Market Update – September 8, 2008

Weekly Results:

S&P 500 1,242.31 -4.48%
NASDAQ 2,255.88 -6.46%
Russell 2000 718.85 -3.87%
MSCI Emerging Markets 36.86 -8.22%

Again, recurring themes continue to resurface in a slowing global economy. Actionable ideas have mostly paid off in betting against commodities related groups and emerging markets. Similarly, fundamental erosion in credit markets reconfirm an established downtrend.

A challenging holiday shortened week in which bulls lost confidence and volatility climbed higher. Last week played an important role in macro indicators as Crude fell 7%, Emerging Markets(EEM) declined 8%, and S&P 500 barely held above July 15th lows of 1200. In addition, VIX (Volatility Index) rose 18% to 23.06.

In looking ahead, participants await reactions to this weekends announcement. The takeover of Freddie/Fannie by the Federal Government reflects the credit cycle and role of intervention. Now, given ongoing anxiety in Financial Markets, additional headlines contribute to further uncertainly. In the days ahead, investor reaction (overreaction) will be highly monitored as we enter a weak seasonal period and upcoming elections.

Managing Ideas/ Trades

As the S&P 500 remains 9% removed from its 200 day moving average, one can expect a near-term bounces. In addition, last weeks heavy selling is poised for mean reversion. Nonetheless, a bottoming confirmation is not clear. Investors must distinguish near-term noise versus established downtrends.

Since March 2008, Bear Sterns collapsed, Gold prices peaked and US dollar began its recovery. In that period, European banks have sold off aggressively along with other emerging markets. That said, US is becoming attractive on a relative basis especially for companies with revenues mostly in US markets.

"S&P 500 stocks with no overseas exposure (148 stocks) are up an average of 20%, while those with more than 50% (106 stocks) are up 2.84%. The S&P 500 as a whole is up 4.94%. If the dollar continues to rally, this trend should stay in place."

Bespoke, September 3, 2008

Healthcare Long:

BLUD (Immucor), GENZ (Genzyme) and ILMN (Illumina Inc), JNJ (Johnson & Johnson) and TECH (Techne).

Other Long Ideas:

LUV (Southwest Airlines) , WMT (Wal-Mart), and PMTC (Parametric Tech).

Commodity Related Short :

TS (Tenaris SA): STLD (Steel Dynamics), SID (Companhia Siderurgica Nacional ADR) and GGB (Gerdau S.A)

Financial Short :

HCBK (Hudson City Bankcorp), AIB (Allied Irish Bank), STD (Banco Santander SA) and FED (First Federal).

Key Macro Levels:

Crude [106.23]: Broke below two key levels. First, the commodity is trading below its 200 day moving average. Secondly, prices failed to stay above $110 as the next major level stands at $100.

Gold [ 808.50] : Remains in a downtrend after peaking in March at $1011 and failing to recover above $880 level. In the near term, oversold after reaching annual lows of $786.

US 10 Year Yield [3.69%]: Yields continue to decline from June 13^th peak of 4.27%. Attempting to stabilize near 3.60%. Perhaps, decline in yields showcase risk aversion in global participants.

DXY – US Dollar [78.93] An explosive run as the index is up near 10 % since March lows. Next resistance around $80 and overbought in the near-term.

Market Review –September 2, 2008

Weekly Results :

S&P 500 1,282.83 -.72%
NASDAQ 2,367.52 -1.95%
Russell 2000 739.50 +.26%

MSCI Emerging Markets 40.08 +.18%

As the summer season nears an end, global markets are at a critical junction. Despite various trend reversals, there is a lack of investor conviction and new trends are undefined. Of course, investors are demanding yields, banks are seeking a rescue, and analysts are scrambling to reassess risk. These issues have resurfaced in the past year given the conclusion of a bull cycle from 2003-2007. Now, this turning point has entered a readjusting period where trends are not easy to spot. In terms of making money just shorting Financials and going long Crude is not as profitable as before. Interestingly, taking the other side of the bet (short oil/long financials) is equally challenging. Perhaps this is a reflection of the psychological deadlock in investors minds.

Clearly, choppy price patterns makes it difficult to distinguish long versus short term ideas. Importantly, geopolitical and regulatory factors can weigh heavily in establishing new trends. For those looking for actionable ideas, it makes more sense on a stock specific basis. Potential trend reversal in commodities and currencies can heighten overall anxiety and uncertainty. Of course, there is no lack of major headlines ranging from elections, hurricane coverage and global conflicts.

