March 10, 2008 – Market Review

Markets continue to respond to macro concern as talks of banks de-levering and Federal Reserve intervention are on the radar for most participants. For example, providing liquidity and restoring confidence are areas of key interest among global central banks. Clearly, investor sentiment remains negative as volatility continues to rise and sentiment indicators are too bearish. From a mainstream perspective, market declines are attributed to discussions of economic concerns, rising commodity price pressures and mounting fear in the outlook ahead. In short, mean reversion in credit deterioration and commodity acceleration has not materialized.

Last week economic data failed to provide investors a positive catalyst. Not to mention the lingering effect of housing slowdown. Even oversold technical signals were not enough to spark a recovery in broad markets. Interestingly, the S&P 500 barely closed above its annual lows of 1270.05 reached on January 23, 2008. Perhaps, it is a bullish sign for a near-term recovery. Nonetheless, downtrend remains intact. This is showcased in Financials as the XLF (Amex Financial SPDR) has given up all its gains from 2004-2007. The index is 31% removed from its all-time lows reached in 2002. Therefore, there is room for downside move in the weakest group in this market correction. This reflects the trend shift in the business cycle as markets pause from multi-year bullish run.

There is a growing demand for cash rich companies with quality balance sheets, especially given weak returns. The current trend of declining yields, rising risk in small cap stocks and speculative commodity prices all contribute towards a favorable environment for "cash rich" stocks. For example, the US 10 year yield is down nearly 30% since September 2007. Meanwhile, Wal Mart (WMT) bottomed in the same period and is up nearly 22%. This emphasizes that cash rich companies with solid fundamentals can create upside potential. In fact, for select large companies there are opportunities despite growing credit worries. "In January 2008 U.S. corporate borrowing was $101 billion, up slightly from the same month a year ago" (Ken Fisher –Forbes).

A long-term cycle perspective suggests that Large Cap is setting up for market leadership. Last year demonstrated early indication of relative strength in big cap themes. This rotation can present a sustainable upside move for 2-3 years. That said, selective approach is critical, this demonstrates attractiveness of companies in developed markets. Especially in themes related to innovation while having fundamental strength. Additional pessimism and investor selling of previous cycle winners can enhance demand for neglected and undervalued themes in US markets.

Stock Specific Ideas:

Healthcare:

GENZ (Genzyme): Consolidating at current levels between $70-75. Add on weakness as leadership remains intact with solid fundamentals.

Stock is appealing as it offers exposure in large cap Biotechnology.

STJ (St.Jude): Reaching a buy point at current levels. As a leader in the medical equipment group stock is cheap on a relative basis. Importantly, long-term technicals suggest adding on weakness.

Technology:

ORCL (Oracle): Relative strength is intact since summer 2006. Approaching major support at $19. Further declines enhance risk/reward for buyers. Company looks to benefit in a favorable M&A environment and upcoming quarter results.

AMAT (Applied Material): Recent expansion in the solar panel industry bodes well for long-term outlook. Stock is up 25% since early January 2008. Expect further upside move as fundamentals continue to improve.

Media:

DTV (Direct TV): Stabilizing at current levels between $22-24. Stock is attractive given increasing subscriber demand, international expansion and positive momentum.

Market Outlook – March 3, 2008

Weekly Results:

S&P 500 -1.66%, NASDAQ -1.38% Russell 2000 686.18 -1.33% and MSCI Emerging Markets +.80%

Market Outlook – March 3, 2008

As we enter the first trading day of March, the macro environment appears like a continuation of second half 2007. Explosive rise in Commodity prices, new lows for US Dollar, and lack of stabilization in US markets. Once again, interest rate sensitive and commodity related groups continue to dominate investor focus. The unraveling of fundamental weakness is even keeping the biggest optimists away from buying at near-term lows. Clearly, the on-going sell-offs are contributing towards higher volatility. Last week, VIX (Volatility Index) increased 10% and VXY (G7 currency volatility) rose 11.52%. Not surprising to see lingering fear as "unexpected risks" is not fully flushed out of Financials. Plus interventions by policymakers of key global markets result in more uncertainty.

As most participants reduce overall risk appetite there are opportunities in neglected themes. In the weeks ahead, Federal Reserve decisions and economic data are key near-term market drivers. Additional downside move (S&P 500 1270 and lower) in stocks can create better odds to purchase. As macro concerns settle down then new trends can emerge creating stock specific bargains. Rotational themes become attractive, as investors realize that performance chasing (i.e. Energy and Emerging Markets) results in less than favorable odds. At this point, just like the summer months, most investors are not convinced of a pending trend shift. It is worth watching the effects of credit concerns into the behavior of Emerging Markets. This can provide clues for an inflection point in global cycles.

Market timing becomes even more challenging in periods of immeasurable risks, unclear trends and irrational behavior. Generally these factors create less interest in equities for passive participants. As seen in the past few weeks there is a herd-like tendency to chase performance. Ideas with long-term sustainability and attractive risk/reward are favorable. In other words, identifying only cheap valuations may not be enough. At the same time, picking only sectors and groups might not create desired returns given the risk in the marketplace. Interestingly, these are times where strength in solid fundamentals can be rewarding. Nonetheless, for aggressive participants the next few weeks can open doors for entry points in Developed Markets, Innovation themes, Large Cap Growth and Cash rich companies. That said, on a stock by stock basis there are select areas worth a closer look.

Stock Specific Ideas:

Food:

HSY (Hershey Co.): Deeply oversold after peaking in 2005. Currently holding above long-term support of $35 and recently showing signs of bottoming at the $33- 37 range. Part of the decline includes its high exposure to US markets. Nearly, 80% of its sales are from US consumers. That said, current expansion to global markets, attractive valuation and new management can create a catalyst for an upside move.

Technology:

CSCO (Cisco): Price declines offer entry points as stock stabilizes around $24. Along with solid fundamentals, expansion through acquisitions create positive long-term outlook.

JNPR (Juniper Networks): Positive relative strength in the past few months. Improving revenue and growing demand of on-line videos bodes well for stock performance. Buy point near $25 and promising long-term outlook.

Chemicals:

DD (DuPont): Attracting buyers near $44, this serves as key support level. Company benefits in growth in agriculture needs, as well as a move towards recyclable packing. Provides an exposure in sales growth from Developed markets.

