Market Thoughts 7-9-2007

At this point, markets are awaiting a major catalyst for directional shift. Potential catalysts can be the upcoming earnings seasons combined with credit concerns. There are several big picture topics resurfacing in the marketplace. Regardless, actionable ideas are worth a closer look. To summarize, Energy/Crude related themes remain elevated and need a breather. In the next few weeks ahead, participants are allocating for second half plays. Technology and healthcare themes should offer alternative solutions for those seeking rotational opportunities. Although, financials look oversold, the looming “credit risk” is unfavorable for the sector. Again, lenders and REITS are the least favorite areas in the marketplace. Overall, communication, networkers, telcom and media offer a timely buying opportunity combined with a favorable risk/reward. (Ideas reviewed).

S&P 500: Closed at 1530, just few points away from 2000 highs of 1552.87. Again, the uptrend is intact while near-term momentum remains overbought.

Dollar (DXY): Recovery has been short-lived, as we are slightly holding above April lows of $81.29. Watch for turn in the coming months.

US 10 year yield: Consolidation between 5 and 5.20%. Look for further sideway action in the next few weeks.

Gold: Attempting to recover with first support at $640. (200 day mva 641.25).

Revisiting Crude and China:

Macro themes with perceived long-term sustainability, but poised for pullbacks especially given the current extended levels. For near-term market participants, betting against these themes can be rewarding along with corrections in the equity market. Taking a step back, reminds us of the bullish trend in emerging markets that began 4+ years ago. Although, the long-term trend remains positive for crude and emerging markets, current entry points don’t offer an attractive risk/reward.

Crude: The bullish argument resurfacing in the media. We are few points away from July 2006 highs of $77.95. Indeed, the strength continues but outside of geopolitical factors crude is nearing overbought levels.

China: FXI: (China 25 Index): Continues to make new highs. In the past two months, index has surged at a faster pace but is nearing a key inflection point. The index is 33% removed from its 200 day moving average; following a 50%+ run in the last four months. All considered we are setting up for a downside surprise for bulls.

IDEAS: Technology, Media and Telecom.

Semiconductors: SOX breaking to new highs. Next key resistance is near January 2006 highs (559.60). BRCM: Bottoming around $29/30 levels, accumulate.

SNDK: Near-term pullbacks between $48-46 range. Overall, positive outlook for second half of 2007.

Networkers: NTGR: 2+ month consolidation setting up for upside move. Accumulate closer to $34.

Communication: Group working and currently favoring JNPR. Also, MOT is oversold and poised for recovery. Also, TLAB from a long-term view offers a buying opportunity.

FNSR: After consolidating between $3-4 ranges in the past year, can work as a speculative value play.

Telco: NIHD strength continues, any sharp corrections should be a buying opportunity.

Media: CBS leadership intact, uptrend remains solid. DTV: Support around $22.50 continues to accumulate.

BLC: recent corrections offer attractive entry point. Finally, CMCSA an attractive long-term play.

Healthcare

A tricky area as Pharma and select Biotech have produced risky returns and unforeseen disappointments. Some areas remain in an uptrend. For example: PTJ Dynamic Healthcare Services Portfolio led by names such as ESRX, MHS and CI .

LLY – Looking for second half recovery. Next major resistance level is closer to $60.

ABI- If above $28 level, trend remains positive.