In addition, strategists are adjusting to these changing market dynamics. In the past few weeks, US Dollar has increased noticeably. This strength is casting doubts on profits for large US companies. Similarly Gold has fallen sharply where long-term bulls see opportunity to enter at recent lows. Inflation is a global phenomenon as economic outlook remains net negative. Indexes in emerging markets remind us that buyers are not that interested, despite significant declines from an October 2007 peak. Finally credit markets seem far away from stabilizing. The depth of fundamental weakness in Financial services persists.

"The main question is how these figures reconcile with the fact that the FDIC has only $53 billion of funds, and has already used 15% of that to bail IndyMac. Conservative estimates place the number of troubled US banks at about 700 banks, which is 7 times greater than the number in the FDIC's 'watch list'" --Ashraf Laidi -CMC Markets NA Aug 28, 2008.

Portfolio Management :

As the S&P 500 attempts to stay above 1250, many await a sustainable recovery. On March 17^th participants did get a bounce, but it resulted in a false bottom. Perhaps early optimism among the hopeful based on undervalued and relatively attractive US stocks. Now, in a trendless environment most ideas do requires patience. Therefore, when placing bets today one is setting up for a pending recovery. Within the S&P 500 index, 64% of stocks are above their 50 day moving average. (according to BeSpoke Investments). In other words, internals are improving especially after mid-summer lows.

This early fall presents an opportunity to arrange portfolios for the rest of the year. Healthcare is displaying relative strength fueled by innovation in Biotech and dealmaking in Pharmacuticals. IBB (Nasdaq Biotech Index) has strongly outperformed broad markets especially this summer. Investors seeking positive momentum look to rotate into this space especially given weakness in energy related areas. From a cycle view, the following groups offer attractive stock specific selections.. Media, Networking, Communication and Telecom.

Technology Long:

· (AXE) Anixter International [$73.81] – Positive momentum continues given recent technical breakout. Poised for near-term pullbacks and offer attractive entry point near $68-70 range. Company growing through buying of competitors. Solid fundamentals in the wire/cable industry. Can benefit greatly from a shift away from commodity themes.

· SWKS (Skyworks), PLT (Plantronics) and PLCM (Polycom Inc)

Healthcare Longs:

· JNJ (Johnson & Johnson), ABI (Applied Bio System), GENZ (Genzyme) and TECH (Techne)

Consumer Discretionary and Media Longs:

· WMT (Wal-mart) and SBUX (Starbucks),

Financial Shorts:

· AIB (Allied Irish Bank), STD (Banco Santander SA), and FED (First Federal).

Energy/Commodity Shorts:

·TS (Tenaris SA): STLD (Steel Dynamics), SID (Companhia Siderurgica Nacional ADR) and GGB (Gerdau S.A)

KEY MACRO LEVELS:

Crude [$115.60] Holding above $110 which serves as next key support level. Similarly, the 200 day moving average stands at 110.66. At these levels, buyers seeking a recovery are looking for an entry point. Meanwhile, $100 remains a key level.

Gold [$829.30] Oversold in the near-term from annual lows of $786, yet remains below key trading range from $860-880. Intermediate-term trend points down given peak established during March 17^th peak.

US 10 Year Yield [3.78%] Sideways trading pattern with yields trading between 3.80-4.20%. Again, attempting to break out of a multi-month trading range.

DXY US Dollar [77.92] Increasing signs of a strong recovery. July 15^th lows set a possible turning point as the index is nearly up 8%. Follow through of this recovery can create a signifigant shift in Macro behavior.

EEM MSCI Emerging Markets [40.05] ETF is down over 25% in the past 4 months. Currently, holding near 40 after setting annual lows of 38.73 on August 19^th.

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 Outlook: August 18th 2008

Weekly Results:

S&P 500 1,298.20 +.14%

NASDAQ 2,452.52 +1.59%

Russell 2000 753.37 +2.60%

MSCI Emerging Markets 40.40 -1.68%

In the past few weeks, markets are readjusting from extreme levels. Plenty of moving parts with Commodities declining, the Dollar strengthening and on-going concerns in credit markets. As many investors seek a turning point, the current landscape requires one to distinguish long versus short term behavior. In an attempt to decipher this puzzle, other questions are worth asking.

