Macro, Markets, Growth vs Value and Ideas.

General Comments:

In the near-term, US equities appear extended. Plenty of ideas, macro and cycle shifts reviewed. Crude finally slowing down with calming headline risks. Econ data unclear as markets looking ahead to econ / earnings. Any weakness ahead can create buying opportunities. Also, Growth vs. Value relationship showcases a rotation into Growth stocks.

(+) LONGS: S, MOT, IDCC, CMCSA, NTGR, CSCO, ABI, DNA, TECH, and PEIX.

Sector/Groups: Tech and Biotech.

(-) SHORTS: FED, CFC, SPG, BXP, HST, and VNO

Sector/Groups :Financials and Industrials:

Cycle Perspective -Growth vs. Value:

Since 2003, value is outperforming Growth in a bullish enviornment. The following chart illustrates the relationship between S&P Value vs. Growth. Notice: Growth ETF is dominated by technology (20%) and Healthcare(17%) as the leading sectors. Both sectors underperformed and are poised for a recovery. At the same time, value index composition is led by Financials (32%) and Industrials (11%). Interestingly, I continue to favor technology while trimming financials given this junction in the current cycle. Select industrials are showing sings of weakness. This style shift, lines up directly with sector rotation into tech and financials. Bottom-line, if growth stocks show strength, that should benefit select tech and healthcare.

Historical point to consider:

“A CSFB report late last year confirmed this view. The report concluded that on a price-to-cash flow basis growth stocks are cheaper than value stocks for the first time since at least 1977. The entire decline in the S&P 500’s p/e, since the bubble burst in 2000, is attributable to growth stock multiple contraction.”

Econ: #s appear solid and continued bullish interpretation (Non-Farm payroll included). Employment seems in tact and government data suggest inflation remains in check. Overall, the consensus view remains positive, which is reflected in the market behavior. Healthy tone is primary driven by gov’t data and Fed’s reassurance. The issue of rate hike vs cut is unclear – difficult to read. Currently, an edge to the 'rate cut' story, as pending economic concerns loom ahead.

All that said, I am looking for one more downside move in the general markets, which can surprise the market. I think that the housing data is underestimated and setting up for a surprise. Data watching will dominate headlines but I recommend staying focused on stock specific names.

Crude: After reaching a peak level at $66 – driven by Iran headlines which are slowly calming down. Near-term expecting further pullbacks. Reasonable support level at $60. (followed by $58).

US 10 Year Yield: Range bound in the last 7+ months. A tight range between 4.40 and 4.80. – This consolidation awaits fed policy or shift in economic climate.

Gold:remains in a tight range – not trending and actionable. There is a tug of war between buyers/sells as they await for a driving catalyst. Inflation is the assumed catalyst but yet to be resolved.

Investor Sentiment: Overall very neutral…argument for both taking holds and seen in the option markets. Not many extremes including VIX. In this environment, market can await headlines and on technical basis use Q1 highs as resistance level. Regardless, a difficult period to exploit extreme levels. Unless sector or stock specific calls. Also, money flow data

Growing confusion between slowing (Q4) earnings – especially in consumer related sectors vs. strong economy. Something has to give. In addition, the first quarter produced a correction and focus on weak housing. Also, a 4+ year uptrend in market calls for new trend to emerge. Hence, the argument for technology, Telco and media.

Looking Ahead:

Areas to buy on weakness: Again CNTM themes – Communication, Networkers, Telco and Media:

Communications:

IDCC: Attractive entry around 32 level, offers a short-term trading opportunity. (Tier 3- Idea).

Networkers: NTGR and CSCO to name a few – group setting up for an upside move.

Sprint (S): Turning around after a negative view and series of events. Climbing out of oversold levels but I do see further upside potential.

MOT: Continue to like the idea. And accumulate at current levels.

Media: CMCSA – worth a look above $25 where it is holding. Emerging ideas

Areas to sell on strength: Credit related themes –REITS –are vulnerable at current conditions. Short names to consider:

Watch list/Closely Monitoring: Retail recovery after an extended pause. GTRC – gaining some momentum as Q #’s are surprising the street. Also, declining oil can boost few retailers and consumer related space in the near-term.

Add to existing thesis: Alternative Energy: A growth area in energy – should provide additional lift despite crude performance.

Biotech looks attractive at current levels. Biotech powershare etf shows encouraging signs of turning. The group severely underperformed the rest of the market in 2006. It has been a difficult place to make money and poised for a turnaround. ABI – deeply oversold with a support level at $28.

Also, GILD, AMGN worth a look. Recent upgrades in other names in the group should trigger further investor demand. Actionable / early bet here. Other names to consider: DNA- multi-month trading range. TECH – strong volume as price increases. Buyers are stepping in, as ideas are worth a look on pullbacks.