sometimes steeply, Wednesday or Thursday of expiry weeks, some whiplash seems likely this week. Obviously, the herky jerky action doesn't HAVE to be by the outsized percentages as seen last week. In fact, if the bulls are going to stake a claim to more upside for the coming weeks, it's possible we'll see moves within tightish or, at least, in tighter ranges this week.

Since the late January FOMC meeting has been blamed for precipitating the fall in the markets over the last two months, everyone is focused on this Tuesday's statement. Because I think the chairman wants to avoid getting locked into an over-concentration on repetitive language ("considerable period" or "can afford to be patient"), I think the committee will spend a lot of time focused on a change in it's statement that won't cause the markets to overreact. For that reason, the post-meeting statement might say nothing more than that the committee's assessment of the economic risks remain unchanged from their last meeting. Of course, we can rely on John Berry, in the Washington Post, and John Ip, in the Wall Street Journal, to tell us what little birdies have been whispering in their ears--ears with access I don't have. But I really think the committee will spend less time worrying about the economy than it will the markets, and how to fashion a statement that won't spook the markets. Remember, in a recent speech by Fed member Bernanke, who's also rumored to be a likely successor to Greenspan, he said the Great Depression was caused by the central bank and made worse by the C. B.'s tightening before the fragile economy was on sure enough footing. Recent data would suggest the U.S. economy, while still far stronger than others, especially Europe, is growing year over year but weakening quarter over quarter, without the usual ripple through rebound normally seen, in employment, especially. Likewise, corporate borrowing hasn't recovered, despite rates at some of the lowest levels in history. While the first rate rise could spur some hurry up borrowing, the lack of demand in all but consumer borrowing suggests some caution. This is a Fed determined to avoid a double dip, which realizes that strengthening confidence requires strong equity markets. Therefore, after last meeting's reaction to what must have seemed to committee members as a benign difference, it seems likely the meeting statement will veer from saying much at all, hence my suspicion it says it sees little changed since the last meeting which it may reiterate it's confidence in employment ultimately recovering. Whatever the FOMC says, there's no reason to expect it to signal a rate rise any time soon, which may be all the markets need to regain some of the footing shaken from it last week..

Which doesn't mean I expect much upside this week. Triple Witches are often the most volatile. The nearly year long run followed by the recent dip allowed the few remaining shorts to cover and sit back, waiting for the next rally--a rally that should need strong catalysts that won't arrive until April's earnings reports. Which isn't to say there aren't any notable earnings reports due this week. On the contrary, Lehman Brothers (Tues.), Bear Stearns (Wed), and Morgan Stanley (Thurs.) are set to step to the plate. Plus, large homebuilders KB Home and Lennar are set to report Tuesday afternoon. The financials and homebuilders are essential to the markets, because of Alan Greenspan's recent mention of possible chaos if mortgage giants Fannie and Freddie aren't reined in. Furthermore, with consumers representing two thirds of GDP, there is no stronger statement of consumer confidence than the commitment to home ownership. Tech earnings of note will arrive from Jabil Circuit, a peek into manufacturing strength of at a range of it's tech customers, and Adobe Systems, which should be benefiting from the surge in sales of digital cameras, though you'd never know if from looking at the stock. For consumer non-durables, and the recently strong food group, General Mills may serve as a proxy, while retailers Barnes & Noble, Williams-Sonoma, and Nike, which recently raised expectations, may make or break retailers which finally saw some profit-taking after the usual strong winter months for retaielrs. FedEx will.also report, giving DOW Theory adherents one more notch on their toteboard. Truthfully, the financials could beat estimates by a mile, as they often have, and all the other companies reporting this week could exceed expectations and it wouldn't matter. Not when the FOMC is meeting and a multiple option and future expiry ends the week.

Many market watchers look for symmetry, so it was quite surprising that so little was written or said in the days leading up to last week's sell-off about the one-year anniversary of the market bottom and the first bombs being dropped in Iraq. Alright, I admit it, I don't have the sound on for the daily financial news so there may have been more said than I heard but I was shocked at how little was written in the press--NOTHING like was seen in advance of the first anniversary of 9/11. (Was it just coinincidence that the Madrid bombings arrived on 3/11, exactly six months in either direction from 9/11? A very few said it wasn't.) However, I'm sure there are some looking at the downside convulsions last week and assuming they'll mirror the surging rally that started with the Iraq war, suggesting that last week's decline was the first of many that will bring the markets back to retest the October 2002 lows. Other than Robert Prechter, I don't know of any confirmed bears who say it's so, though many others are at least wondering if last week's action was prelude to an imminent decline to match (mirror?) last year's rally. Do I think that's gonna happen? NO! But I do think we'll see lower prices after this week--another week or two like last week--as the month's end draws closer and more companies warn. I'm also particularly mindful of how muted next quarter's outlooks could be when they're set with the coming earnings at quarter's end. It's hard to forget that this is the last month of depressed economic activity before comparisons become much tougher; hard to forget that last year's Q3 saw GDP rebound by 8.2%, something that's going to make it tougher sledding in the coming months. Ironically, the longer it takes for a really strong rebound in tech spending, the more I think Q4 will be a barn burner, as companies rush to cash in on the accelearted depreciation schedule allowed under an emergency tax rule that expires at the end of this year.

So, looking ahead, I think we could see more selling in the weeks to come, even as I expect this week to end unchanged or slightly positive. But I don't think we've seen the highs, either. I think that's something we'll see in July or the first week of August, even as I think there's a strong possibility the recent highs are retested and fail in late April to early May. For the next five days, though, I'm not expecting a resumption of either the bull run or the selling seen last week, with 180+ down DOW points--unless there's another exogenous event to trigger a big sell-off. Investors were caught off guard last week, and like an ice skater who takes a hard fall and, after standing up, skates tentatively while massaging bruises, the cockiness of the prior rally is gone, investor confidence is shaken, for the time being, and profit-taking will suddenly seem wise, again, even as short sellers will be looking for fresh opportunities, after many months of slamming to the ice and hitting their heads on each short attempted at a presumed high in the market. That's the kind of set-up that makes strong runs unlikely, while making sector rotation somewhat of a necessity, as profits from one group is rotated into a beaten up group. It's also a set-up that makes a freefall unlikely, since Miss Market rarely makes trading that easy. Resumption of the bull from here? I don't think so: a retest of last weeks lows anytime from March 22 through April's expiry seems more likely than this week. That means you should choose your spots very carefully, jump on profits, and protect the downside--even if puts don't ever again get as cheap as they were before last week's tumble.

You'll note I didn't even mention this week's calendar of trade shows. I don't see how trade events will top an FOMC meeting, Triple Expiry, or the bad taste and hesitation left by last week's spill. Besides, if you're reading this, you have access to the Premium Calendar and can view all the events yourself. With Financials, selected Leisure stocks, Consumer Non-Durables, Utilities, and Homebuilders boasting the strongest stocks, you can match events to specific stocks, then decide if you're a contrarian. If you are, you should buy some beaten down names in groups that are set for news while avoiding those stocks that failed to correct. Of course, if you believe strongly in buying only strength, than those stocks that seemed immune to last week's deluge are for you. The biggest events, in size, will be Carriers World Asia, CeBit in Germany, and the International Housewares Show, while the one that could make the most news is AAAI, Allergies and Immunology. But none will compare to the words and paper devoted to the FOMC and comparisons to and dissections of last week's market action, with much of it, probably, devoted to the coming earnings and tax season, and assumptions about retirement funds flowing into the market. That inflow is likely to be needed badly by the time it actually arrives, since I think we see more downside after this week is over. And don't overly rely on last minute funding of retirement accounts to boost the markets to new highs, since much of that money is merely transferred horizontally, from other stock-invested accounts. If history is any guide, the markets may have trouble making any headyway before the April options expiry and may very well make seee downside before then. If you're considering calls, consider the May expiry at the earliest, since the Q2 earnings rally usually tops the first week in May, by which time I'll be looking to put my money back into retailers, just as I do every year. And while you're planning ahead, also bear in mind that the best preforming index in April is the DOW. That narrows it down to 30 stocks or the ETF's, at least. 

© Sandi Lynne 2004 Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions are the author's alone.

Take that Employment Report--puhleeze. I have no idea why everyone thought it would be the first barnburner in years. Challenger, Gray, & Christmas told us January lay-offs were the biggest in months. While plenty of union contracts and some federal laws require 60 days notice, many aren't that lucky. Laid off in January means applying for unemployment insurance immediately, with a two week lag before benefits begin. How many hiring announcements did you here? Exactly! Had you heard about many, CNBC personnel wouldn't have parked outside a Hollywood, Florida Native American Hard Rock hotel, covering the people lined up to apply for the 3,000 jobs being offered. Mass hirings are SOOOOO unusual, CNBC felt obliged to cover the event. Where were those 140K jobs supposed to come from--when all you hear about is outsourcing? Preposterous estimate, I tell ya--but then, you don't need me to tell ya that, the Labor Department said if--OFFICIALLY.