Key Market questions:

• Given recent declines in Commodities does one sell Commodity stocks?
• Should a Dollar recovery correlate with a bottoming US Stock Market?
• Does one continue to bet against Financials?
• Are US stocks relatively attractive versus Global stocks?

Commodities/Currency:

Despite these steep near-term declines, the Long-term uptrend in commodities appears intact. (Crude above $80 and Gold over $700). That said, bulls are taking profits as the asset class corrects from overbought ranges. In addition, the macro dynamics of inflation and slowing global demands serve as a negative catalyst. Inversely, this is benefiting the US dollar as investors seek alternative options.

At this point, select stocks offer shorting opportunities especially in "overheated" emerging markets.
Short Ideas: TS (Tenaris SA): STLD (Steel Dynamics), SID (Companhia Siderurgica Nacional ADR) and GGB (Gerdau S.A),

Crude [$113.77]: Holding slightly above a 200 day moving average of $110.14. A break below $110, sets the stage for next key support of $100. From a psychological and technical perspective, the recovery in next few weeks can test the overall buying demand.

Gold [$786.50]: Making annual lows after whipping out 2008 gains. Clearly, oversold in the near-term given steep sell-offs. Finally, $700 is a long-term support level, last reached in fall of 2007.

US Dollar Index -DXY: [77.18] : Up over 8% since March 17^th lows. Explosive recovery in the month of August. Macro driver includes speculation of a potential US rate hikes versus a cut in rates by foreign central banks. Stabilization ahead between $74-78 ranges.

Financials:

Despite the first wave of a recovery, Financials' long-term downtrend presents a less than favorable odds for buyers. Credit concerns remain in mortgages, credit cards and commercial related areas. On that note, rate direction and pending interventions provide better guidance for entry point. At this stage, buying seems rather premature.

Short Ideas: STD (Banco Santander SA) and AIB (Allied Irish Bank).

US Markets :

U.S. stocks pulled ahead of Brazil, Russia, India and China this week for the first time in 2008, spurred by the Federal Reserve's efforts to cut borrowing costs even as the biggest developing countries are raising theirs.

(Eric Martin – Bloomberg.com August 13^th 2008).

On a relative basis, there are opportunities in US markets despite overall bearish sentiment. Given a slowing environment in the Euro region and cooling Emerging Markets, investors are seeking quality ideas.

Long Healthcare:

BLUD (Immucor), GENZ (Genzyme), JNJ (Johnson & Johnson) and TECH (Techne).

Consumer Long: Majority of consumer related areas attempt to recover in a difficult period. Nonetheless, WMT (Wal-Mart), SBUX (Starbucks) are worth a look from a long-term entry point.

Market Outlook – August 11, 2008

Weekly Results:

S&P 500 1,296.32 +2.86%
NASDAQ 2,414.10 +4.46%
Russell 2000 734.30 +2.53%
MSCI Emerging Markets 41.09 -3.47%

Market Outlook – August 11, 2008

Global markets are at a key junction point. Commodities and Emerging markets continue to decline. Importantly, this process is an on-going corrections in themes related to Credit, China and Crude. In other words, leaders of recent bull cycle are now retracing from overvalued levels. Increasing concerns of global inflation is a key catalyst in this deceleration. On the other hand, the US dollar is demonstrating strength. After several months of sideway behavior the DXY (Dollar Index) is up nearly 6% since July 15^th.

Given this sell-off in "hard assets", investors are seeking other areas of rotation. The challenge ahead is to sort through various data and identify false breakouts from sustainable growth. Now, US markets are becoming attractive on a relative basis. That said, credit weakness continues to persist in small cap banks, commercial real estate and in other credit sensitive groups. According to Invesco, money markets funds rose last week and asset are up 24% year-to-date. Perhaps, investors are sitting on the sidelines waiting for better opportunities.

In this period of readjustment, new relationships are at early stages of forming and other trends are reversing. On relative basis, US stocks appear attractive versus Emerging markets and Europe. This behavior is evident since May 16^th , where the S&P is down 5% versus a 20% decline in EEM (Emerging Markets Fund). That said, a bottom in US stock market is unclear.

Stock Specific Ideas

Consumer Long Ideas:

WMT (Wal-Mart): Showcasing sings of market leadership since Q4 2007. Opportunity to add on weakness given recent sideway pattern between $56-60. Gunmetal outlook bodes well from a long term view.