MACRO LEVELS:

Crude: Overbought in the near-term after reaching all-time highs on February 28, 2008 at $102.70. The commodity is up nearly 50% since lows set on summer of 2007.

Natural Gas: Long-term trend is positive. Strong move in the past 3+ months. Next key level is near $10, reached in the first quarter of 2006.

Gold: Similar to Crude, Gold is up almost up 50% since summer 2007 lows. Despite long-term uptrend, the recent upside move is reaching speculative levels.

US 10 Year Yield: Weakness continues after reaching 3.95% on February 20, 2008. Approaching annual lows at 3.28%.

US Dollar (DXY): Reached all-time lows, yet again, last week at $73.56. Currency index is down nearly 40% after peaking in July 2001.

S&P 500: Multi-week consolidation continues between 1300-1400. Once again, major support resides near annual lows of 1270.

EEM (MSCI Emerging Markets): Attempting to stabilize after peaking in November 2008. Consolidation phase continues as near-term momentum remains extended. Major support level around $128 reached in summer lows.

Market Outlook – February 25, 2008

Weekly Results:

S&P 500 +.31% NASDAQ -1.25% Russell 2000 -1.4% and MSCI Emerging Markets +1.4%

Broad markets are attempting to stabilize after the S&P 500 reached its annual lows at 1270.05 on January 23, 2008. As the consolidation phase continues, investor sentiment reflects further uncertainty. Perhaps, a reflection of mainstream's worrisome outlook of the Economy. Of course, there is a tendency to bundle housing, stock market and economics into one conclusion. Despite these conclusions, there are various opportunities on a group by group basis.

Credit Risk and Financials:

The scrutiny of the financial market continues especially in an election year. Furthermore, credit crisis is becoming more apparent across various industries. On that note, what dominates investor actions in these conditions are lack of conviction, irrational behavior and performance chasing. These traits usually increase overall portfolio risk for desired returns.

Friday's close demonstrated signs of hope fueled by talks of bailouts. Once again, investors are seeking catalysts for a recovery. In the past few months, policymakers have taken various steps to stimulate a struggling credit market. These actions include aggressive rate cuts by the Federal Reserve, extension of credit to financial institutions and a stimulus package. This creates a growing interest for value investors to buy shares in Financials. On a technical basis, the sector is clearly oversold. Nonetheless, the risk of fundamental weakness is greater than purchasing at a cheaper cost.

Emerging markets and Commodities:

Emerging markets and Commodities have been the cycle winners since 2003. The dynamics of this uptrend are shifting especially since mid summer. At this point, most areas in commodities are stretched from a long-term perspective. On a relative basis, sustainable upside move for the next 2-3 years are not as favorable.

Emerging markets are showing further signs of weakness. For example, EEM (MSCI Emerging Market Fund) was up over 400% from April 2003 to October 2007. Since the peak last fall, the index is down 14%. This is an early sign of pausing and further selling from elevated levels. Similarly, FXI (China 25 Index) is down nearly 50% since October 2007 highs. Although, appealing in the near-term. In other words, the gap balance between fundamentals and expectations are widening.

In the same way, speculation is visible as global investors react to crude nearing $100. Interestingly, Crude closed at $98.18, despite numerous headlines suggesting explosive upside moves. Also, Gold and Copper are trading near all-time highs. Plenty of global variables are affecting prices but these elevated levels suggest a speculative environment across key commodities.

Money Management:

In the past cycle, investors have seen strength in Crude, China and Credit. It is vital to see that these three themes are connected. Credit risk is affecting global markets in different forms. Noticeably, Asian markets fell yet again last week. That marks a seventh decline in the past eight weeks. So far, areas tied to Credit and China have been correcting from extreme highs. Meanwhile, Crude appears next in line for price declines at least on a relative basis. Simply, rotating out of these themes can be rewarding for long-term investors.

This sets the stage for a cycle shift which is slowly taking place. Areas of interest for long-term investors include developed market, innovative based areas, large cap growth and cash rich companies.

Stock Specific Ideas:

Healthcare:

STJ (St. Jude Medical): Attractive on a valuation and technical basis. Offers an appealing exposure in the medical equipment group.

JNJ (Johnson & Johnson): A long-term investment offering with low P/E ratio and above average dividend yield of 2.60%. Current macro climate of uncertainty and a cycle shift to companies with predictable earnings presents favorable entry point near $62.

PPDI (Pharmaceutical Product Development): Momentum remains positive as stock continues to outperform especially since October 2007. Next resistance range is near $49 as the company continues its global expansion. Despite recent strength analysts are rather cautious. Nonetheless, with a strong support level at $42 add on pullbacks.

Consumer Staple:

WMT (Wal-Mart): Continues its leadership after reaching $100 billion in sales last quarter. Despite worries of US consumer, the stock is timely and sustainable. As management reduces capital expenditure and possibility of gross margin expansion stock is at a buy point.

Media:

DTV (Direct TV): Positive trend intact. Earnings demonstrated higher than expected fundamentals. As analyst play catch up and raise targets, investors can add on any weakness.

CMCSA (Comcast): Profits increased by 54% last quarter driven by cable TV services. Also buy back announcements and cheap valuation make a strong case for further upside. Finally, following a 46% declines in stock price, the technical picture suggests early signs of a recovery.

Technology:

XLK (S&P Technology SPDR) is oversold and approaching 200 day mva. Since summer of 2006 the sector has outperformed the S&P 500. Currently the index is reaching oversold levels from an intermediate-term perspective. That said, the sector is poised to reestablish its leadership especially among larger cap stocks.

CSCO (Cisco Systems): Deeply oversold despite promising outlook. Momentum from recent product launch and underestimated fundamentals create a timely entry point.

AMAT (Applied Materials): Stock is up over 20 % after making annual lows. Most of the rise is due to higher than expected earnings. Product demand remains strong and the cycle is favorable for a turnaround. Although, sharp upside movement in the past few days near-term price movement; the longer term outlook bodes well.

NOK (Nokia): Uptrend intact. Launches in handsets contribute to solid growth estimates. Accumulate at current levels near $36.