Speaking of CNBC, shame on the station for it's coverage of Martha Stewart's trial, particularly the jury decision. Blown WAY out of proportion. Business news? Marginally! Martha still owns a slug of shares, her "injured" shareholders have had plenty of time to exit--Friday at some of the best prices in quite some time. ENRON is a news a business story! Thousands of investors and retirees were wiped out and won't ever have a chance to recoup their retirement funds or capital losses. But Martha? A gnat on the business landscape, most important, perhaps, to K-Mart, which managed to file bankruptcy long before Martha's Stewart OmniLiving Media became involved with Martha's legal problems. Anyone else think CNBC is starting to look like the live action version of the New York Post's page 6, the notorious gossip page? But, then, where else would you have heard someone suggest Jack Welch might be a candidate to replace George Mitchell or Mike Eisner at Disney.

Speaking of Jack Welch, General Electric is about to offer it's insurance unit this week. That might actually be better for market juice than the coming Retail Sales Report for February, due this week, which the weekend media would have you believe is the "key" report of the week.. After last week's chain store sales were reported, and with gas prices as high as they've ever been--higher around here than ever before--ya think there's a soul left on earth or Broad & Wall who doesn't know it's gonna be big, bigger yet thanks to an extra day, Leap Day estimated to add as much as $30B to GDP this quarter? I know the media likes to curve fit the news to suit the market action but calling this week's Retail Sales a key number just slays me. The market reacts to surprises, not known quantities and Retail Sales are a known quantity. Maybe not the exact number but certainly the size--big, big big!

Wanna talk big number? How about Monday's 10-yr treasury issue, since that series is least common and the issuance will arrive as mortgage rates hit a record low--thanks to economists' miscalculation of the number of jobs created. Wanna know where the action'll be this week? In the bond market, where many holders were caught leaning the wrong way on Friday. (Ever wonder how economists get it wrong so many times and still keep their jobs?) And look for financials to remain popular--though NOT necessarily those who fund mortgages which are about to see another wave of refi's.

Now, while you're laughing over the economists, let's smile about January's Producer Price Index which still isn't out, despite the fact that February's is due on Friday. Theyz tellin us that January's coming but, then, so is Easter. Anyone else think the government is looking for a way to surpress the inflationary forces we're all feeling, by reworking PPI to keep it down? Ya heard or write about Bernanke's speech last week, laying the blame for the Great Depression of '29 at the feet of the Fed Bankers, making, what sounded to me, like the best defense of FOMC patience before raising rates?

Ya know what else is coming this week? Another preliminary Consumer Sentiment survey from the U. of Michigan. I think it's flat to down another smidge but that's because I cover seasonality and, the longer winter continues, the lousy the sentiment. However, I've never understood the market's reliance on 250 people, and that's all the prelim covers. The January Trade Deficit is also coming but given how much we import, and the cost crude, thanks to a week dollar, me thinks that, also will be big. If the dollar continues to rise against major foreign currencies, the Trade Deficit will fall in dollar terms but record January and February sales should mean record imports of inventory or chain store racks will be bear. It's all up to the dollar and one has to question how eager foreign governments will be to buy this week's bond offerings, given rates at such lows. Trust me, if you're watching equities, this week, your watching the collateral effects and not the cause--the reaction, not the action.

In addition to being at the peak of mid-quarter updates, we're also about to enter one of the peak months for corporate meetings with analysts. Therefore, Automatic Data Processing, Prudential, Johnson & Johnson, Texas Instruments, Exxon Mobil, Emulex, and McDonald's will be on the radar screens, this week, the latter announcing, Friday, a webcast for the 8^th, at 2pm, which is why I'm singling it out, since many of you print out the schedule in advance, and miss things added at the last minute.. Of course, Oracle's earnings are scheduled this week, too, so check the charts for recent past earnings announcements and figure it does a rerun.

Speaking of earnings, besides Oracle, the week promises supermarket chains and retailers, along with EchoStar and Apollo Group, along with it's online offspring, University of Phoenix. Just keep your eyes open between 1 and 2pm on Thursday, cause that's when National Semiconductor is likely to release it's earnings--earnings I find much more informative than Oracle's--not that you asked. Investment banks are busy, with Bear Stearns hosting Media, Entertainment & Information, a replay of a similar recent conference hosted by a competitor. Deutsche Bank offers IT Hardware & Software, while Lehman does similar, offering Software & IT Services. JMP Securities will host it's Annual Research Conference, a hodgepodge of sectors, as usual. Oppenheimer doing a one-day VoIP conference, which coincides with earnings from Net2Phone, the granddaddy of VoIP. Breaking away from the tech scene, CIBC will offer Global Energy (too bad we can't bottle the hot air out of the economists, no?), while Smith Barney does Industrial Manufacturing, something Lehman did recently, too.

Wanna know what sector is likely to get the most press, other than financials? It's the cardiac group, since the American College of Cardiology started it's meeting Sunday, Boston Scientific and Angiotech Pharma won approval for TAXUS last week, and CTT will meet as soon as ACC breaks--and that's ALL about stents--Cardiothoracic Techniques and Technologies, for those of you who don't follow the group and don't know what the alphabet stands for.

So here's what I'm thinking--I think the markets have a bit of a tough time early in the week, as it makes up it's mind whether that putrid Employment Report is good or bad news. It puts the FED on hold but ya need people with paychecks to buy goods and, after a riproaring Q3 GDP at over 8%, and a good Q4, you'd like to think companies are expanding--which hiring would indicate. On the other hand, Friday's report means the FED is on hold for longer than some were beginning to predict, so that's the "good" news. Come Thursday, when the week's auctions close, and every knows exactly what demand was--the market would be free to run, if demand was good. Problem is, it's getting harder to see how that's going to be possible--UNLESS the dollar keeps rising.

So here's the plan, if the dollar backs off, start worrying about the 10-yr's being offered, and expect equities to back off. If the dollar holds, the market should hold. If the dollar turns tail, and starts working off some of it's recent gains, the equity market is gonna fall. AND, if I had to bet, I'd bet on NAZ continuing to underperform listed, expect retailers to start seeing sector rotation, which means some outflows. Homebuilders, R.E.I.T's and other hi-yielding names should still find fans, while gold will move in opposition to the dollar. Some of the broker/dealers recently broke out and could keep reaching a little higher, especially those that report the week after this. After all, deals keep springing up like tulips in spring, while rumors of potential deals are still making the rounds so hot and heavy, even Barron's felt obligated to mention the big rise in Deutsche bank last week, and the rumored suitors.

Equities are in the black hole--caught between earnings seasons, hostage to other markets. It's easy to make it through a black hole with velocity but tougher to keep your bearings without momentum. Momentum has been waning, so a bit of turbulence seems in order before the markets find their way. 

© 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.

As it it weren't enough to have Chip Billings and Intel's mid-quarter update this week, Morgan Stanley will also hold a Semiconductor & Systems Conference, setting up a 1-2-3 punch for chips. While Intel spurred techs the first time it narrowed it's guidance to the high end of the range--and did so again after reporting, I don't think that will be good enough this time. Even as Oracle plans it's legal strategy against the justice department for blocking the PeopleSoft takeover, Wedbush Morgan will host Software companies--about the only group unlikely to warn two-thirds of the way through the quarter, given the back-end loaded nature of every quarter for the group, except for those who rely on long term licenses, instead of new sales for the bulk of their  earnings. GSP-Wireless meets in San Francisco, though some of the thunder from the group was stolen, Sunday, when Sprint announced it would be buying in it's wireless tracking stock, PCS.

Which doesn't mean I think digital tech--NAZ tech, in particularly, sees the wheels come off this week. On the contrary, strong inflows at the open of almost every month, combined with anticipation for Intel's update, suggests tech will probably continue to lag but doesn't necessarily have to give up that psychologically important 2K level this week--at least not until after Intel weighs in. Just know I don't think this is another August or November, previous occasions when NAZ looked about to rolled down a hill but was pulled from the clutch of the bears: I simply don't see Intel saying anything "good enough." to provide the mojo the group has lost.

Elsewhere in the market, it's quite possible the major indices will retest recent highs or even bust out to new highs--at least if February Same Store Sales (SSS) are as good as I suspect they'll be. Not only were the malls well trafficked in February but comparisons to last year are relatively easy. SARS, and the build up to the Iraq war kept people home, instead of shopping. Oddly, if SSS are as good as I think they might be, homebuilders might be chief beneficiaries, since it's a group that exited February strong yet still under suspicion, with many waiting for a slowdow that may be inevitable  but doesn't   seem iminent. Strong chain store sales are often seen as proof of consumer confidence, which is what's deemed necessary to keep the housing boom going. Of course, the early in the week vehicle sales numbers won't compare well to a year ago but that should come as no surprise--to anyone. The prior pace was unsustainable and, if anything, weaker vehicle sales are often offset by strength in other consumer names, because major purchases of expensive durable goods often chasten consumer spending for a few weeks.