SBUX (Starbucks) At these levels, stock presents a long-term entry point. Recently, stock jumped from lows of $13.30 to $15.12. Consensus for a negative view is visible as the share prices peaked late 2006. Odds are favorable for a a turnaround for those willing to stay patient. Stock remains far removed from 200 day moving average of $27.90.

Short Global Steel:

TS (Tenaris SA): STLD (Steel Dynamics) and SID (Companhia Siderurgica Nacional ADR)

GGB (Gerdau S.A): Brazilian Steel company which benefits from weak US dollar and high demand. Despite increase in revenue last quarter, stock is extended. From technical perspective stock peaked on June 19^th. Changing dynamics in Macro climate can inversely affect stock prices.

Long Healthcare:

BLUD (Immucor), GENZ (Genzyme), JNJ (Johnson & Johnson) and TECH (Techne).

KEY MACRO LEVELS:

Crude [$115.20]: Closing below $120 and approaching next support near $110. The 200 day moving average is $109.55. Breaking below this point can decelerate further selling. For now, oversold in the near-term with increasing downside pressure.

Gold [$852.50] Attempting to hold above $850. Annual lows of $846.75 are the next key level. After reaching all-time highs on March 17^th ($1011.25) index failed to make new highs on July 15^th ($986.00)

US 10 Yield [3.92%] Stabilizing between 3.80-4%. From an intermediate-term perceptive, momentum appears to slow near 4.20%.

DXY US Dollar [75.84] Breaking out from multi-month range which stood between $72 and $74. Too early to make a long-term call but technical strength developing.

S&P 500 [1296.32] Forming a bottoming range below 1300 and above 1250. 50 day moving average stands at 1297 as index is far removed from 200 day moving average of 1374.

Market Outlook – August 4th 2008.

Market Outlook – August 4^th 2008.

Weekly Results:

S&P 500 1,260.31 +.20%
NASDAQ 2,310.96 +.02%
Russell 2000 716.14 +.82%
MSCI Emerging Markets 42.57 +.29%

Taking a step back :

Since mid-July, markets have witnessed a sharp upside move despite an established downtrend. Mixed earnings, unclear economic data and undefined trends continue to confuse investors. In weeks ahead, investors' challenge is to sort out noise and look for developing themes. Meanwhile, some participants are attempting to identify leadership groups for the second half of 2008. On one hand, a bottom appears close based on mean reversion. That being said, fundamentals of credit markets remain weak from various angles. Given this enigma, most await for clues in pending elections and actions by the Federal Reserve.

Macro Relationships:

Yet again, the behavior in Crude prices and Financials sector are topics of high interest for participants. July showcased an early glimpse of reversal patterns in exiting macro trends. After multi-year run of higher oil and lower financials, last month showcased a different story. Crude declined from highs of $147 to $124. At the same time, (XLF) Financial index rose nearly 5%. Importantly, global markets are slowing which partially contributes to declining demand for commodities.

"The LME index tracking the six main metals traded on the bourse dropped 4.8 percent in July, led by declines in copper and aluminum, the most-traded contracts on the exchange. Industrial- metals demand tracks global manufacturing activity." ((Chanyaporn Chanjaroen Bloomberg –Aug 1, 2008).

Steel Producers: (Short)

SID (CIA Siderurgicia), GGB (Gerdau SA) and TS (Tenaris)

Residues of credit crisis:

In the past few days, headlines in Financial publications remind us of the one year anniversary in the credit crisis. Of course, the results of deteriorating fundamentals are reflected in real estate, failing banks and stock market performance. Weakness persists in Financials, as REITS remain vulnerable along with European Banks. Finally, rising inflation in global economies contributes to this ongoing cycle slowdown.

"In the Eurozone, inflation accelerated to the fastest pace in more than 16 years, with the 15-nation number rising to 4.1% in July. Furthermore, economic sentiment declined to its lowest level in five years." (Northern Trust -Paul Kasriel)

European Banks (Short)

STD(Banco Santander SA), AIB (Allied Irish Bank) and DB (Deutsche Bank)

Readjustment Period:

Results of slowing global demand signal to a slowing consumer environment, lower risk appetite and negative investor sentiments. Further selling in commodities related areas presents opportunities for rotation into neglected areas. This current market cycle is a readjustment period, as major asset classes retrace from escalated levels. In this landscape, odds seem favorable for investors to narrowly isolate market exposure. Investment ideas in this "fear driven" period can spark volatility at a rapid pace.