Market Update – February 19, 2008

Weekly Results:

S&P 500 +1.4% NASDAQ +.73% Russell 2000 +.37% MSCI Emerging Markets +4.27%

As investors focus their attention on upcoming Federal Reserve decisions, many should not be surprised by pending "rate cuts". Similarly, discussions of a slowing economy and need for an economic boost is becoming a consensus view. Overall, a period of rate cuts and government interventions are not uncommon and have worked in previous cycles. For example, the current environment mirrors the 1990-1992 easing cycle which led to a bail out of banks and commercial real estate loans. Of course, history can repeat itself but not in the exact pattern. That said, there is additional credit risk which plagues the financial markets. Also, growing fear and uncertainty during a cycle shift present a challenging trading atmosphere. Nevertheless, in controlling the controllable investors can manage risks and maximize odds by selecting trending themes.

Managing Risk:

Credit risks concerns continue to resurface in different forms and shapes. For example, short-term debt witnessed failed auctions last week. A concern that stems from "financial engineering" in a cycle where the macro climate is less favorable. Financials appear too early to bet on a recovery. As lending tightens up and fundamentals deteriorate the uncertainty levels continues to grow. This showcases that investors are not convinced that the risk of further fundamental weakness is greater than purchasing value at a cheaper cost. For near-term traders, Financials might present a short-lived recovery from oversold levels. The AMEX Financial Services index is down 37% since peaking on June 1^st and 27% removed from 200 day average. At this point, its difficult to state that we are in the early innings of a downtrend. Unfortunately, it is even more challenging to declare a bottom when the cycle is coming out of a "bubble-like" run in the past few years.

Developing Themes.

Innovation based themes are worth a closer look. Especially, in some areas with less exposure to credit risk. The long-term cycle suggests rotational opportunities out of Financials, commodities and emerging markets. Again, groups of interest include developed markets, Large Cap Growth, Healthcare, Media, Telecom and Technology. On a stock selective basis, investors can seek relative out performance. As for "absolute" returns in groups, sectors and broad markets there is too much noise. Volatility is trading towards the higher range despite a weekly 10% decline. A signal for broad market buy point is when volatility calms down with less daily swings. The risk of panic, media watching and impulse trading are all contributors for a trend-less market.

Stock Specific Ideas:

HEALTHCARE:

STJ (St. Jude): Early signs of stabilization near the $42-40 range. Company's growth prospect looks attractive given promising revenue estimates into 2008.

TECHNOLOGY:

CTXS (Citrix Systems): Last quarterly results demonstrated strength and a higher than expected results. An upside catalyst in the near-term includes re-branding of products and implementation of new strategy. In addition, stock is pausing and remains oversold at current levels. From an investment perspective, stock is attractive.

CREE (Cree Inc): Strong surge in stock price so far this year. This is a play on efficient lighting which falls under the macro theme of alternative energy. Performance chasing should cause more volatility in the near-term. Nonetheless, solid fundamentals create long-term opportunities as uptrend is intact.

NOK (Nokia): After bottoming near $32 levels stock price displays signs of improvement. Expansion to US market, strategic partnerships (i.e. Google), and managements defined game plan bode well for further upside move. As the global leader of cell phone markets the company's stock price is still far removed from all-time highs. (Price of $62.50 in June 2000).

MEDIA:

DTV (Direct TV): An explosive recovery in the past few days, as earnings were very positive. Despite recent run up, stock remains at a buy point between $24-22. Add on pullbacks. Quality earnings are attributed to credit worthy clients. In other words, consumer worries did not cause significant weakness to fundamentals.

Market Update – February 11, 2008

Weekly Results:

S&P 500 -4.6% NASDAQ -4.5% Russell 2000 -4.3% MSCI Emerging Markets -3.9%

Recent market action requires more patience and selective approach when picking ideas. A difficult period to earn desired returns, for the risk one is taking. The drivers behind this include lack of established trends and wide daily swings in stock prices. Last week, VIX (Volatility Index) rose by 16% as broad markets drifted lower. All these factors contribute to growing fear in a period of trend shift.

Evaluating risk/reward odds has confused many traders. Therefore, riskier bets appear not to make sense for most participants. Clearly, the Federal Reserve is aware of these conditions as demonstrated by aggressive rate cuts. One of the intentions is an attempt to lift the perception of "reward" for investors in the marketplace. That said "rate cuts" alone might not be sufficient to create a bottoming process. Market timing is even more challenging in an election year with looming credit concerns.

Despite a gloomy picture, there are opportunities to enter in longer-term investments. As volatility subsides the trend is favorable for innovative themes, cheaper value in neglected areas, and quality companies with steady growth. Given this approach, there are actionable ideas even before signs of a major market "bottom".

MACRO LEVELS:

Crude: Following a strong upside move in 2007 currently index is pausing. 3+ month consolidation between $85-$95.

Gold: Long-term momentum is positive but elevated in the near-term. Index is trading at all-time highs following an explosive run. Key trading range is between $880-920.

US 10 Year Yield: Attempting to bottom at current levels. Major support level at $3.28 as overall downtrend pressure continues to linger.

Dollar (DXY): Holding above all-time lows set in November of 2007. The last three months demonstrate a pause in sharp declines.

S&P 500: Next upside hurdle is around 1400 as its 200 day moving average is at 1480. From a longer-term perspective, index is oversold and reaching a buy point below 1350.

FXI (China 25 Index): After sharp sell-offs since late October, index is reaching a floor around $140. Look for buyers to step in at current levels.

Stock Specific Ideas:

Technology:

CREE (Cree Inc): Stretched in the near-term but pullbacks offer buying opportunity for longer-term investors. Recent acquisition improves revenue outlook despite short-term impact on company's earnings.

PSEM (Pericom Semiconductor): Surging revenues driven by higher demand for video related products. Following 7+ year of consolidation, stock is poised to outperform. Major support at $14.

WFR (MEMC Electronic Materials): Core fundamentals are in-line with expectations, long-term rewards are relatively appealing. Add on pullbacks between $70-75 ranges.

Healthcare:

PPDI (Pharmaceutical Products): Positive momentum and relative strength. Fundamentals are solid as profits came in line. Plus, growth in new business areas creates a sustainable upside potential.

GENZ (Genzyme): Trend is favorable from a technical perspective. Overall, prospects of growth remain bright based on company's pipeline. Potential decline to $75 range presents a buy point.