Bear Stearns holds a Retail, Restaurants & Apprel conference, while Merrill Lynch hosts Advertising, Marketing, Education & Information. Bear wins laurels for hosting a group that's been making new highs. Just be aware retail/apparel often puts in a short-term peak this week, concurrent with the February comps and last of the big earnings--with Costco, BJ's Wholesale, Hot Topic, Chico's Fas, Saks, Dillard's, and Staples just a few of the names on tap. Now when I say the group tops, I'm talking about putting in a short term spike on the comps sales out Thursday, followed by some plain vanilla profit-taking, not anything really serious. This year, an early Passover and Easter will help boost March retail sales. Merrill's Advertising, Marketing, education & Information is quite a mixed bag, with Disney's embittered Shareholder meeting about to convene, and Viacom looking like a tech stock--it's been so weak. Comcast, yearning groom of DIS, has also been hit, while radio, in general, hasn't been doing well--despite the election year. As for Education, brave, brave souls, from Corinthian College's trading hiccup, to ITT Education's investigation, there hasn't been much to love in that group for the risk averse.

I'm not much worried about Wednesday's Beige Book, since the Fedheads have been frequent speakers, lately, and all towed the line about employment picking up soon. Never mind they've been dragging that line around for two years, asserting rising unemployment is just around the corner--that has nothing to do with it. The market hates surprises and the Beige isn't likely to surprise--not when it's based on a survey of businesses around the country, conducted by federal beancounters well aware of what the outcome is SUPPOSED to sound like.

As for industry trade shows, well, let's just say I'm underwhelmed. Pet suppliers will be on display at Pets 2004, in Orlando, but earnigs from PETsMART won't have me saying Woof! PETM, in particular, is on stilts, as overbought as any stock around, so look for it to fall on the news, especially if it continues it's ascent in advance. The Pet show is just one of many niche retail trade shows set for the coming weeks, with retail buyers descending on New York, this week, to actually order back to school merchandise. Beyond retail specialties, the trade show conference is dominated by healthcare/biotech, of one sort or another.

Superdrugs & Superbugs in London, will be followed by the American Pain Society, and the International Congress on Infectious Diseases. With Avian Flu suddenly cropping up in the U.S., it's not hard to imagine what some of the abstracts will be about--even if they weren't scheduled months ago. Likewise, Lehman Brothers is holding it's Annual Healthcare Conference, in Miami., starting the 3^rd, while the American College of Cardiology, planned for next weekend, is something to position for in advance.

In sum, I'm looking for more aimless trading until Wednesday afternoon, when I expect to start seeing retailers catch bids in advance of strong comps. Thursday, SSS should give the market one last boost but I don't think most of the rally leaders hold their bid into the end of the day, when traders will be positioning in advance of Friday's Unemployment Report. Note, last week, no one suggested Greenspan's confidence in the turn up in hiring was based on his "preview" of the coming data--the data simply isn't prepared that far in advance, and no one wolud believe it. The daily CNBC coverage of three days of hiring at the Seminole Indian's Hollywood FL hotel/casino is proof of how rare an event hiring has become. The economists have consistently overestimated the new jobs portion of the Unemployment report, so there's little reason to expect anything different this time. Anyway, given the double edged sword a strong employment report would be, one can only hope the report isn't either too hot or too cold--or Chicago will start pricing in earlierrates hikes, which won't help equities at all.

Now, when I said the indices should meander around this week before a top that could arrive Thursday, that doesn't mean the indices will remain flat. In truth, both the S&P and DOW should show the typical early in the month automatic inflow upside bias, even as NAZ is likely to get sold, again, on every pop. Since we'll be deeper into warnings season as each day of this month passes, rather than see dip buyers, or holders pining  for yet another Pop, I think the rallies should be sold, to build cash for better opportunities, the best of which may not come until closer to the third week in April, when the real earnings start coming out in large numbers. 

© 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.

Ya know I run the charts every night. Even if I don't share what I see, directly, by talking about specific technical levels, the charts inform what I write every Sunday night, for this post. Without charts, I couldn't possibly conclude whether stocks were going to rise or fall, or pinpoint which shares seem poised to outperform. With that in mind, I'll propose a rally to start the week, this week, with tech participating at the start. But I'll also point out the unlikelihood of NAZ really building a head of steam and breaking out of what is clearly, now, a short-term downtrend.

On the economic calendar, PPI will be released sometime this week, after last week's delay while the bean counters work on integrating new data into a revised series. Revised, you say? But of course: the government has regularly revised data series that don't bend to it's will. Trouble is, PPI's changes were more of a challenge than expected, so as I write Sunday, all we know is it's coming--like Easter, sometime soon. Meantime, the Conference Board delivers it's Consumer Confidence Index Tuesday, while UM finalizes it's Sentiment Index Friday. If history is any guide, the Conference Bd's data should be higher than UM's, though both will remain below January's--that always happens as Winter starts to wear on mass psychology. Additionally, I'm not as optimistic about Jan's Durable Goods number, out Thursday, as some are. New Home Sales, likewise, could have taken a hit, thanks to severe winter weather in most of the north, which discourages what, for many, is one of the rites of spring--traipsing through model homes. Friday's Revision to Q4 GDP is expected to come in unchanged--especially after December's whopper of a Trade Deficit. All in all, not much to get excited about in the data this week.

But then, who needs data when Greenspan will be speaking three times--once before the Senate Banking committee on GSE's. The Fed's Bernanke will also be jawboning this week and, say what you will--his as likely to flair the animal spirits as anyone--often speaking more plainly than most Fed members, including speaking his mind--though his disclaimers about speaking for himself, not the FOMC, as a body, are roundly ignored. Since Greenspan added much liquidity, after draining some in Mid-January, we can assume he's micromanaging again. Net effect? He's cooled the beast that was the market's rally, early in the year, but isn't about to see it surrender too much of recent gains. With the added liquidity, a drop in oil prices and more strength for the dollar may be just what the doctor ordered to keep the markets consolidating by marking more time than giving back too much price.

The earnings calendar moves, almost exclusively, to retailers, , with Lowe's, Home Depot, Bloomingdale's and Macy*s Federated, Tiffany, JC Penny, Limited, Kohl's, Gap, and Children's Place, just some of the names expected. But there are a smattering of non-retail earnings to come, with Clear Channel Communications and Autodesk just two prime examples. Still, it's retailers, retailers, and more retailers, from here on out. The group will have it's spate of trade shows, as well, with Off-Price Specialist, ASAP (for immediate delivery), eTail, and MAGIC International all set to meet and attract analysts. For emphasis, Bear Stearns holds it's Retail Conference, which includes Restaurants & Apparel, while some of the names will appear at Raymond James 25^th Annual Institutional Investors Conference.

For tech, Goldman Sachs holds it's annual "Investment Conference," which includes some large tech names but that is a double edged sword. Warnings season has begun, with nearly two-thirds of the quarter now over. Given this quarter is the one least likely to produce upside surprises--and given that many companies projected only 3--5% declines, this quarter, when 10% are more typical--there's a lot of room for disappointment, with only last year's pre-war easy compares to save the day. If you remember back to the recent Thomas Weisel and Merrill Lynch tech conferences, you surely noted how little news, of any kind emerged from those meetings. Trust me, bad news makes the loudest noise--so it's warnings to watch out for, first.

Boston Scientific and Symantec plan Analyst Days, this week, as do Pulte Homes and Sandisk. Perhaps more important are mid-qtr updates from Kulicke & Soffa and Novellus, especially after the less than enthusiastic response to Applied Materials significant earnings upside and bullish outlook. You might recall Novellus triggered the Semi correction when it missed estimates, which it blamed on orders pushed back. If orders fell into this quarter, instead, it darn well better say so during it's update cause NAZ is closest to seeing the wheels fall off.

Regarding other trade shows scheduled, OSA--the optical society, is a geek event, concerning a group that was so low, in '02, it's meeting was cancelled and now raised to much higher on optimism and excess pared back, some of the engineers attending no longer have to worry about which companies will survive to employ them. My eyes glaze over, though, looking at most of the rest of the schedule, and seeing Healthcare Information, Supply Chain Forecasting, HR Summit, National Manufacturing Week, and ICCM: Call Center & CRM. GSM World Congress, in Cannes, though, might give a boost to some pressured when it was believed a European name would bid for AT&T Wireless, while Biometrics, in Miami Beach, has often caused some micro-cap names to sprint. You'll forgive me if I don't name names (the calendar does) but I'm not in the habit of making people familiar with some of the most speculative names around--just not my style. While GSM Congress meets in France, BroadBand Wireless World meets in San Diego. Again, I can't say the prospect rolls my sox up and down. I just have no taste for tech, this time of year. CEA Winter might be one heck of a party but it's known for tight security--and little news.

SEMPTE: Motion Imaging may be lots of fun to attend but doesn't excite me: at best we may hear about some blockbuster picked up by a network in time to fail during either the spring or fall sweeps on TV. Of course, we're likely to hear more about next Sunday's Academy Awards than anything else--cause CNBC is as star struck as any second stringer around. Heck, CNBC even reruns Donald Trump's Apprentice which it promotes relentlessly--despite the fact that The Donald's casino company is teetering on the edge of default.

Of course, if hanging on data and Fed speakers are not your idea of fundamental support for trade decisions, you can always tune in, instead, to the many trials of former executives. This week, more on Martha, with the penultimate question whether she will, or won't, testify in her own defense. Meanwhile, the Rigas of Adelphia Communications fame will see their trial begin--so watch for more camera work of the fancy wheels pulling up to the courthouse and, perhaps, to be political correct, we'll have CNBC dissect the apparel--just as they have throughout Martha's trial, particularly fixated on what coat she wears to make it from the car up the courthouse steps.