Healthcare/ Technology:

These sectors are mostly mixed as seen during earnings season. So far, making a turnaround bet in these groups has not been easy. In terms of sectors, current cycle suggests that a recovery is favorable on a relative basis. Nonetheless, to enhance exiting risk/reward, more evidence or a turnaround seems necessary.

On the long side, select Biotech is attractive within US markets.

Healthcare Ideas: BLUD (Immucor), GENZ (Genzyme) and JNJ (Johnson & Johnson) and TECH (Techne).

KEY MACRO LEVELS:

Crude [$125.10] Oversold in the near-term. Holding above $120.75 key June lows. 50 day moving average at $133. Longer-term view, suggests a potential peak with further evidence needed for downtrend.

Gold [$912.50] Consolidating between $900-920. There are no signs of positive momentum since peak in March of $1011. Several attempted recoveries in the past few months. Buyers are seeking catalysts to drive accumulate around $900.

US 10 Year Yield [3.93%] after peaking in June 2007 at 5.32%, yields are attempting to recover in 2008. Basically, range bound near 4% yet above annual lows of 3.28%. Overall, poised to trade sideways between 3.80-4%.

DXY – US Dollar [$73.43] Positive bottoming process developing. The currency index has not made new lows since March 17^th.

S&P 500 [1260] : Holding above key support of 1200 which marks annual lows reached on June 15th. The last time index traded below 1200 was in November 2005.

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 Thoughts | July 28 2008

Weekly Results:

S&P 500 1,257.76 -.23%
NASDAQ 2,310.53 +1.22%
Russell 2000 710.34 +2.49%
MSCI Emerging Markets 42.46 -1.52%

A confusing period given mixed economic and earning data. Once again, Financials and Energy are at the center stage and at extreme ends of market performance. This trend is a topic of interest for policymakers and investors. Interestingly, politicians are seeking “praises” for actions leading to declines in Crude. Perhaps, this makes sense in an election year. On the other hand, veteran observers point out a cycle correction in commodities. Meanwhile, investors question the legitimacy of recent downtrend in Crude and growing optimism in equity markets.

In the past year, participants have witnessed peaks in themes related to Credit and China. That said, Crude appears next in line to retrace from escalated levels. The big picture suggests a trend shift in the global macro cycle. At this point, observers will attentively watch overall buying interest in Crude, results in earnings of energy companies and pending legislations.“Investors who have built up positions in Energy names throughout oil's run-up this year surely have a sour taste in their mouths this month. Since oil peaked on July 11th, the average S&P 1500 Energy stock is down 9.96%, while the S&P 1500 as a whole is up about 2%.” - July 27, 2008 Bespoke Investment Group.

From portfolio management view, earnings season can create near-term movements in weeks ahead. When assessing portfolios on fundamental basis, its important to keep in mind macro conditions, investor sentiment and geopolitical factors. Focusing on stock specific calls and isolated groups makes sense since a clear area of leadership is undefined. At this junction, the environment requires for one to trade less and consolidate stock holdings. “There were 1304 new lows on the NYSE Tuesday July 15. That number dropped to 51 last Wednesday.” Alpha Investment Management – 7/26/2008. Perhaps, this signals a turnaround but additional catalysts are needed for sustainability.

Technology and Healthcare appear mostly scattered and making sector calls presents less than favorable odds. Biotech continues to demonstrate relative strength. IBB (I­shares Biotech Index) jumped from $76 to $86 in the past five weeks. Conversely, Large Cap Pharmaceutical is not an easy place to pick stocks especially given regulatory risks.

Healthcare Ideas: BLUD (Immucor), GENZ (Genzyme) and ILMN (Illumina Inc), JNJ (Johnson & Johnson) and TECH (Techne).


KEY MACRO LEVELS:

Crude: Declining from all-time highs of $147 to $123. Next critical level between $120, followed by $112-115.

Gold: Failing to reach March highs of $1011. Consolidating back to a trading range between $880-920. Approaching 200 day moving average of $880.

US 10 Year Yield: Attempting to hold above 4%. Annual highs of 4.27% serves as a key resistance level reached on June 13.

DXY – US Dollar: Once again, stabilizing between $72-73. No major evidence of a recovery. Index remains above $72 since mid April.