Market Update - February 4, 2008

Weekly Result:

S&P 500 +4.87%, NASDAQ +3.75%, Russell 2000 +6.1% and MSCI Emerging Markets +2.75%

After reaching extreme pessimistic levels, markets have rallied to tilt the imbalance towards investor sentiment. Noticeably, VIX (Volatility) Index declined by 17% while the Federal Reserve cut rates. Both contributed to a sharp recovery especially in beaten up groups such as Homebuilders, Financials and Retail. Generally, markets respond inversely to front page stories written by mainstream media. Not a scientific approach, but interesting to read the following titles: Road to Recession, Market Reckoning and Its Rough out There. At this point, effects of credit risk and economic concerns are well acknowledged. Perhaps, last week's performance is a sign of bottoming.

The S&P 500 index is down nearly 13% since October 2007. Broad markets peaked in mid 2007, which is almost 7 months ago. Some argue that a classic recession lasts ten months; therefore we are nearing a turnaround. Fear has led to a flight towards quality. Now that trend is becoming exhausted. For example, the bond market and the price of gold are reaching overbought levels. In other words, risk aversion is becoming a crowded trade.

Financials have led the recovery from deeply oversold levels. Catalyst for the sector include rate cuts, short covering and a technical bounce which have contributors to an upside move. Not surprising to see a violent upside given the heavy sell-offs. On January 22, 2007 the Bank Index (BKX) was 31% removed from its 200 day mva. That set the lowest point for the index after topping on February 2007. The gap has narrowed and the sector has roared back. As for improvement in overall fundamentals the future is unclear.

Stock Specific Ideas:

Staples:

WMT (Walmart): Strength continues as the stock maintains its uptrend. Add on pullbacks closer to $48.

Healthcare:

AFFX (Affymetrix): Sharp upward rally caused by dispute settlement versus rival disputes and improving revenue outlook. Attractive risk/reward at these oversold levels. Buy point between $20-25.

HUM (Humana): Provider of Medical benefits continues its positive momentum. Solid relative strength combined with persistent earnings growth demonstrates additional upside potential. Timely entry point at current trading range.

Technology

QCOM (Qualcomm Inc): Company is guiding higher revenue and bouncing from extreme lows. An early indication of a long-term recovery.

ORCL (Oracle): At a buy point around $20. Near-term oversold, as fundamentals remain positive.

CSCO (Cisco Systems): Deeply oversold especially since peaking in October 2007. Bottoming around $24. Earnings look promising after launching new product Nexus 7000.

Industrials:

LLL (L3 Communication): After bottoming around $105, setting up for an upside move. Sales and Revenues are expected to rise.

Market Update – January 28, 2008

Weekly Results:

S&P 500 -.19% NASDAQ -.88% Russell 2000 +1.18% and MSCI Emerging Markets -.90%

Big Picture :

Plenty of action in a holiday shortened week. A sharp global sell-off, Federal Reserve intervention and approval of a stimulus package all caught the attention of mainstream media. Beyond the growing concern of "recession" and panicked selling, there are plenty of factors contributing to market performance. Mainly, company earnings continue to shape investor outlook. This week is jam-packed with earnings results from several companies that can give clues to emerging themes. Also, outside of typical investment noise, last week's actions should not be surprising given the current junction of the business cycle, credit concerns and a pending trend shift.

Volatility and Trend Shift

As many investors watch their portfolio fluctuate, once again it reminds us of the power of volatility, or at least it showcases the importance of watching movement in the VIX (volatility index). More so, on a relative basis the last few years were less turbulent in a period of a bullish uptrend. For example, the index is up nearly 300% since December 2006.

Now, a trend shift is upon us, following a multi-year upside move in commodity based and emerging market themes. Last week, demonstrated a historic like market response; highlighted by wild swings in global markets. As fear continues to build, it forced the Federal Reserve to take a decisive and aggressive approach in cutting rates.

Portfolio Management:

Sentiment remains at extreme bearish levels, which suggests that markets are poised for mean reversion. At the same time, current macro condition leave uncontrollable doubts leading to uncertainty. Therefore, investing in quality ideas is critical. Especially, when expectations are relatively high following recent bullish run. Nonetheless, from a cycle perspective, investors can seek bargains in innovative based themes.

ACTIONABLE IDEAS:

Technology:

Technology is showing signs of regaining leadership following recent corrections. Again, stock specific selection can create better rewards, especially if earnings are above expectations. Simply, valuations for most names are cheap. Plus, the market cycle favors an upside moves in select areas.

CREE (Cree Inc): Upside move continues with strength in its relative strength especially in the past 3 months. Following a solid strength, plenty of upside catalysts including environmental concerns, and demand for efficient energy use. In terms of upside potential, stock is far removed from all-time highs of $100.

SY (Sybase): Profits continue to rise as management delivered to its shareholders. Accumulate as stock stabilizes between $27-25 ranges. Longer-term outlooks are promising.

EMC (EMC Corp): Technical pattern is attractive with a buy point at $16. Fundamental drivers include ownership of VMC (VM Ware), a leader in providing efficient products for IT servers. In addition, EMC's other business units are relatively cheap on valuation basis.

Healthcare:

ECLP (Eclipsys): Company should benefit from growing demand for IT healthcare. Near-term entry point is attractive around $24.

BLUD (Immucor): Reaching oversold levels around $28, a major support level. Analyst have lowered estimates which can create an upside surprise. Overall, fundamental are intact and weakness can create buying opportunity.

MACRO LEVELS:

Crude: Consolidating between $98-88 in the past few months. The commodity is searching for an upcoming catalyst after pausing at $100.

Gold: Once again reaching all-time highs. An explosive 43%+ run since summer lows. Again, investors are rushing for safety following credit concerns.

US 10 Year Yield: Inversely correlated to Gold prices. Nearly a 35% decline since summer highs of 5.20%. Last few days are showing a bottoming potential near 3.28%.

DXY (Dollar Index): Following sharp declines in the past few years, interestingly the index has not made new lows since November 26, 2007. Once again, a 3 month pause appears like a trend reversal. Nonetheless, bearish view on the US Dollar is reaching extreme levels.

FXI (China 25 Index): Attempting to stabilize after declines after peaking on October 31, 2007. Currently, trading near 200 day average. These levels are worth watching to gauge if buyers are ready to reenter.

S&P 500: Next major resistance level is at 1400 followed by1450. Technical indicators are deeply oversold and suggest a recovery. Index is 12% removed from 200 day moving average.

