Market View – April 7th 2008

Weekly Results:

S&P 500 +4.2%, NASDAQ +4.9%, Russell 2000 +4.5% and MSCI Emerging Markets +4.4%

Market View – April 7^th 2008

Big picture Trends:

As we start the second quarter, there are few reasons for optimism in spite of ongoing credit concerns and weakening economic data. In the past 10-15 days, the prevailing turnaround signals are visible in declining commodities and stabilizing US markets. The "defining moment" of a trend shift potentially took place on March 17^th, as S&P 500 Index set new lows, Crude/Gold peaked and volatility declined. Interestingly enough, that's the same day (3/17/2008) Bear Sterns stock collapsed. Nonetheless, markets have tendencies to look ahead of mainstream discussions. Given that fear indicators reached extreme levels, a "recovery rally" is foreseeable. For example, Friday's disappointing job numbers appear to be "priced in" by the market as broad indexes closed positive for the week. This trend reversal sets the stages for new cycle leadership.

Now, as for existing trends, a recovery in Financials is questionable. Of course, the sector is deeply oversold and that attracts buyers. For the most part smaller cap banks remain vulnerable as fundamentals deteriorate. Therefore, seeking bottoms in interest rate sensitive groups (I.e. Banks, Retail and homebuilders) is tricky. In addition, participants have to clearly distinguish short-term trades versus long-term investments. As for an existing pattern of higher Crude prices, the recent consolidation between $100-110 can dictate the rest of the quarter. Overall, betting against Financials and favoring an upside move in Crude presents more risk than reward.

Emerging Optimism:

Since the summer months, global markets have sold off aggressively and sentiment was extremely negative. In 2008, inside buying has increased from historically depressed levels." Based on Form 4 filings, insider buying has totaled $7.2 billion in first-quarter 2008, which is 3.6 times higher than the $2 billion in first-quarter 2007. Indeed, insider buying in the past three months has been the highest in our records". (Forbes – 4-1-2008).This illustrates that company executives are less pessimistic and confidence is slowly developing. At the same time, valuations in US stocks are compelling relative to global assets. In the recent crisis, global stock markets have traded in a similar downtrend pattern. At this inflection point, there is a strong possibility for US markets to surpass emerging markets following a 5+ year of underperformance.

Money Management:

In this market environment, there are two dangerous behaviors among investors. First "performance chasing" in commodity related areas. Secondly, a "lack of patience" in buying up-and-coming cycle themes.
A concentrated portfolio on a stock by stock basis seems appropriate for the weeks ahead. Here are attractive areas in the US Markets:

• Innovation related groups mainly in Technology and Healthcare
• Large Cap Growth – including Media and Telecom
• Cash rich companies with neglected "value"

Technology remains attractive and is poised to growth 15.35% for the first quarter. (Zacks Investment Research). Again, fruitful results are obtained by picking specific stocks while benefiting from positive sector momentum. Similarly, Biotech is another innovative theme that is appealing. The BBH (Biotech Holders Trust) is up nearly 13% after bottoming in January 2008. Biotech's relative strength is showing signs of improvement. M&A growth should continue to lift the sector.

Actionable Ideas:

Biotech:

GENZ (Genzyme): Outlook for the next 5 years looks hopeful in spite of the 400%+ price acceleration since 2002. Company is growing through Acquisitions Also, positive forces include leadership in therapeutics and well diversified products.

Technology:

CREE (Cree Inc): Leadership in LED lighting revolution sets the stage for a sustainable run. Further declines near $28-26 should offer a buying opportunity.

AMAT (Applied Materials): Recent surge is being noticed by investors. Expansion in the solar panel industry generates growth in the company's fundamentals. As price retreats in the near-term, investors can add around $19/20.

Consumer Staples:

WMT (Wal-Mart): Shares are up nearly 30% since September 2007, reflecting its strength despite a weak environment for equity markets. Pullbacks offer buying opportunity near $52-50. Also, stock should benefit from positive momentum, after being the best performing stock in the Dow Jones for the first quarter of 2008. Promising future ahead as company plans to introduce new products and respond favorably to client demands.

Media:

DTV (Direct TV): Core fundamentals are solid. The stock remains at a buy point as it attempts to breakout of multi-month range ($22-26). Owning these shares can provide exposure for investors looking to profit from recovering media sector.

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 – March 31, 2008

Market Update – March 31, 2008

The results of the credit crisis are dominating investor behavior and corporate outlook. A confusing period for market observers as policy intervention is playing a larger role. Of course, the challenge for policymakers is to restore trust in the overall financial system. Important to note, that “credit” stems from a Latin word credere which means “to entrust”. This primarily explains the growing pessimism of participants and the rush to risk-averse investments. “For households, the demand for absolute safety of Treasuries is so intense that money-market funds like Vanguard have refused additional deposits into their Treasury-only accounts” (John H. Makin AEI). This reflects the desperate rush for yields, on-going skepticism and higher volatility. Although, fear in the marketplace is justifiable, there is a growing possibility for excessive worry which should play itself out in the weeks ahead.