S&P 500: Recovering from annual lows of 1200. Next key level include 1300 followed by 50 day moving average of 1324.

Weekly Results :

S&P 500 1,260.68 +1.71%
NASDAQ 2,282.78 +1.95%
Russell 2000 693.08 +2.69%
MSCI Emerging Markets 129.33 -.46%


Plenty to digest in an eventful mid-summer week. Numerous events caused reactions but yet some confusion remains.


Market Cycles and Politics as usual:

Heading into last week, broad indexes were deeply oversold as fear gauges escalated to extreme levels. Intervention by policymakers launched a sharp recovery from annual lows. This resulted in a sense of relief and optimism. Two major catalysts included the rescue of Fannie and Freddie, and a new SEC rule for short-selling. Perhaps this reminds observers, that Cycles and Politics play a key role in market psychology. In the past 1+ year Energy and Financials have been the two extremes in this market; currently both are nearing an inflection point. These changing dynamics can determine overall market sentiment, regardless, additional confirmation is needed.

Cycles :

From a cycle view, odds for a trend reversal present an appealing argument. After losing more than half its value since February 2007, the Bank index(BKX) lead the market higher last week. Conversely , Crude dropped more than 10% as it closed below $130 . Clearly, for investors these events trigger questions about sustainability. Now money managers have to consider readjusting portfolios for the second half. In the past few quarters , bottom seekers in Financials have guessed incorrectly and calling tops on Crude has been a costly bet. In the weeks ahead, earnings can dictate the potential of an upside surprise given the existing bearish expectations. Volatility is declining significantly, and Larger cap is at a favorable point of the cycle. That said, it makes sense for investors to expect new areas of leadership and ongoing sector rotation. Technicals are set up for mean reversion at least in the near-term. On the other hand, fundamental improvement is not evident but odds look favorable for an upward bias.

Politics:

Interestingly, the long awaited trend shift (from higher oil/ lower stock market) is catching the attention of lawmakers, the Federal Reserve and regulators. In an election year, a weak stock market and weakening economy can increase the need for action. The same way speculators are blamed for bidding oil prices higher, now short-sellers of Financials appear to be the next targets. Of course, policymakers and traders think differently and have different objectives. That being said, investors cannot ignore the impact of an election season and pending policies.


Portfolio Management :

Pending decline in commodities can attract capital into innovative areas. Results of changing dynamics, present entry points in themes that have underperformed in the past few years. Those areas include, Technology , Healthcare, Large Cap Growth, media and telecom. Given mixed earning data, a stock specific approach can be more rewarding at this point. As for emerging markets and commodities, further weakness can offer shorting opportunity. Finally, the fundamentals of non-large cap banks remain susceptible despite bail out efforts.



MACRO LEVELS:

Crude[128.88]: After making new highs in the past 3 weeks, index failed to reach record highs of $147.27. Braking below $130, has set off a near-term downtrend.

US 10 Year Yield [4.08%]: Trading above 3.80% for over four months. Attempting to stabilize near 4% level. Next key upside level is at annual highs near 4.27% last month.

US Dollar – DXY [72.18]: Showcasing signs of bottoming since March lows. No major confirmation of a turnaround and remains in a tight trading range.

Gold [959.75]: Uptrend intact. Recent rally from May lows are approaching all-time highs of $1011. Poised for near-term correction as it is 16% removed from its 200 day moving average.

S&P 500 [1260.68]: Bounced sharply from annual lows of 1200. Oversold in the near-term. Next key level is 1300 followed by 50 day moving average of 1337.

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 Thoughts | 7/14/2008

Weekly Results:

S&P 500 1,239.49 -1.85%
NASDAQ 2,239.08 -.28%
Russell 2000 674.95 +1.38%
MSCI Emerging Markets 129.92 +.32%

An eventful week highlighted by an on-going credit crisis. It is evident that weakness in Financials and deteriorating fundamentals in housing are among the key drivers of a market downtrend. Charts do remind us, that Financials peaked in February 2007. Since that period, the Bank index (BKX) is down 55%. Recently, there are growing speculations and looming rumors of takeovers . The net effect has yet to change the macro relationship of higher oil/low stock market. Perhaps there is room for further fear as VIX (Volatility Index) is 36% from annual peaks reached in January. History has shown that markets tend to overreact at the extreme ends of cycles. Therefore, a sharp downside move can create opportunities for buyers. That said, an interesting week ahead with earnings, option expatriation, Federal Reserve testimony and policymakers deliberations.