Market Outlook – January 22, 2008

Weekly Results:

S&P 500 -5.41% NASDAQ -4.09% Russell 2000 -4.47% MSCI Emerging Markets -7.46%

Big Picture:

An indecisive Federal Reserve, confused investor community, peaking market, investor panic and unraveling of credit risk resulted in a negative week. In short, markets don't like uncertainty.

In regards to the Federal Reserve actions here is one view below:

"Why would anyone borrow money if they know rates are going to be lower in the future. If you're going to cut rates, do it. If you're not, let the market know that you're not." Bespoke Investment Group.

Earnings and Broad Markets:

As usual, earnings season provides a reaction to company specific stories. Much of trader responses are based on results of the actual vs. expectations. At this junction, downside estimates and pessimistic outlook set the market tone. There is a growing agreement of a bleak outlook and less confidence about the future. Nonetheless, Wall Street analyst estimates appear too high entering earnings season. "At year end the consensus estimate [for S&P 500] was approaching $105. A more likely expectation is $90 to $95 for 2008" (1/14/2008 -Analytic Services). This is not surprising given the positive market response in the past few years.

Along with earnings, the Macroeconomic conditions remain the cornerstone of participants concerns. At this point of the cycle, the bullish run since 2003 is being severely tested. As the unraveling process continues, most value investors are gearing up for buying opportunities. Meanwhile, recent breakdowns signal a confirmation of bear market declines. On that note, current sell-offs begs the question of key technical ranges. The next major support levels are near lows reached in summer 2006(S&P 1260 NASDAQ 2000).

Sensitive issues:

Once again, investor sentiment is lopsided with fear. Even for bears the uneven sentiment makes it questionable to add to short positions. Talks of stimulus package might create near-term optimism but for the most part investors are skeptical. The credit crisis continues to plague both fixed and equity markets. Despite being deeply oversold, earnings for financial companies appear far removed from a bottom. For example, the Bank Index (BKX) is down 37% from highs reached on May 7, 2007. During that period, several recovery attempts have failed sharply including last week. In short, there is a desperate need for an outside catalyst but overall impact is uncertain.

Rotational opportunities:

There are actionable ideas and themes to consider in a period of sharp declines. Generally, there is an inclination to take a defensive stance at times of negative market returns. Nonetheless, Innovation based themes such as Healthcare and select Technology are demonstrating relative strength. These are two themes that were not cycle leaders from 2003-2007. As turbulence lessens, few areas are worth a closer look for bargains.

Rotation opportunity lies ahead as global participants trim exposure in emerging markets, commodities and energy related groups. For example, FXI (China 25 Index) is down nearly 34% since October 2007. Following a tremendous upside explosion from, "bubble-like" levels, Global indexes continue to retrace.

Short:

Emerging Markets (10%), Crude/Energy (15%), and Financials (20%).

Long:

Technology (35%) and Healthcare (25%)

Chart attached below.

Stock Specific Ideas:

Staples:

WMT (Wal-Mart): Outperforming on a relative basis in the past 4+ months. Attempting to break out from multi-year range $44-48.

Technology:

AMAT (Applied Materials): After setting lows on January 11, early signs of a recovery. Management continues to make changes and positive order flow can spark a turnaround. Major support at $16.

EMC (EMC Corp): Approaching key support level at $16. Attractive entry point despite mixed earnings expectations. Overall, growth from VMWare , established customer base, and barrier to entry in its core business contributes to a positive outlook.

BRCM (Broadcom): Despite a heavy broad market sell offs, long-term outlook remains positive. Growth in the cellular market and upcoming product cycle bodes well for sales. Finally, stock is deeply oversold and valuations are relatively cheap.

CREE (Cree Inc): Trading within a range between $24-26. Fundamentals are positive driven by Light-Emitting Diode [LED] technology. Despite near-term speculation, long-term outlook is promising.

Healthcare:

GENZ (Genzyme): Prospects of growth looks very promising. Solid product pipeline and increasing revenues contribute for a sustainable run. Add on pullbacks closer to $75.

Dear Readers

The positions and strategies discussed on MarketTakers are offered for entertainment purposes only and are in no way intended to serve as personal investing advice. Readers should not make any investment decision without first conducting their own thorough due diligence. Readers should assume the editor holds a position in any securities discussed, recommended or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in any way, considered liable for the future investment performance of any securities or strategies discussed.

Market Update – January 14, 2008

Weekly Results: S&P 500 -.75% NASDAQ -2.58% Russell 2000 -2.35% MSCI Emerging Markets +.17%

Broad Market Outlook:

A tense period for investors as discussions of recession, rate cuts and fear dominate headlines. Not to mention, a sluggish stock market performance to start the year. That said, we are approaching extremes in investor sentiment. Fear is clearly visible in these markets. Put/Call ratio is at the higher end of historical range. In terms of investor sentiment, percentage of bears increased by 7%. Conversely, bullish readings declined by 23%. (Source: American Association of Individual Investors). Once again, along with rising volatility the sentiment readings are lopsided in one direction.

As we enter earnings season, stock behavior will be linked to stock specific results from fourth quarter. Recently, analyst downside revisions continue to have a negative impact. In fact, year over year growth expectations have been revised down by 20%. (Birinyi Associates, Inc). This illustrates extreme pessimism, which generally results in cycle lows. The next few weeks will reveal if the actual results are worse than the growing lower expectation.

Financials remain a key topic of interest for both buyers and sellers. Buyers are seeking to purchase at these depressed levels. Meanwhile, sellers are waiting to place additional bets on downside moves. M&A announcements, write-downs and pending earning announcement should produce eventful results. Importantly, speculation on Federal Reserve rate cuts and slowing economy will dictate a recovery in the sector.

Staying on Course:

Sticking to year-end goals, rotation into innovation can create opportunities. In fact, healthcare is leading most groups in staying ahead. For example, XLV (Healthcare Sector ETF) is up 5% versus the S&P 500 -4.6% in 2008. The sector remains favorable on a stock by stock basis.

Stock Specific Ideas:

HEALTHCARE:

GENZ (Genzyme): Strong performance in the past 3+ months. Solid revenue growth and fundamentals have given stock further boost. Add on pullbacks closer to $72-70.

XRAY (Dentsply Intl): Although extended in the near-term, long-term uptrend in tact. Global dental demand should contribute to further upside gains. Trend remains positive $40.