Does any of this sound like a catalyst for a market move? Doesn't to me either--though I'll give my vote to Sir Alan and his crew for potential market moving comments, seeing as perception seems to mean more than actual words, when rates might be the topic.

In sum, a rally to start on Monday shouldn't deter NAZ from completing it's mission to the downside, working off some of that remaining 83% gain, since the bottom. The listed, still, look stronger than four letter land, with banks and brokers clearly not ready to give up trying to reach higher prices. Ends of months often bias to the upside but that didn't happen in January, so it's not a guarantee. If you have to be long, I'd do it in retailers, if I thought I had an edge on any of the upcoming earnings or possible upside announcements in advance of Bear's Retail conference but, otherwise, I'd rather use rallies for profit taking--building cash for what's sure to be a better buying opportunity, in March.  

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

In sum, I expect typical expiry action this week, with a brief relief rally Tuesday after a long weekend, followed by weakness into Thursday, when a reversal should arrive. After 4 straight weeks of negative action, tech looks like it still has some unfinished business to the downside that should be relieved by the end of the week, when an oversold rally could materialize. Consumer names will dominate the news, with CAGNEY and the retail earnings season hitting it's stride this week but tech should benefit, after a fashion, from the Intel and Texas Instruments Devcons. Of course, with March often another weak month for tech, and the quarter at it's exact mid-point, tech rallies should be used to advantage--and that doesn't mean getting long. This is the quarter when earnings warnings aren't sufficiently offset by upside announcements--since this is the quarter least likely to produce any. Furthermore, as winter perdures, a collective seasonal depression often overcomes the populace, mass SADD (Seasonal Affective Disorder, in the medical books),, which has often lead to more selling as warnings seem to accelerate. Use rallies to raise cash in everything but R.E.I.T's, which have often outperformed in March. So, too has gold,  in the past, as foreign manufacturers, India, in particular, buy raw materials for the jewelry trade, as factories start humming with Christmas, '04 production.   Don't know which one to buy? Try one of the HOLDR's or ETF's for R.E.I.T.'s and sit back and relax. The long promised metals ETF hasn't made it's debut, yet, but may very well by the time March rolls around. 

Trust me, retail and biotech outperform in February, while gold and R.E.I.T.s outperform in March. If you're going to stay long, at least keep seasonality on your side. If you'd rather be short, just bear in mind Friday's rally helped carry the indices right outside the fence--not quite strong enough to predict another leg to the rally but no where's near broken enough to count on a quick and steep wholesale decline. If anything, the financials were so strong Friday, with many avoiding a trend break at all in the two-week decline, it's really only tech that's still in trouble, while internets had started catching bids by Thursday, before digital tech even climbed a board. Bottom line, protect yourself, but don't get too aggressive in either direction until the market shows it's hand. My gut may tell me there's more to the correction straight ahead but the turn didn't show up in the charts by Friday's close. Whether that means there's more rally to come for hours, or days, it's too early to say with any certainty. 

© 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.

In practice, central banks appear to appreciate the importance of influencing market expectations about future policy. ….In the United States, the August 2003 statement of the Federal Open Market Committee that "policy accommodation can be maintained for a considerable period" is another example of commitment. The close association of this statement with the committee's expressed concerns about "unwelcome disinflation" implied that this commitment was conditioned on the assessment of the economy. The conditional nature of the commitment was sharpened in the Committee's December statement, which explicitly linked continuing policy accommodation to the low level of inflation and the slack in resource use. More generally, in recent years, central banks have devoted enormous effort to improving their communications and transparency, a major benefit of such efforts should be a greater ability to align market expectations of policy with the policymaking committee's own intentions. *link to URL for full speech here.

So, fully two weeks before the FOMC met, Bernanke was letting the markets know that the FED's intentions to remain accommodative were tied to a mix of economic datapoints: deflation, slack in the economy, with employment widely seen as a third. The refinement of the Fed's policy statement at the January meeting, to talk of "removing" it's accommodative policy in the January statement either came as a result of so many asking how long "considerable period" might be, while the FED was clear in signaling it wasn't referring to time but conditions. If the Committee's target was-NOT a bounce in the dollar and reversal in stocks, it missed by a mile, no matter how far the Committee thought it went in preparing the markets. At least we'll find out what the Committee wanted to happen in reaction to it's statement since Fedheads Moskow & Bies will speak this week, Susan Bies before the Bond Market Association, clearly the group most impacted by every FOMC sneeze or word.

Of course, the FED's statement is already old news, with the markets looking ahead to Friday's Unemployment Rate, the topper to a week filled with January clues. From Vehicle sales to both the Manufacturing & Service ISM, the markets will respond to what January offered, with the Preliminary Q4 Productivity & Costs out Thursday, along with January chain Store Sales. With the markets at an inflection point, and the bond market prepared for the Fed to raise rates under certain conditions, the bond market should once, again, be the chief influence on stocks. I was very happy to hear Joseph A. Banks announce that the cold winter hadn't hampered sales and might have helped sell higher margin outerwear because my sense of things was January '04 was far slower than January '03--which it may very well have been in Florida, where I'm located. Of course, I have plenty of friends up north who are bemoaning the deep freeze and staying indoors, period, avoiding driving on ice, so I'm not sure Jos. Banks statement will bear fruit for other retailers but one can hope..

The Unemployment Rate, of course, is a complete mystery, not only revised in months to come but based NOT on applications for benefits filed at state unemployment offices but on surveys of businesses and households. Then, given the propensity for the Fed's to adjust the numbers based on their own idea of seasonality (Retail LOST 37K jobs in December when retailers failed to hire those 37K bodies), it's possible the 37K retail employees NOT hired in December will also be "employed," or, at least "not unemployed" in January, while many job seekers who sat out the holidays probably and, therefore, weren't part of the worker pool, in December, should have returned to actively seeking jobs in the new year. A mess, I tell, ya, and that mess is what trillions of dollars rise and fall on every day in the bond and currency markets.

As for earnings, Cisco is, unquestionably, the top dog, this week, by which I mean the name every analyst and media interview will touch on. Given Nortel's big week, last week, the bar is pretty high for Cisco. As seems fitting after the SuperBowl, both bear giants, BUD and Coors report this week, though you know it's a group I like better right before summer. Otherwise, a mix of companies report, including some more media companies, energy service names, and other tech. A smattering of retail/apparel names will weigh in with earnings, especially on Wednesday but expect the group to start releasing not just January but quarterly sales in fits and starts, all week, before Thursday's official release date for Chain Store Sales.

In addition to the vehicle sales data, the National Automobile Dealers Association will meet in Las Vegas, more commonly referred to as NADA. But it's retail/apparel that really starts dominating, with Chain Store Sales, the New York International Gift & Housewares Fair (in New York), ISPO for winter sports in Munich, Menswear Preview, in Chicago, Electronic Retailing, in Florida, Fancy Footwear, in New York, and, to top off the industry events, CIBC's 7^th Annual Retail Conference, in Toronto, all of which is quickly closing in on MAGIC, the largest show of the year.

Which isn't to say tech is just fading away. On the contrary, DesignCon, in Santa Clara, is where Intel will be releasing more details about it's chips, along with officially announcing the first shipments of Prescott, while AMD awaits confirmation that Hewlett will migrate to it's Ahtlon64--despite HPQ's part in developing the iTanium chip. RBC Capital will host it's annual Tech, Telecom & Media Conference in Banff, Canada, will there's also an Internet Security Conference in San Diego. Across the globe, Net & Com meets in Chiba, Japan, but all that's secondary to Thomas Weisel's annual Tech Forum in San Francisco, known for as many as 300 presenters with break out sessions often off limits to analysts. While it's too soon after earnings and too far away from end of quarter for warnings, there's little patience for tech, right now, aside from AT&T Wireless, the subject of a takeover. and the networkers, after Nortel's surprisingly great quarter last week. Problem is, Cisco could dash all the optimism, this week--not a prediction, just a possibility.

For my part, I'd rather concentrate on the American Gaming Summit, in Las Vegas, that starts on the 3^rd, 'cause people rarely cut back on their vices and, with the markets recovering in the last year, there's more reason to believe people will indulge. And I'm not just talking about betting on the SuperBowl. At least gambling is a growth business, with more states allowing casinos, and Native Americans asserting their advantage, where states are reluctant.

Normally, I look for the markets to top around the 5^th of February and there's still a very outside chance that could happen but I wouldn't count on it. The preliminary GDP struck me as quite low, after strong earnings and a dramatically lower deficit. Friday's Unemployment Rate may very well reflect an uptick in unemployed, as those who sat out the holidays return to their search. Q4 Productivity & Costs doesn’t' strike me as a number to hang a new high upon. Nor does Thomas Weisel's meeting: those still standing in the market are mindful of their seasonality and are more likely to take tech profits on every pop, than shovel money in on every decline--especially after NAZ posted such stellar gains last year.

Years ago, I used to find investment ideas around the SuperBowl--like the year Breathe Right made it's debut--but I haven't found good ideas in years and didn't this year. Nor do I subscribe to the SuperBowl indicator, which wouldn't seem to outrank the presidential elections as a factor for the markets. Instead, as I concede the top is already in, I'm looking ahead to meetings of both the G-7 and OPEC and thinking the markets could have a few weeks to mess around to the downside--especially IF OPEC announces it won't use dollars, exclusively, as it's oil currency of choice.