Meanwhile, the S&P 500 is attempting to bottom despite well documented economic slowdown. As we approach quarter-end, there are visible signs of window -dressing among money managers. In addition, investors look ahead to economic data, regulatory decisions and upcoming corporate earnings. Beyond key headline news, global markets are nearing an inflection point. For example, on March 17^th VIX (Volatility Index) peaked at 35.60, Gold stalled at $1011, US 10 Year Yield bottomed at 3.30%, US Dollar (DXY) reached spike lows at $71.28, and S&P marked its annual lows at 1256. Few days earlier on March 13, Crude peaked at $111 along with Commodity (RJ/CRB) Index. Interestingly, this can be a turning point for recovery of “paper assets” and declines in commodities. Certainly, this a long awaited turning point for trend followers, fund mangers and those seeking rotational trades. In one hand, commodities are too speculative and trading at extreme levels. At the same time, a recovery in “paper assets” requires for stabilization of credit risks. Overall, further evidence is needed to confirm a trend shift.

The first quarter witnessed excessive selling and growing fear. In this landscape, it is easy to overlook areas with upside potential. For many weeks, trend following tools, valuations measures and technical indicators have indicated buy points. Nonetheless, most investors have not subscribed to the idea that markets are “cheap”. For that reason, there is great tendency to neglect value due to lack of patience and mainstream worries. For example, performance chasing in commodity related areas produced speculative moves which are rather risky. Similarly, buying Financials because of steep declines has not been rewarding. In taking a step back, the long-term picture is appealing for Technology, Media, Telecom, cash rich and innovative based companies.

From a cycle perspective, higher risks in quality areas can produce promising returns. Recent earnings results in Technology continue to display turbulent results. Nonetheless, Large Cap Technology is attractive despite the difficulty of calling “bottoms”. Decline in earning expectations creates an entry point ahead of analyst optimism. At the same time, the Technology sector contains a range of socks across different industry groups. Therefore, performance and correlation remains spotty when evaluating sector performance. Importantly, idea selection is more vital than ever and is required when sifting through various market noises.

Specific Ideas:

Telecom:

In telecom, sector specific funds present a better strategy given that stock selection is tricky while the stocks trade uniformly. VZ (Verizon) and T (AT&T) are oversold and setting up for a recovery. Also, election speculation can play a major factor in the months ahead. Nonetheless, the sector is favorable. In fact so far in March, Telecommunication Services is the best performing sector (+3.12%) in the S&P 500.

Technology:

ORCL (Oracle): Despite last weeks sharp declines after earnings announcement. The stock is trading near long-term support of $19. As selling settles down, long-term investors can accumulate in the weeks ahead. ORCL is reaching oversold levels and offers favorable fundamentals versus its peers.

GLW (Corning): Early signs of recovery. Stock is attempting to breakout from current trading range ($23-24). Growth remains solid while demand for silicon products is higher than consensus expectations. (According to Matrix Group).

Consumer Staples:

WMT (Wal-Mart): Strength continues as the stock is up nearly 25% since January 14, 2008. In the near-time, declines in shares present buying opportunities. Positive fundamentals in the past 5-10 years and rewarding dividends should create higher investor demand.

Biotech:

GENZ(Genzyme): Fundamentals remain solid. Next resistance level is annual highs of $82.08 reached on January 17^th. Plus, relative strength is positive and profitability appears slightly underestimated among analysts.

Market Thoughts – 3/24/2008

Weekly Results :

S&P 500 +1.1%, NASDAQ -0.2%, Russell 2000 +0.3% and MSCI Emerging Markets -5.2%

Market Thoughts – 3/24/2008

As spring is upon us, there are signs of market optimism, declining commodity prices and pending results from Federal Reserve intervention. Last week was action packed, despite a holiday shortened week. Once again, global markets are reaching key inflection points. Investors look to seek relief from on-going credit risk as other trends attempt to reverse. Interestingly commodities and US dollar displayed signs of mean reversion. After several years of reaching extremes, this trend (higher crude/lower dollar) is facing critical tests. Generally, as a trader it is dangerous to declare "bottoms" and to call "tops". In fact, the past few years, investors have witnessed that going against exiting trends is rather costly. Nonetheless, there are various themes developing which offer attractive entry points to select areas especially in the US equity markets. Perhaps an early signal of a cycle shift into developed markets, recovering dollar and further declines in emerging markets.