Other ideas include: TECH (Techne), MATK (Martek Bio), BLUD (Immucor) and PPDI (Pharmaceutical Products).

In the meantime, the sell-offs in the NASDAQ (down 8% year to date) is creating more investor panic in technology themes. Once again, picking bottoms is not an easy task. There are bargains out there in the marketplace especially in quality names. Overall, valuations are near levels reached in 2002 bear market lows. Following earning results, odds for entry points should become more favorable.

MACROS:

Crude: Further consolidation between $100-90 ranges. Near-time momentum is extended suggesting pause/downside move.

Gold: Trading at all-time highs. Since late June 2007, the commodity is up nearly 40%.

US 10 Year Yield: Attempting to bottom between 3.75-3.79%. Yields have declined 29.4% since summer 2007.

S&P 500: Trading at key support level near 1400. Watch for August lows of 1370 as a gauge of investor's views.

EEM (Emerging Markets): Above 200 day moving average which suggests an exiting uptrend. In the past 2+ months, upside move is pausing between 144-152.

Market Update – January 7, 2008

Weekly Results:

S&P 500 -4.39% NASDAQ -6.43% Russell 2000 -6.71% and MSCI Emerging Markets 147.41 -3.36%

Despite a holiday shortened week, S&P 500 fell more than 4% to start the year. Perhaps, this further confirms the existing uncertainty and growing pessimism. Once again economic data is the main focus for investors. Last week produced weak economic results in labor, housing and factory sectors. Friday's non-farm payroll triggered "panic-like" sell offs. For the most part, declines are not surprising given the junction of the market cycle.

Investor sentiment is overly depressed along with excessive negative coverage in the mainstream media. For example, last week Volatility index rose by 18% and put/call ratio increased by 16% --again indicating more fear. Stock market continues to reflects weakness since mid 2007 which has turned near term indicators into oversold territory. That said, being a bear is heavily fashionable but dangerous when too extreme. Nonetheless, expect sideway swings in the weeks ahead.

In period of uncertainty and confusion, it is helpful to list out key points which can serve as a road map.

First quarter themes:

• Markets are pausing from muli-year bullish run
• Growing probability of a trend shift especially in an election year
• Take advantage of rotational opportunity
• Accumulate quality areas for cheaper value mid year
• Credit risk themes are yet to be resolved leaving most financials vulnerable
• Reactions to Economic data will dictate investor sentiment
• Expect volatility to increase and remain above average levels

Actionable steps:

Trim risk exposure in previous cycle winners. Such as Small Cap, Emerging Markets and Commodity based themes. After a strong 5-7 year cycle, in these areas the risk/reward outlook is not as attractive.

In the upcoming months, investors will have the opportunity to build smaller position in investment ideas. At this point, buying long ideas might not offer a timely entry point; the 1^st quarter is a challenging period, therefore raise cash or slowly accumulate stocks in innovative related groups.

Stock Specific Ideas:

Technology:

CREE (Cree Inc): Early signs of long-term recovery at current levels. Stock remains timely despite broad market sharp-sell off. Competitive edge with efficient product in and technology such as LED (light emitting diode) creates opportunities for long-term investors. In fact, investors rushed to buy as the stock fits the "green technology" theme.

PAYX (Paychex): Deeply oversold in the near-term. Following a 7+ year of price consolidation, stock is attempting to recover.

Healthcare:

BLUD (Immucore): Longer-term chart pattern is attractive. Fundamentals overall are positive more detail in earnings this week. Nonetheless, outside of major surprises stock is appealing at current levels. $32-30.

TECH (Techne): Solid 6+ month relative performance for the maker and manufacture of biotechnology products. Recent buybacks are driving stock price higher and company is relatively cash rich. That bodes well in the current environment.

PPDI (Pharmaceutical product): Strong relative performance versus the broad market in the fourth quarter of 2007. Revenues are increasing and stock price is consolidating between $40-42 ranges. That should set up attractive entry point.

Macro Review:

Crude: Uptrend in tact. Intra-day high of 100 (January 3^rd) remains next key resistance level. Index is becoming overbought in the near-term.

Gold: Making new highs following 2+ month consolidation. Explosive upside move since mid 2007.

US 10 Year Yields: Down over 28% since June 2007. Nearing lows from November at 3.79%. No evidence of a turnaround at this point.

S&P 500: Consolidating in a tight range (1540-1400), further illustrating a pause. From a short-term perspective, index is approaching oversold levels near 1400 followed by 1370. Expect aggressive short-term traders to place long bets at these levels.

EEM (MSCI Emerging Markets): Attempting to bottom from recent declines. Currently in the process of a 4+ month of sideway trading. Look for a key inflection points between $136-144.

Dear Readers

The positions and strategies discussed on MarketTakers are offered for entertainment purposes only and are in no way intended to serve as personal investing advice. Readers should not make any investment decision without first conducting their own thorough due diligence. Readers should assume the editor holds a position in any securities discussed, recommended or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in any way, considered liable for the future investment performance of any securities or strategies discussed.

Market Update: December 31, 2007

Weekly Results:

S&P 500 +1.26% NASDAQ +1.27% Russell 2000 +.55% MSCI Emerging Markets +2.28%

Although not many actionable ideas, it is a good time to ask the following questions:

Do your portfolio holdings contain sustainable ideas for 3-5 years ?

If not, ask yourself what is your upside expectations?

Finally, what areas are worth exploring for emerging ideas?

Does your portfolio match your goals and reflect your market views?

Perhaps, answering these questions can springboard a fruitful New Year.

Looking ahead:

The status of the US economy will take center stage in the mainstream media as we head into an election year. That seems to be one of the few high conviction ideas for 2008. Perhaps, increase in volatility ranks second. Also, heavy sell-offs can mark a period of trend shift. In general, excessive pessimism creates "bottoms" for new cycle themes. Finally, it would be a wise move for investors to leave a category titled "unfathomable". Although, not actionable, it's important to recognize and react to least expected events.

Econ Talk:

Actions from Federal Reserve, slowing economy, concerns of housing and stabilization of financial services can dictate market directions. Expect plenty of opinions, prognoses and data focus. Nonetheless, the basic takeaway is that we are transitioning away from a period of "easy" money. At this point, policymakers will attempt to manage consequences of this cycle rotation. The interesting (relevant) part is watching investors react to ongoing economic data.