Markets word off extended conditions by either marking time or declining. This time I think we're in for a bit more of a decline than we've seen in the past 11 months. PLEASE BE ADVISED the February Outlook will NOT beposted February1st because we've just become aware that out domaine name is one of those that's been hijacked for the MyDoom virus. Because the weekly  was more important, I decided to post it, then have the webmaster shut down the mail and other features on thesite, to prevent any possible infection to our servers, or from ours to yours. 

© 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. At the time this was written, Sandi and/or her affiliates had positions in Intel & Cisco, though those positions can change at any time without notice.

Tuesday, the Conference Board releases it's version of Consumer Confidence for January. Given it's tendency to print a little lower than UM, and to lag UM at extremes, it should provide the media's excuse for Tuesday's rally, which we were likely to see since the lead up to FOMC announcements tend to have an upside bias. Wednesday, we'll hear December's Durable Goods report and, if auto, retail, and electronic sales are any indicator, the markets should have reason to trade up before the 2:15pm FOMC announcement. Oddly, both Berry & IP (Washington Post & Wall Street Journal, respectively) haven't offered much speculation, yet, so the market had little to chew over Friday. No doubt they'll catch up Monday & Tuesday.

Thursday's Advance Q4 GDP is guesstimated at 5.2% but a higher number wouldn't surprise after the lower than expected Trade Deficit most recently announced. Of course, by Thursday, T-3 settlement and the FOMC meeting will be history for January, so there's little to stand in the way of the usual end of month rally. Should GDP print higher than expected (I think it could), the rally could get quite euphoric, which would set-up an excuse for traders to pay more than usual attention to the UM Final Consumer Sentiment on Friday which, I think, is likely to be a shade off the preliminary reading which struck me way too high.

As it happens, the week still promises a couple of key earnings reports, starting with a mid-day report from American Express, on Monday. With travel recovering, and retail sales better in December than last year, AXP should deliver. McDonald's and Texas Instruments report Monday, as well, with both on the recovery path. Novellus could spoil the semi equip stocks but, then, they've been spoiling themselves for over a week, after too big a run.

Tuesday promises the resurrected Xerox, as well as internet bell weather Amazon, which, it just so happens, has topped estimates for quite a number of past quarters. It will share the spotlight with Electronic Arts, a bellweather for 'he gaming sector. By Wednesday, the market will be slow, awaiting the FOMC statement which, lately, has contained surprises of it's own--including shaded changes to the paragraphs for which neither Berry or IP--or any economists--provided guidance. Earnings from Altria, Time Warner, and Proctor & Gamble will probably get the most attention. Friday, thankfully, is a slow earnings day, but, then, it'll be the last day of the month to trade, with UM, December Personal Income & Spending, and a peek at all of January from Chicago's Purchasing Managers.

Because so many companies report, the investment conference calendar remains thin, before some biggies the first week of February. Analyst meetings hosted by both Bank of New York and Honeywell, a Smith Barney Financial Services Conference, USB Healthcare and A.G. Edwards Retailing Science/Technology, as well as Raymond James' Growth Airline Conference are it. Note, no 350 presentation Technology conferences this week but there will be next week, when Thomas Weisel Partners holds it's annual Tech Forum, which has often spurred the group to an intermediate high, since it's too early for warnings, and the most recent quarter's earnings often leads to optimism.

There are several Trade Shows, including Oracle AppsWorld, ComNet, PaperWeek, Internepcon/Electrotest Japan but it's the retail trade shows I'm starting to focus on, as I always do the last week in January. Leading off is SIA-Ski Industries America which is a full two months earlier than it used to be. Premier Kids is the kids market show in England, while PGA (Professional Golf Association) meets starting Thursday, in Orlando. Speaking of kids in England, the U.K. Toy Fair meets in London, while the New York International Gift & Housewares show will convene next weekend. Just around the corner are ISPO--the biggest winter sports show anywhere, in Munich, as well MAGIC, the fashion industry's big show in Las Vegas. With Valentine's Day only weeks away, and Easter, Spring and summer the deliveries retailers are ordering, now, while you're bundled up against the cold and ice, it usually pays to remember retail earnings will, also, soon dominate the news flow, starting with January's Chain Store Sales on the 5th, at which time many chains will announce quarterly sales and offer earnings guidance.

So, as I do every year at the end of January, I'm thinking about retailers and apparel manufacturers, and planning on scooping up on weakness, concentrating on sport names, especially, because it's an Olympic year, with the games starting mid-August, in Athens. Because it's also an election year, and a weekend poll has suddenly made it a horse race, claiming Kerry leads Bush, I'm thinking about media companies likely to benefit--just as the group starts reporting, some, like New York Times, this week.

So for me, it's a new year, and a new day but the same market, with the same seasonal influences likely to impact trading. Usually, we see the first moves in retail/apparel starting around the 25^th but, last week, I noticed names like Wal-Mart and Lowe's starting to catch some inflows a few days earlier than usual, while Nike has been on fire. Likewise, I watched the energy complex shoot for the moon and, quite honestly, more moderate temperatures might squelch that quickly. Of course, there's an upcoming OPEC meeting, at which I worry more about OPEC talking about switching to the Euro, from the dollar, as it's currency of choice than I do about it's production levels--given widespread cheating. But I throw it out because landmines still await this market and, though I expect one last flourish to the upside between now and February 5^th, as always, I'll be taking a more defensive posture in the coming 10 days--scaling out of positions and/or buying some puts against a possible period of winter doldrums in the next 8 weeks. Historically, as winter wears on and the news flow dries up in the black hole between earnings and warnings, the market has pulled back, sometimes quite seriously. This year, Q1 is up against some of the easiest comparisons in history, since SARS and the wait for the first bombs of the Iraqi war practically crippled economies around the globe but, now, this quarter has some pretty tough sequential comps to beat, which means the streets may not be paved in gold, as they have been for almost a year.

Speaking of gold, it's often been a good investment in March, as have REITs--so you might want to keep an open mind when you're looking ahead. I do know puts have never been cheaper which means you can insure your portfolio at bargain premiums--perhaps the only bargains the market has to offer. 

© 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.

Just plan your exit strategy; replace shares with LEAPs if you can't stand to get out too soon and hold BOTH investments until stocks decline to some trigger below current trade. But, if you think you'll have plenty of time to move out when the market moves down, just cast a gander at oil services and, especially, gold stocks last week--the exits got awfully crowded, at one point. There's a lot of money in tech, which means there'll be a lot more looking for the exits when the time comes. Trust me, you and I will NOT be first--no matter how fast we pull the trigger. With 41% of all trading done by program, and the futures leading equities by almost a half hour--bigger boys with better views will be first. Tread carefully out there. Even trees don't grow to the sky without losing some branches and leaves along the way. And while the week after this one as well as the first week of February might look like spring--with new branches and leaves sprouting everywhere, winter will soon follow. A squirrel doesn't store seeds for spring, he does it for winter--make sure you sock some seeds away while the picking is easy.   

So does all that mean I'm defending the rally? Not really: I'm very concerned about the dollar, the deficit, and the high price of crude. I'm equally concerned about the exuberance in microcaps--the sub $2 stocks that are suddenly challenging $10. Now, add to those worries the possibility that the 8.2% GDP we saw in the 3^rd quarter was strictly a catch to the depressed activity during SARS and the lead up to war, and it's easy to guess Q4 won't be quite as robust as Q3 was, even though the market seems to be pricing in robustness not just for Q4 and the earnings about to come but for the next few quarters, as well, when we may very well see a relative slowdown--relative to the unusual Q3, though still relatively strong compared to Europe.

Big doings this week are the options expiry at the end of the week, when the bond market will also close early in advance of Martin Luther King day, Monday, when all markets will be closed. For fun, I'm looking forward to the chatter about former Treas. Secretary O'Neill's criticism of the current administration, which just happens to be his former employer. Having failed to find weapons of mass destruction, it may not sit well with some of the populace, as well as overseas, to hear that Bush was "blind" and planning an Iraqi invasion since almost the minute he took office. 

The week a buildup to earnings sweeps week, with Yahoo, Intel, Apple, and GE scheduled to report--which'll make the expiry that much more interesting since there's a lot of optimism built into all four shares, optimism mirrored by the stocks' respective call open interest, even as both puts and calls are so cheap they're milk money, which means there's plenty of room for some big players to press their advantage. Ya know stocks often sell off when they're priced to perfection in advance of earnings.

If you happened to watch the biotech index Friday, you saw the dip and aggressive buying in advance of this week's 4-Conference Protein Information week, out in San Diego--an event that should boost biotechs the way last week's Needham conference boosted tech. The group also saw positioning in advance of the JPMorgan 22nd Annual Healthcare Conference, which began life as the Hambrecht & Quist Biotech Conference, long before H&Q was acquired by Chase, which was later merged into JPM. The H&Q conference was always reason to position long in biotech but JPM has been transitioning the event into 50% big cap pharma, so it's not quite the same as it used to be. But that didn't stop traders from reaching for biotech the last two years.