From a macro view point, commodities pulled backed from elevated levels. For example, here are results from last week; Crude -6%, Natural Gas -11.5%, Base Material -10.3% and Agriculture -16.1%. Once again, Crude remains too speculative and long term cycle suggest a pause. In addition, the message from the Federal Reserve hinted that commodities are poised to stabilize. Clearly, all these factors sparked a sell-off in an overbought area. In addition, stocks tied to this area are bound to face further pressure. The performances of most emerging markets are strongly tied to commodity prices. In addition, the past 5+ years created a bull market leading to underperformance in US markets. At this junction, the speculative nature of global investors has created a "bubble-like" atmosphere. International Indexes reflect the on-going declines in emerging markets since the fall of 2007. Since October 31, 2007 the EEM (MSCI Emerging Markets Index) is down over 30%. Again, a risk-averse environment and growing uncertainty has contributed to weakness in emerging markets. "Asia, excluding Japan, funds were hit hardest, posting outflows of $1.2 billion for the week" (Economic Times).

Since the summer months, credit deterioration in Financials was a dominant market force. Clearly, weakness in housing, slowing economy and investor anxiety became apparent to mainstream observers. Regardless of uncertainty and growing volatility, the S&P 500, held above annual lows of 1256 and January lows of 1270.A positive sign that coincides with Federal Reserve policy to create more liquidity. Although the Financial troubles will take time to recover, other areas of the market are poised for an upside move. In other words, a broad market recovery is possible given the oversold technicals. In terms of portfolio management, long-term investors can begin to buy quality ideas for a sustainable upside move. Meanwhile, near-term traders can take aggressive bets on these attractive risk/reward levels.

Long ideas in US Equities:

- Healthcare : GENZ (Genzyme)

- Technology: CSCO (Cisco Systems), ORCL (Oracle), AMAT (Applied Materials) and CREE (Cree Inc.)

- Consumer Staples: HSY (Hershey Co), MO (Altria Group Inc.)

- Media/Telecom: DTV (Direct TV)

March 17, 2008 – Market Review

Weekly Results:

S&P 500 -.4%, NASDAQ unch, Russell 2000 +.4% and MSCI Emerging Markets -2.0%

VIX (Volatility Index) +13.3%, Put/Call Ratio +12.9% and (VXY) Currency Volatility +12.2%

Historic, emotional and intriguing times indeed!

Solvency and liquidity are key factors in the ongoing credit crisis. These concerns play an important role across banks, hedge funds, auction markets, and real estate, eventually impacting US consumers. The desperate need for intervention and capital injection further illustrates the deterioration of Financial Services. Headline news such as Bear Sterns need for capital, illustrate the severity of the crisis. Over the weekend, the Federal Reserve was forced to lower the discount rate to 3.25% and JP Morgan acquired Bear Stearns.

The past 9+ months have been profitable for investors betting against Financials while additional opportunities lie ahead. In other words, Financials are still vulnerable, as the XLF (Amex Financials Index) is 29% removed from all-time lows set in 2002. At the same time, depressed investor confidence continues to disrupt financial systems. In terms of commodities, new psychological milestones as Crude trades above $100 and Gold broke through $1000. These results are a further reflection of a global trend of declining paper assets and surging hard assets. Again, this is a powerful and noticeable inverse relationship that continues to reach new extremes.

A week that witnessed explosive upside move in volatility, sharp sell-offs and breach of key technical levels. The volatility index rose 13% in anticipation of further market turbulence ahead. At the same time, most participants await more actions from the Federal Reserve in the holiday-shortened week. The big picture outlook reminds us that a cycle decline is in fully in place. That said, markets remain in "fear" mode as sentiment data showcases high anxiety levels. This is a period where financial professionals scramble for answers while aggressive traders seek out extraordinary risk/reward levels. Of course, for active investors this downtrend presents select buying opportunities. On a positive note, the S&P 500 is slightly holding above annual lows of 1270. Nonetheless, when panic selling takes place market timing is even more difficult.

Generally, turmoil breeds opportunity especially in areas with less exposure to interest rates and commodities. Previous winners in the last cycle (2003-2007) were driven by themes related to Credit, China and Crude. In addition, weakness in emerging markets can trigger a rotation into undervalued US stocks. Meanwhile, commodities are going up, but are too speculative for efficient risk management. Long-term cycle favors cash rich and innovative companies with solid fundamentals as attractive. Now, traders can view recent interventions as a catalyst for a market rally. At this point, investors can seek early signs of a bottoming process in quality areas especially in Technology and Healthcare. On a stock specific basis, few ideas are worth a look in the weeks ahead.

Stock Specific:

Staples:

HSY (Hershey Co): Attempting to stabilize between $34-38. On a technical basis, stock is making new highs after hitting annual lows of $33. Valuations are appealing as demand for specialty chocolate continue to rise.

MO (Altria Group): Add on weakness as stock approaches major support at $70. Appealing dividends, strength in profit margins and upside potential are positive factors for purchase.

Technology:

AMAT (Applied Materials): Recovering from oversold levels. Fundamentals are promising from solar panel exposure. Accumulate at current levels near $20.

ORCL (Oracle): Holding above key long-term support at $19. Setting up for a recovery as revenue growth and M&A opportunities look attractive.

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.

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.