Investor Sentiment:

Volatility increased significantly in 2008. VIX remains above 20, which indicates investor anxiety. Fear is caused as investors anticipate a trend shift. Currently, the bearish sentiment (according to AAII) is elevated and reaching depressed levels. Therefore, an upside move or relief rally in the near-term should not be surprising.

Chart attached below.

Sell Offs/ New Opportunities:

There are opportunities to profit from sell-offs assuming significant declines in the first part of 2008. The S&P 500 is up 92% since 2002 as the bullish run is intact. That said, it is not surprising to see near-term corrections. For less aggressive investors, mid 2008 can offer early entry points to beaten up stocks. Again, areas of interests are in innovative related themes. Groups include Technology, Media, communications and select Healthcare.

Financials:

Once again the upcoming year, can be a difficult period for Financial Services. Certainly, not a pleasant way to starts a New Year but several factors lead to this assumption. Fundamentals of large financial institutions remain weak, credit card defaults are rising (26% last month), foreclosures are increasing and more unraveling of existing credit risk.

Now, a turnaround bet is too early at this point. Aggressive investors can claim to see "value" at these levels, but the Macro environment is not favorable. In fact, until volatility shows stabilization the risks can outweigh rewards. In addition, attempted bail outs, outside intervention and dependency on Federal Reserve policy create short-term optimism. Therefore, investors have to assess short-term catalysts versus long-term recoveries.

Stock Specific Ideas:

Media:

DTV (Direct TV): Attempting to bottom around $23. Growth in HD TV bodes well for overall fundamentals.

CBS (CBS Corp): Nearing key support level at $26. Oversold, following a disappointing 3^rd quarter. Stock is cheaper relative to its group, fundamentals are not as negative as price suggests. As investors adjust their expectation, expect an upside move.

Telecommunications:

VZ (Verizon): Long-term recovery is intact. Wireless results are promising, remains at a buy point ($44-40 range).

Healthcare:

GENZ (Genzyme): Stock price demonstrating leadership. Although, slightly stretched in the near-term, product remains as a positive outlook.

BLUD (Immucor): Fundamentals are solid. Risk/reward for an upside move is attractive for the maker of blood bank systems.

Technology:

CREE (Cree Inc): Recovering from oversold levels. Recently, innovative technology is giving investors some confidence. That can be a catalyst for an upside move from the $25 range.

ORCL (Oracle): Strength continues to develop as the stock price is finishing the year on a strong note. A rotation into technology and larger cap names leads to a favorable outlook for ORCL. Technical pattern and fundamental outlook remains solid. Accumulate between $20-22 ranges.

HTCH (Hutchinson Tech): Attempting to break-out from multi-year trading range. Company continues to efficiently control its cost while improving gross margins.

HAPPY NEW YEAR!!!!

Dear Readers:

The positions and strategies discussed on MarketTakers are offered for entertainment purposes only and are in no way intended to serve as personal investing advice. Readers should not make any investment decision without first conducting their own thorough due diligence. Readers should assume the editor holds a position in any securities discussed, recommended or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in any way, considered liable for the future investment performance of any securities or strategies discussed.

Market Reflection - December 24, 2007

Weekly Results:S&P 500 +1.13% NASDAQ +2.1% Russell 2000 +4.2% MSCI Emerging Markets+.35%

Given the recent market behavior, most participants are ready for 2008. Especially with a sluggish December which appears to finish belowhistorical average. This wraps up a rollercoaster year which witnessed asurge in Crude prices and an ongoing upside move in Emerging Markets. On the other hand, 2007 demonstrated a depleting US Dollar and breakdown inFinancials triggered by a credit crisis. Not to mention, accelerated boom in China, decline in yields and a clear increase in volatility.Interestingly, the market dynamics kept the bulls and bears active.Overall, a 'wild' welcome for Ben Bernanke, as his first year chairman of the Federal Reserve. All added up to an eventful year.

Looking ahead, most cycle studies suggest a trend shift is upon us.Visible trends in the past 5 years are subject to change. Primarily, apause in an explosive bull market for Emerging Markets, Crude, Commodity related themes and Commodity linked Currencies. Conversely, a bearishperiod for US Large Cap, US dollar, and innovative based industries.Now, to clarify a trend shift can mean opportunity while others call ituncertainty. For example, emerging strength in Large Cap Growth developing. Again, select technology and healthcare can be rewarding forstock pickers. Unfortunately, there are more issues to be resolved for the broad markets. Regardless, additional sell-offs can set betterentry points.

During this part of the year, it is customary for the analyst communityto write about thoughts for the next year. In fact, most pundits have stated that a weak and slow year is ahead of us. Let us not forget, thatswitching the calendar does not alleviate on-going market trends.Meanwhile, there are themes that developed in 2007 that have yet tomaterialize. For example, media sector remains depressed, most US healthcare is stagnate and large cap tech is showing early signs ofleadership.

Now a New Year is a fresh start but old investment disciplines are yetapplicable. As stated above a cycle shift in leadership offers intriguing times for money managers. Expect periods of "trendless"markets which will challenge investor's conviction levels. At the sametime additional panic selling can carve out bottoms which can be neglected by fear. Perhaps this New Year offers a buying opportunity for long-term investors despite near-term concerns.

Happy Holidays!

Market Thoughts - December 17, 2007

Weekly Results: S&P 500 -2.44%DJIA -2.10% NASDAQ -2.60% Russell 2000
-4.02% MSCI Emerging Markets 151.36 -5.16%

A negative finish following rate cuts by the Federal Reserve. 10 trading
days left as participants look ahead to 2008.

In the upcoming year, mainstream media will continue to focus on the slowing
economy and a potential recession. This is understandable, as we head into an
election year. Most of 2007 unraveled the fundamental weakness in Financial
Services. Some value managers are seeking to pick bottoms in Banks driven by
Central Bank's decision to inject liquidity into the financial system. Overall credit risk is not fully complete and picking bottoms, in general, is a difficult task. Finally, investor's willingness for higher risk tolerance is questionable – primarily in a declining sector. Yet again, the duel between optimist and realist will be determined in the weeks ahead.