Also jiggy Friday were casinos, in advance of the Annual Western Indian Gaming Conference, which began in Palm Springs, CA, Sunday.

If you thought the SOX had run it's course until Intel reports and sets the year's capex, that may not be true. The SEMI Organization is holding it's annual Industry Strategy Symposium in Pebble Beach, so there's more reason to suspect we may be buying in advance--though also more reason we could see selling on the news.

Wachovia is holding a so-called "Multi-Industry: Conference in W. Palm Beach but the only names it announced for the event are the homebuilders, which were starting to catch bids Friday on the bond markets cut in yield after the weaker than expected employment report. By the time Deutsche Bank Securities hosts it's Real Estate Outlook Conference, on the 15^th, all the news should already out.

Energy Service names, especially, took moon shots on Friday, which the Reg FD Press Releases in advance of Merrill's Energy Conference are unlikely to support. There have been more warnings from the energy sector than any other, I think. Of course, Apache splits this week, so it's been an especially strong E&P, helped by the frigid weather in the Northeast, which should have raised demand for Natural Gas, a big portion of APA's reserves. For the past few months, stocks about to split have run up in advance, then sold off on the split. Caveat Emptor!

Prudential is hosting a Retail Conference for a group that sold off so badly last week even names with good comps went down. I don't expect the conference to help. The sector has long been one to avoid for the first 25 days of January, or so, except with an eye to position long for February, when it usually outperforms the general market, thanks to earnings that are rarely as weak as the comps would suggest, thanks to better inventory management and trimmer staff--those 38K jobs "lost" in December.

Come Thursday, Gillette will be holding a product introduction in NY, but I didn't like the way so-called defensive names acted Friday--food stocks, especially, so I'm not really interested. For all intents, G has been rangebound since 1998, and there's little reason it'll break it's record now.

On Tuesday Alan Greenspan speaks at the Bundesbank. Anyone who expects him to really comment on the dollar's continuing fall through all his doubletalk might be sorely disappointed. Ditto Fed Reserve Governor Olson, when he speaks on Tuesday, also. Ditto the Philadelphia Fed Bank President when he speaks Thursday, though all of them may suggest rates can stay low for a more "considerable" period of time--especially after Friday's Unemployment data. Wednesday and Thursday are almost the Data Derby, with Dec PPI and CPI, the Fed's Beige Book, the Trade Deficit, the NY and Philly Fed surveys of manufacturing, as well as Thursday's December Retail Sales which may, in fact, be stronger than some expect since it includes restaurants, gas stations and the like.

Now, I always remind readers that Expiry weeks involve an up/down or down/up sequence. In the past, it's been wise to watch Tuesday and Wednesday but, since the bull run really got charging in March, Thursday's been the reversal day, usually the down day, which may very well synch with the post Intel earnings action, if Intel's earnings fail to match the buildup.

Traditionally, stocks have sold off after the first week of January, and haven't recovered until the last few days of the month, when end of month window dressing causes a turn that boosts 'em straight into the first week of February. I see no reason to think this year will be any different than usual. That means the bull could run into some muck this week. Of course, as it's been throughout the 15 month bull run, the indices could merely stall for a coupla weeks or so, without really suffering a serious setback but the odds weigh against it after such a sustained period without so much as a 5% correction. If the 5% correction is overdue, than this might just be the right time for it to arrive--assuming the sellers have it in them to pull the trigger, something they haven't had much impetus to do until now.  

© 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. At the time of this post, Sandi or her affiliates had positions in Intel which are subject to change at anytime, without notice.

January 5—9, 2004    DON’T LISTEN TO ‘EM    The talking heads are making my blood boil. They’re all convinced 2004 will be another good year for equities, like 2003—obviously meaning stocks will rise—no shorts or bears talking about another good year in ’04 like ’03. Others would have you believe the Fed’s on hold until ’05 cause it’s an election year. How short their memories! As recently as the late 90’s the FOMC raised rates at a December 23 meeting, when all the talking heads were convinced, vocally, so, that the Fed would never raise rates right before Christmas. It did.

So there you have the top 5 events of the week: CES, the auto show, Thursday’s chain store sales, Friday’s Unemployment Report, and earnings from the first DOW stock to report. Since the week ends with the most important report, it’s easy to see how a good report could send the markets to a Friday flourish to the upside but also easy to assume there’ll be plenty of reason for some nervousness in advance. Uncertainty often leads to lower markets, which we’ve so politely referred to as profit-taking. What makes me most nervous, of course, is everyone else’s certainty that we’ve entered another year that should see equities rise. It could happen if everything goes just right. But, then, when has that ever happened? 

© 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.

December 29--January 2, 2003   A SAFE and HEALTHY NEW YEAR     Well, I thought I wouldn't write again this year but, after reading Abelson in Barron's, I had to put in my two cents worth. Last Sunday, as I was setting the table for a banquet with friends, neighbors, and relatives I came across the Passover enactment bag near the serving pieces, and realized how much the troubles of the past few years remind me of the 10 plagues Moses visited on the Eqyptian Pharaoh. It was a concept that really jelled for me when I found myself behind Dennis Kozlowski in line at one of the men's registers in the local Burdine's--Dennis trying to exchange a too small black shirt, me forced to explain I was returning three pairs of shorts because the recipient had died--which the salesman found the most hysterical excuse anyone had ever invented--even when I told him I took offense because it was my father who had, indeed, died.

So there I was, thinking about how it all started--with charges and lawsuits against the analysts, with Blodgett becoming a verb, progressed to 9/11, the Enron, Worldcom and other corporate scandals, to BSE (Bovine Spongiform Encephalitis) in England, (later Canada), to SARS, the Mutual Fund/Hedge Fund timing scandals, then Grassogate, followed by a flu epidemic, then a case of BSE in the U.S. and, now, 2 more cases of SARS-- one the lab worker diagnosed two weeks ago, the latest a new Chinese victim.--not to mention Parmalat which may top all prior corporate scandals for duration, since it's beginning to look like the fraud began 10 or fifteen years go. Metaphorically, I could easily draw parallels to the 10 plagues of Pharaoh. Problem is, I think a few more plagues have yet to arrive in 2004, and I don't think we'll get past February before they do.

I think there''ll be more fund and NYSE scandals, yet more corporate scandals but it's SARS that worries me most because no one ever did develop a vaccine or cure. The history of germs is their ability to survive--otherwise science would have wiped out colds and flu years ago. NOTE I haven't mentioned terrorism as what worries me: it's not something I can worry about and go about living at the same time. SARS, however, is something else, and only a fool would believe round two isn't about to visit mother earth before this winter is over. The dollar doesn't seem to worry equity traders when it should, so add a continuously declining dollar and the US debt to the potential for the global economy to ground to a halt over SARS, again, next year, and it's hard to see how the markets can keep rising without interruption.

So that's my top worry of the year but I have others, like what the economy does to keep stock prices rising after it's posted 8.2% GDP one quarter--a quarter, I might add that came after a virtual  6 month shut down while SARS and the pending war in Iraq took precedence over earnings. Worrying me, also, is the elevation of expectations. For 2003, the markets had a free pass to rise after dozens of months of decline that may, just, have overshot to the downside but, now, with everyone sure the economy is not only healthy but getting healthier, expectations have again risen to, what I believe, are unsupportable levels. Is there anyone who truly believes companies can keep growing earnings 30, 40, 50% and better as they did in 2003 from severely depressed levels? Will 5, 10, and 20% suffice? NOT LIKELY, if you've studied markets.

Can homebuilders and vehicle makers top 2003? I don't think so. Can retailers keep growing comps ad infinitum???????? Well, on that score I happen to be somewhat of an expert: back in the early 80's, when I first started selling athletic wear for tennis, ski and swim, the Italian imports were first becoming a rage Ellesse, Fila, Colmar--names people lined up to buy. Soon after, Reebok introduced hi-top sneakers for aerobics, creating a new category. After I left the biz, I watched snow boards take off, ATV's but, eventually, people looked in their closet and said "NO MAS!": People find they'd have to move if they bought another thing--their possessions burst at the seams and, back then, the reaction happened. Suddenly, $6 addidas gym shorts became hot and no one would dare be seen at the supermarket wearing anything representative of past excess, like their $500 track suits, called "warm-ups" back then.

2000 was a defining year for the beginning of the shrinking wealth effect. 2001 for the terrorist attacks. 2003 will go down as the penultimate year for refi's and cash-outs--to enable purchase of  the "treasures" Americans bought for themselves and parked in their driveways, stowed in their jewelry boxes, or put on their feet and heads. But the reaction to excess is always withdrawal, and that's what I'll be watching for in 2004, while almost guaranteeing it will hit full force as early as 2005, no later than 2006.

The upside at home is renewed business confidence and profits after multi-year fat cutting programs, which may very well be futher bolstered in early 2004 by the accelerated depreciation of capital equipment which has already helped boost Deere and Caterpillar as farmers took advantage of historically low rates (PLEASE take a gander at those charts).  AND the upside for multi-nationals will be a whole new globe just becoming acquisitive, China most especially, and there are tons more Chinese to consume than there ever were post-WWII Americans. But the local suburban mall won't look like it's looked the past three years--while New York, L.A., Washington, and Vegas will see the surge of Chinese tourists as they once saw Japanese, Arabs before them and, even earlier, Germans. In other words, all will NOT BE LOST but it will be different, the difference hurting most the locals outside major cities and tourist attractions--hurting most the small caps that shined throughout 2003. Multinationals will have such a clear edge it's stunning--at least until ther rest of the world decides it no longer will take dollars, as OPEC may be first to do.