A colorful second quarter after a poor broad market performance in the first half of 2008. Year to date, S&P 500 is down 15% . Unsurprisingly, inflow into money markets has increased. According to Invesco Co Inst, Money market funds have risen by 24.3% annualized. Clearly, this is a reiteration of declining sentiment, growing fear and less risk tolerance. Nonetheless, there are catalysts for optimism, including the fall elections. Odds makers do realize that technicals indicators are oversold. Similarly, short-sellers recognize that taking some profits at these levels might make sense. Both can create an upward bias especially with policymaker intervention.

Many observers point out that we are reaching an inflection point. In recent days, there is an early indication of a disconnect between Crude prices and Energy stocks. In other words, the commodity continues to make new highs while energy shares underperform. This relationship might be short-lived or possibly indicate a change in current dynamics.

In case of a trend shift, Technology and Healthcare set the stage for a market "recovery" . Now with earnings season upon us, stock specific news should drive majority of market behavior. Those seeking value will pay close attention to groups related to Media, Technology, Communication and Biotech. Perhaps, leaders of a new cycle reside in sectors that are oversold from long-term perspective. For those willing to tolerate risk, there are opportunities to position into innovative themes.

STOCK SPECIFIC:

Long:

Technology :

· SWKS (Skyworks), PLCM (Polycom), and LSI (LSI Corp)

Media/Telco:

· AMT (Amer Tower) and DTV (Direct TV)

Healthcare:
Biotech: On a realtive basis, group remains strong especially since the end of 2007.

· TECH (Techne), CBST (Cubist Pharma) and GENZ (Genzyme)

Global weakness / European Banks:
Combined with emerging markets peak, recent worries of global inflation can inversely affect European Financials and Basic Materials.

SHORT IDEAS:

European Banks remain vulnerable and investors have reasonable fundamental concerns.

· STD (Banco Santander SA), AIB (Allied Irish Bank) and DB (Deutsche Bank).

Similarly, as global demand slowdown, global companies such as steel producers remain vulnerable.

· Brazil: SID (CIA Siderurgicia) and GGB (Gerdau SA)

· Argentina: TS (Tenaris SA)

Market Observations | July 7, 2008

Weekly Results:

S&P 500 -1.58%
NASDAQ -3.27%
Russell 2000 -4.67%
MSCI Emerging Markets -4.18%

As we start the second half of 2008, optimists and bottom pickers are struggling to find many signs of a turnaround. Also, investors who profited from growth in emerging markets are reexamining their bullish views. Overall, attention is shifting to concerns in global inflations as policymakers look to take action. Meanwhile, the months ahead offer election results and pending rate hikes by the Federal Reserve. Perhaps, US investors await a further catalyst for change in recent trends.

Despite the holiday shortened week, the S&P 500 barley closed above its annual lows (1251). On the other hand, Crude is at record highs while investor sentiment is overly pessimistic.

On February 19^th Crude broke above $100 – a key psychological level. Since that period, the S&P 500 has fallen nearly 7%. The rise in Crude prices is a result of positive momentum which remains a powerful force especially in the past two quarters. Popular reasoning for rising oil includes: supply/demand factors, booming global growth and increasing speculation. Nonetheless, the key takeaway is a positive cycle which has intensified by increasing bias in investor psychologically. That said, there is a growing trend among politicians to blame speculators. On that note, The Economist offers a different perspective:

"neither index funds nor other speculators ever buy any physical oil. Instead, they buy futures and options which they settle with a cash payment when they fall due. In essence, these are bets on which way the oil price will move. Since the real currency of such contracts is cash, rather than barrels of crude, there is no limit to the number of bets that can be made. And since no oil is ever held back from the market, these bets do not affect the price of oil any more than bets on a football match affect the result." ("Don't Blame the Speculators"- Jul 3rd 2008 -Economist)

Last week, the European Central Bank raised interest rates. This signals early indications that inflation is impacting global economies. Similarly, steel producers declined last week. Perhaps, these are early stages of visible weakness in emerging market companies related to commodities. In addition, credit weakness results in tighter lending which severely impacts fundamentals of banks.