As for the stock market, December has not proven to be bullish as history suggested.
In fact, yearly highs reached in October 2007, seem far removed
to eclipse as we are left with few trading sessions. For example, the S&P
500 is 7% away from yearly and all-time highs. Let's not forget, the S&P 500
index is up over 86% since March 2003. Therefore, recent market declines are
viewed as a pause (top) in the current market cycle, especially among the
bearish crowd.

Volatility is poised to go higher in a period of uncertainty. Since October
11, VIX (Volatility Index) has shown signs of bottoming and is up 44%. At
this point, VIX is set to rise again following short-term declines. The
increase in volatility showcases that there is fear in the marketplace.
Index is above 20 for several weeks which historically suggests increased investor anxiety.
Finally, this turbulence signals a shift in market leadership.

Actionable Ideas:

Despite worries, concerns and additional noise there are stock specific
opportunities as usual. The challenge is timing just as much as it is
identifying the right catalyst. Past 4 + years, cycle leaders were mainly in
commodity and emerging markets led an upside rally. Now, the cycle is
poised for a trend shift into developed markets (US and Europe) and
companies focused on "innovation".

For example, Growth oriented ideas are showing strength especially in Large
Cap. Healthcare and Technology are the key "growth" sectors and appear
favorable. Clearly, traditional value (such as: Banks and Energy) are poised
for a consolidation and lack relative strength. In fact, Large Cap Growth is
up 12% year to date and is the best performing style.

STOCK SPECIFIC IDEAS:

Technology:

FFIV (F5 Networks): Deeply oversold and offers value at current levels.
On-line video growth bodes well for the company as it maintains its
completive edge. Stock is 28% removed from 200 day moving average.

PAYX (Paychex): Strong consistent revenue growth yet stock is extremely
oversold. A leader as a payroll provider and no debt in the balance sheet,
upside promises are attractive. Again, value investors can enter long
positions around $38.

Staples:

ADM (Archer Daniels): Relative strength intact. Remains at a buy point, as
companies' agricultural exposure offers further growth. Current price range
offers buying opportunity.

Healthcare:

GENZ (Genzyme): Positive fundamentals and a technical breakout since October.
Buy on pullbacks. Above $70, existing trend is intact.

Telcom:

VZ (Verizon): Shares remain depressed as stock attempts to bottom.
Analysts expect further weakness, therefore there is less downside surprise
ahead. Accumulate between $44-42.

Macro Levels:

Crude: Consolidating between $90-95 ranges. In the fourth quarter, on
three occasions investors have kept the commodity above $90. Noticeably,
buying pressure is slowing down.

Gold: Near-term pause after an explosive 4+ month upside move. Trading
within a range $820-780.

US 10 Year Yield: Sharp recovery from November lows. Bottoming at current
levels (4.00-4.20%).

US Dollar (DXY): Similarly, bouncing higher from November lows. Attempting
to hold above $77. Early signs of recovery.

S&P 500: Slightly extended in the near-term. Next major support at 1440.

EEM (Emerging Markets):Pausing in the last 3+ months. Recently, Volume
has declined and buyers await pullbacks to add. Also, index is far removed from 200 day moving average, which suggests additional near-term declines.

Market Thoughts : December 10, 2007

Weekly Results:

S&P 500 +1.59% NASDAQ +1.70% Russell +2.31% MSCI and Emerging Markets +3.87%

Policy intervention and pending rate cuts by the Federal Reserve contributed to a positive week. Recent discussions of "bailouts" generated optimism. Headline news (noise) on 'mortgage relief' forced bears to exit in the already depleted financial sector. Sadly, the plan can generate near-term uproar but sustainability remains doubtful.

Following the Thanksgiving weekend, the S&P 500 is up 7.2% and 6.1% for 2007. Seasonally, odds are favorable for an upside move especially following a period of high pessimism. Also, a sharp decline in volatility (VIX Index) points to oversold conditions and less downside turbulence. Macro indicators are showing signs of early trend reversal. For example, US dollar is up more than 2% since November 26. At the same time, Crude is down 11% from yearly highs. Although, short sighted, current dynamics set the stage for a broad market rally.

This market requires one to differentiate short and long-term ideas. In other words, it is important not to confuse trading vs. investing. With 15 trading days left in the year, some areas are worth a look for a technical rally. On the other hand, long-term bargain hunters can seek "value" especially in groups poised for cycle leadership. Finally, for those looking to profit on declines, patience can be more rewarding well into 2008.

Near-term: (3-6 weeks):

Oversold consumer themes such as, Banks, Lenders, Retail and homebuilders, led a sharp rally in the past few days. As expected, there are higher beta themes and yearly underperformers are poised for a year-end rally. For example homebuilders increased 10% for the week. It is not surprising to see a trading bounce given sluggish performance in the past 2+ month.

Intermediate-Term: (6-9 months):

In looking ahead, attractive ideas should emerge from Technology and Healthcare. A rotation out of commodity themes can rotate to innovation based companies. Large Cap companies are relatively "cash-rich" and can benefit in a slowing economy. For example, AAPL (Aapple) carries a $15.4 billion cash position which is ahead of Microsoft. That bodes well for future innovation within the sector. Of course, pending price declines can offer better entry points.

Also, consumer staples present exposure in defensive themes mainly in food related areas. For example, Wal Mart (WMT) and Costco (COST) are up over 15% since mid November. Expect this momentum to carry over for upcoming quarters ahead.

Stock Specific Ideas:

Media:

DTV (Direct TV): At a buy point near $24. Fundamentals are solid as company continues to increase its market share.

Healthcare:

BLUD (Immucor): Consolidating near $30. Appealing entry point following recent declines. Also, a leader in automated instruments for blood typing.

Technology:

BRCM (Broadcom): Attempting to bottom between $26-28 range. External factors are keeping buyers on the sideline. Overall fundamental strength remains intact.

SWKS (Skyworks): Relative strength is favorable. Increase in gross margins, and promising outlook in communication area, sets the stage for a buying opportunity. Accumulate on any pullbacks.

GLW (Corning): Stock price is oversold from a long-term perspective. Sales growth looks promising in the company's display and communication segments.

Staples:

CQB (Chiquita Brands): Uptrend intact. Accumulate on pullbacks closer to $18. Favorable tariff results in Europe can trigger additional buying. In addition, basic fundamentals are net positive.

ADM (Archer Daniels): Low p/e ratio suggests attractive valuation. Technical pattern is positive given recent breakout above $38. Finally, attractive cycle for agricultural related themes.