More immediately, the 2004 elections will likely keep the markets flush with a desire to rise--if terrorism and SARS don't derail them--but by July's earnings reports, the peak will likely be in. If the market is the best discounting mechanism around, come July it will discount the harsh economic realities of the past three years of easy money and tax breaks. You'll be able to confirm the top by the dollar's sudden reversal and recovery cause it'll take more fiscal restraint to get the dollar back on it's feet and smart money will start pricing in that restraint to come after the November 2004 elections--if not before.

As for the January effect--when tax loss sellers slaughtered at the end of the year are boosted to outperformance in January? Unless there's some last minute trimming in the few days left, there was not much of that this year, so there shouldn't be much bounce either. If you look at one-time market faves, like TIVO, you'd have to find a really good reason to choose it, in January, rather than a company with a lot better fundamentals. COULD it be the next Research in Motion? I suppose some believe so, just don't count me amongst them since others have developed competitive products that don't require a phone in addition to cable, IO from Cablevision the most notable. I do think some of the large cap techs that have wallowed for better than a month are slated for a bit of outperformance come the first few days of New Year, the proportions of any move directly tied to the warnings and upsides, of which I expect few--in either direction. Few warnings because of the momentum entering the quarter after the 8.2% GDP in the 3^rd qtr, few upsides thanks to elevated expectations since that GDP print. Exceptions to that benign environment are bound to come from retailers where some, no doubt, will disappoint--trust me: I've been in the mall, there are many stores that analysts recommend--even LOVE--that the traffic I observed doesn't support but, rather, proves, retail is NOT about crunching the numbers past or guidance forward. Ironically, that was the downfall of many a retailer back when I owned stores and watched as the most "technologically advanced" retailers supplied their buyers with computer print-outs upon which they relied for setting percentage increases for the coming year. Know what they all learned? If you sold 22K black ski jackets last year, you're NOT likely to sell even 15K this year cause everyone who wanted black has already bought it. So, when the buyers saw the 22K SKU's sold and and tacked on another 15% in black for the coming year, I knew those retailers would have big mark-downs to take. Trust me: there are some rude awakenings in some hi profile names the analysts loved a whole lot better than consumers did--names I gladly supplied in the last 3 months to our institutional clients.

And bear in mind we've seen many a January where the first 5-9 days or so are the strongest before reality sets in and there's a pullback in advance of earnings, as nerves and rumors make for weak holders. With Chain Store sales out on the 8^th, and the December Unemployment report expected on the 9^th--2004 could see another brief honeymoon period created by bonuses flowing into funds at the end of the year before anxiety kicks in, with few assurances that there'll be relief from the earnings that arrive in earnest beginning the third week of month. Not with expectations so high, this time.

I'll wish you all a safe, happy, prosperous and HEALTHY NEW YEAR, with healthy the emphasis. Since my father died it's really brought home the fact that happy, safe, and prosperous aren't worth much if you don't have your health. Bear that in mind the next time you don't think you need a doctor but the people who care about who do. I've never quite understood what it is about the "Y" chromosome that makes men much less likely to seek professional diagnosis when something doesn't feel right but resistance to doctor visits is as tied to that chromosome as reluctance to ask directions. And don't forget bonds close early Wednesday and Friday but equity markets are open for the duration both days, so the hours after 2pm could get especially interesting, reversing the prior hours' trading--just as we saw in the last few weeks, something that's typcial, too, of bull markets. 

© 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.

We can't completely dismiss earnings, either, since Micron Technology is poised to report it's quarterly losses on Tuesday, which won't do much to help tech shares whose charts are almost universally on the precipice of yet another leg down. NOT JUST MU--but tech shares far and wide, eBay one of the few exceptions.

Data? Yeah we gotz data: Final Q3 GDP, November Personal Income & Spending, the final December U. Michigan Consumer Sentiment, November Durable Goods and New Home Sales--that's a lot of "stuff" for such a short week. Given sales of vehicles in November, Durable Goods oughtta be okey dokey, while UM may tick up a smidge, thanks to the capture of Saddam. Why was it down in the first place, you ask? Thanksgiving and the stress of holidays--happens every year, believe it or not, so there was little reason for the market to react. As for New Home Sales, I gotta tell ya, I'm watching commodity prices rise, ESPECIALLY metals like iron, copper and steel, and wondering how much new home prices gotta rise to account for the added costs. To look at the steel stocks you'd think to the moon. Lookin' a lot like a bubble to me.

Speaking of bubbles, have ya gotten a load of the energy complex, with crude above $33pb and natural gas above $7? Thing is, traders are pricing in a huge ramp in drilling and seismic activity that hasn't happened in the two years since crude took flight--just as semi equip stocks began to price in the big recovery that still hasn't made it's appearance for any length of time more than Poxitany Phil, the ground hog that appears February 1^st and invariable scurries right back into his rathole, presumably predicting 6 more weeks of winter.

So well tech looks about to burrow into the nearest hole, there are bubbles galore in the market to replace tech--the Ctrip.com IPO just another example. But heck! Who cares? Lord of the Rings final episode already took in $246m worldwide, so Aol--OOPS, I mean Time Warner, is off the mat, and looking quite perky, thankya very much, just as competitors in China, or United Online are diving for--well, we don't quite know what they're diving for but it's certainly not longs for anyone who values their investment dollars.

Just to be clear: the Santa Claus rally is a rally that begins AFTER Christmas and lasts into the first few days of January--January a month notable for many market tops, as the doomsayers at ElliottWave have matter of factly pointed out this weekend. But then, you remember January 2000. You remember event risk. You might remember it from time to time as we march to the New Year cause it's all the talk in New York, where Friday's news of terrorist "chatter" involving a female suicide bomber targeting New York cut a rally short. By Sunday, Homeland Security Secretary, Tom Ridge had raised the terror alert to Orange, saying risks are "perhaps greater, now, then at any point since Septebmber 11, 2001. Mayor Bloomberg was urging New Yorkers to "go about their business," while the market made clear, last Monday (for anyone who thought otherwise) that capturing Saddam was no big deal. Of course, the DOW and S&P carried on from Tuesday through the end of the week, once it was certain the message got through on Monday, but it wasn't IBM, Intel, Microsoft, Johnson and Johnson, the telcos, Home Depot, Citigroup, JP Morgan, or any of the more typical momo stocks that took the DOW to it's heights. Oh, no. It was the stocks more easily juiced, stocks that had lagged, badly, through good times and bad, over the past 5 years and more. This Monday? it's a post-Options Expiry Monday, and those are MORE OFTEN down than up, so the Orange alert is only the excuse the media will pin on the donkey.

Tuesday and Wednesday? You'll be tapping your Bloomberg to make sure it's working cause volume is likely to be that low. Friday? No real point to keep equities open that day, except for the money it'll cost specialists to close so many days. Of course Friday after Christmas is almost always up for all but retail stocks but the rise can easily be dismissed thanks to low volume no technician on earth would consider significant enough to trigger a signal.

So pardon me if no investor I know really feels like the markets are up or their portfolio reached another recovery high last week. It sure makes for good headlines, anyway, no matter which DOW stocks get the index there. Just as Saddam's imprisonment made for good headlines, though not for any noticable boost to most portfolios, which doesn't necessarily make most investors or traders money so I'd mind the deterioration in the broader market. Mind me when I tell you the malls are busy but not, quite, unusually so for the time of year. Mind me when I tell you to ignore those headlines about the markets making new highs cause that's a snow job, as much as the snow that socked in New York two weekends in a row, as much as Treasury Secretary Snow, who keeps talking about the U.S. policy of a "strong dollar," even as the dollar keeps sliding down a steep slope that's gotta ripple across the financial markets sooner or later, just as hi metal costs have gotta soon impact new home prices, and the very high price of oil has gotta soon impact consumers and businesses alike. Just as it did in fall of 2000.

Back in the spring, the markets were rising against a psychological headwind. Now, the "markets" are rising against some serious ECONOMIC headwinds--the kind of headwinds that have NEVER failed to undermine economic activity--not the least of which is shrinking liquidity. So don't get snowed. Doesn't mean the markets can't do what they usually do, rally New Year's week, after Christmas, through the first few days of next year. And it doesn't mean the highs aren't yet to come--they probably are, and NAZ may stage another attempt to retest 2000 cause that's the way the MOST players could get trapped. Just don't count on NAZ succeeding--if you're reading this you're too old to believe in Santa Claus. Last week I said the Dow looked headed to 10,318 and it still looks that way to mean. But NAZ??? Kindly look at the charts. Ninety percent I follow look lower from here and I don't think MU's got the stuff to trigger a change in that view.

I wish everyone a very Happy Chanukah, Merry Christmas, and a happy, healthy safe New Year. I promise 50 Weekly Outlooks a year, and have extended all subscriptions to account for the two weeks I didn't post this year. So I've got two weeks off to come--actually 8 weeks off to come, because I've never taken my two weeks off since the website went up. I'll be travelling next Sunday and, given the fact that next week is as truncated as this one, if there's nothing really significant to write about, I may just take next week off. That'll depend on events, the markets, and my time. Please be safe, and be careful out there.  

© 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 think Saddam's capture means much to enterprise business activity in the long or short run but psychology is a very powerful thing: that's why the market anticipated not only the win over Saddam in the original war against him back in March but the economic recovery that would follow from all the tax cuts and other stimulus showered on consumers and businesses. Make no mistake: the psychology just firmed, just watch out for the fact that bull markets often end on good news--on the epitomy of good news, a reason you'll always see mention of events converging in this space. 

© 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 8--12, 2003   HAWAII 5-0  TO FED or NOT TO FED IS THE QUESTION     It's THE question, THE ONLY question: Will the FOMC change it's post-meeting statement? Some say no, because Friday's Unemployment Report was punky for a strong economy and, after all, the FED's number job is price stability and full employment. So on the latter--not yet, though there was a time the U.S. would have celebrated 5.9%. Not now: when you've seen 4.9% and better, 5.9% pales. As for price stability, the big question is how long prices can remain stable if the dollar is gonna keep falling. Answer? Not long. Truth is, the question of OPEC continusing to use the dollar has already been raised to not only justify OPEC holding the line on production despite crude prices sailing above the original band bound by $28 but to suggest production cuts will have to come soon. Fact is, OPEC said the higher prices aren't even compensating it for the lower value dollar, suggesting a cut when the group meets, again, early next year.

The averages should be down--with any highfliers not yet hit hunted down and wounded. Sure, we could rally if the post meeting statement from the Fed says rates will remain low for "a considerable period of time" but that would be the signal for smart traders to take more profits, for smart traders to replace some big winners with some of the cheapest LEAP options I've ever seen. Just be aware that the smart money that runs the show won't be that quick to replace--it'll wait for even lower prices next week, cause that's exactly what we should get. Not because the economy is cooling off or even because slightly higher rates are too high for the market to handle: On the contrary, higher rates would help liquidity at this point--encourage bankers to lend. No, the selling will be purely a function of a year we haven't seen in three--a year with strong gains. Book 'em Dano.  MONTHLY OUTLOOK POSTED 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.

First, once the first week of the month is over, there's only a few weeks left in the year, some of which will be thin and punctuated by holidays, like last week was. Second, December 9^th is an FOMC meeting, which, despite Fedhead promises of rates staying low a long, long time, may very well be the meeting at which the FOMC moves to neutrality, establishing risks as equally weighted to deflation and inflation. The Beige Book was the cue for that change, as all 12 districts reported better activity. Of course, purists will look at the price of gold, the falling dollar and expanding trade deficit, as well as strong Q3 profits and GDP and say a move to neutral is overdue. The FOMC, after all, can remain neutral for quite some time before moving on rates, if the voting members mean what they say when they say they'll stay down a good long time--for as long as it takes for employment to pick up again.

Friday, the 5^th, of course, is the day the November Unemployment Rate will be released and, just as last month saw a "surprising" fall (no surprise to you, since I stood alone in calling for it to fall), retailers picked up the pace of hiring this year--where last year they did NOT. That should make both Friday's Rate and Thursday's new claims favorable to equities.

But it's Thursday that intrigues, and leads to my call for the top on Friday. IDC plans to release it's PC outlook for Q4 and 2004, which should be rise on the strength of both laptops and the first signs of corporate refreshes, which often lags the release of a new operating system by 9 months but, this year, should benefit by the accelerated tax deductions for capital equipment, as well as budget flushing, as spending got off to a slow start, early in the year, as the world waited for the U.S. to invade Iraq. After the bell Thursday, Intel will issue it's mid-quarter update. Once again, it should tighten the range near the top of current projections, at least if the tech section of Durable Goods and reports out of Asian contractors are to believed. Also, after the bell, National Semiconductor will release earnings. I expect it to report well, as it has the last coupla quarters. Throughout Thursday, before, during and after the bell, retailers will report November Chain Store sales, where comps should satisfy, if my mall checks are any indicator. As if that weren't enough, Thursday also promises an IBM analyst meeting, as well as the last day of CSFB's Tech conference, which will begin on Tuesday.

Elsewhere in the market, Sepracor's meeting at the FDA on it's sleep aid has been postponed until February but the week promises an analyst meeting with Eli Lilly, one of the stronger big cap pharma names, while Barron's spoke well of Pfizer and BusinessWeek saw something to like in Merck, down here. Likewise, an Infectious Diseases meeting in Honolulu should bring some more news from both pharma and biotechs, a group that made a strong recovery at the end of last week.

The Financial Time's World Telecommunications conference, in London, won't make many waves since it's number portability that's getting all the attention, here, while, as I said, CSFB is hosting dozens of tech companies. WiFi Planet has often moved stocks but, again, Intel's mid-quarter trumps the rest--even SemiCon Japan and SEMI Trends, in Taiwan.

Retailers will be a focus--not just as traders await comps on Thursday but because this past weekend was one of the most important for the group, with my local assessment positive, as unusually cold weather and a strong influx of holiday celebrants from the north helped crowd the malls and strip centers, with people in a mood to spend. During the week, retail earnings will dominate the slip list of reports, with Jos. A Banks, Chicos, Sports Authority, Blyth (the candle company), CSK Auto, and Dollar General some of the better names on the calendar.

In gaming land, Mandalay Resort is slated to deliver earnings, while, traditionally, all the top casino execs meet in Vegas the first week of December, attracting analysts to the city like flies to hamburger with relish. Pepsi meets with analysts Tuesday but I thought it weathered news of Subway's switch to Coke quite well.

The only potential fly in the ointment this week is the meeting of both the Bank of England and the European Central Banks, with the former very likely to raise rates. Should the BOE boost rates, the dollar could take another hit. I'm quite sure the ECB would like to raise rates, to make a point, but it's already been forced to ease the one size fits all deficit requirements and is in no position to get cute with rates, while German Unemployment remains so high. Were Duesenberg still top dog, I'd foresee a hike but the new top banana should exercise more restraint, especially since his country, France, is one of those that needed some "flexibility."

So, all in all, we're likely to see higher prices next year but for this year, the usual strong fund inflows the first week of the month, as well as the convergence of so many "events" Thursday and Friday, leads me to conclude the peak for the year will come Friday, with the coming FOMC meeting the near-term excuse for profit-taking. Of course, December should be all about preserving profits, which I'll write about in more depth by Monday, when I post the new Monthly Outlook. But caution won't be the word to describe trading later this week. On the contrary, euphoria should rein--which is all the smart money should need to start taking profits.

I realize the past few months have seen high's mid-month, between the 13 and 19^th, with both of those dates closer to the time portfolio managers will get serious about taking profits before their year-end vacations but I don't think we'll see a rally into mid-month this month. The final deciding factor, for me, was the "Technology Barometer," on page T4 of Barron's. All ten stocks featured weekly on that page have risen, in concert, only 3 other times in the past 3 years. Each time they did, it signaled a top. Okay, you say, the markets went down most of those years, until March, so that's hardly an indicator. My answer to that was the time all ten finished higher this year, which was followed by the most serious correction we had all year--back when the Iraqi war campaign was declared over. Silly indicator? Maybe but my mind was made up about December 5^th almost a month ago, so T4 was just another spice to the mix.

Away from the market, I want to thank all of you who sent e-mails of sympathy on the loss of my father. I really appreciate it, and hope I got back to all of you individually. If I didn't, it's not because I didn't mean to. Of course, you'll all have your subscriptions extended by a week, to make up for last week, when I didn't post. But I'd also like to tell anyone who lives in NY, or another major US city about Hatzollah (in NY, at 131 West 86 street), which, unlike city ambulance services, responded to a call in 3 minutes, and took Dad to the hospital of his choice. This ambulance service, whose name means "rescue" in Hebrew, offers it's service free of charge, asking only that donations be sent, later, to it's offices. Wouldn't even take a tip. Not only were they quicker and better than a city ambulance, that would have taken longer to arrive and transported Dad to the nearest hospital, instead of Memorial Sloan-Kettering where he was being treated, but, down here (southern Florida), when you call 911 and ask for an ambulance, not only do a minimum of 7 public and private versions respond but they, then, fight over who was first, so the winner can claim the $250.00 fee required UPFRONT. If you know someone who's sick and who lives in a major city, please ask them to check for a local branch of Hatzollah in their area. It's the absolute best gift you could give this year.

Likewise, if you know a single person--teen, college age, divorced, or other--who frequents clubs and bars and you're looking for one heck of a gift, mosey over to safcard.com and find out where their drink test is sold locally. It's a test strip, each good for two drink samples, that tests for 9 potential mickey's used to drug people for date rape. It's what all my friend's kids are getting this year--even those college kids taking a semester abroad, where "rich" Americans are often rolled after being drugged. IF you think you'd like some SafCards and can't find any locally, I'll be happy to obtain some for you. Just shoot me an e-mail using the "Contact US" button on the left frame of the website.

© 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.