Regarding European Banks:

"Goldman Sachs believes regulatory pressures and a sharp turn in the European credit cycle are the two main causes for concern for bank investors. As a result, it estimates European banks would need to raise EUR60 billion-EUR90 billion. Banks would have to consider the upper end of its estimate if the turn in the credit cycle triggers loses in line with those seen in the early 1990s." (DowJones Newswire—7/04/2008)

Portfolio Management:

Ongoing global concerns can present opportunity for betting against European banks and steel producers across various countries. In terms of timing, recent sell-offs can produce a near-term recovery. As the start of this quarter, managers might have an increased appetite for risk.

European Banks (Short)

STD(Banco Santander SA), AIB (Allied Irish Bank) and DB (Deutsche Bank)

Steel Producers: (Short)

SID (CIA Siderurgicia), GGB (Gerdau SA) and TS (Tenaris)

On the long side, few Technology and Healthcare ideas are worth a closer look. A rotation out of emerging markets benefits US markets.

Technology: (Long)

SWKS (Skyworks), AMAT (Applied Materials) and ORCL (Oracle)

OVTI (Omnivision): Attractive technicals with bottom pattern near $11. Improving fundamentals for the company in the camera phone market.

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.

Weekly Results:

S&P 500 -3.0%
NASDAQ -3.76%
Russell 2000 -3.80%
MSCI Emerging Markets -2.69 %

Market Thoughts | 6/30/2008

Near-term:

The next few days present irregular trading patterns given the quarter-end, Russell Index rebalancing and oversold broad markets. One can expect money managers to protect profits and redeploy cash into new strategies. These activities are mostly related to market mechanics rather than a gauge for conviction levels. In addition, this is a holiday shortened week that features a much anticipated monthly economic data.

Big Picture:

Higher oil and lower stock markets are reflected in prices and are fully acknowledged by mainstream coverage. It's evident that policymakers and foreign leaders are closely watching these globally inter-linked markets. Powerful macro trends are affecting major asset classes. Commodities are near or at all-time highs; credit risk continues to deteriorate and recovery in US dollar is unclear. Once again, investors are seeking catalysts for trend-reversals. In recent weeks, concerns of inflation and a potential slowdown in Emerging markets are topics of interest.

Portfolio Management:

It is not an easy period for Asset managers, especially as the S&P 500 is down nearly 20% since October 2007 highs. On the positive side, broad markets appear oversold. That's after recent sell-offs which have nearly wiped out gains from March lows.

Risk tolerance and investment sentiment can determine the outcome of a potential rally. Further analyst downgrades, breach of technical levels and global inflation worries confirm the ongoing downturn. Nonetheless, mean reversion can be fast and furious when reaching extreme levels.

Financials remain vulnerable and require more patience for a recovery. Select areas in Real Estate and European banks offer shorting opportunities. Similarly, steel producers in Latin America are reaching extreme levels. Companies can face pressure if demand is lower than expected. Finally, US based Innovative and Large Cap area present attractive entry points.

Key Levels:

S&P 500 : [1278.38] At the low range of annual trading range between 1300-1400. Currently, index is a few points away from March 17^th lows of 1256.98. Momentum suggests a minor recovery and psychological level is near 1250.

Crude: [140.21] Record week with intra-day highs of $142.60. June established a new trading range between $130-140.

Gold [919.50] Strength developing in the past 2 weeks. Growing buy interest among investors below $860. Annual highs stand at $1011 reached March 17^th.

DXY –US Dollar [72.36] Interestingly, the currency has declined since reaching a peak on June 13^th. Perhaps, a reflection of unclear Fed Policy concerning interest rate hikes.

US 10 Year Yield: [3.96%] Struggling to stay above 4%, after a surge in yields this second quarter.

Market Observation| June 23, 2008

Weekly Results:

S&P 500 -3.10%
DJIA -3.77%
NASDAQ -1.97%
MSCI Emerging Markets -1.33%

As we are set to close out the second quarter, there is a growing anticipation that markets are reaching an inflection point. Last Friday marked quadruple witching. A day when contracts for index futures, index options, stock options and stock futures expired. Generally, this quarterly occurrence results in abnormal and turbulent trading. Clearly, this contributed to rising volatility- a reflection of ongoing anxiety among participants.

It has been a difficult year for money managers, given sideways market behavior, risk-aversion, credit worries and heightened skepticism. "According to numbers released by Hedge Fund Research (HFR) on Thursday, 170 funds liquidated during the first three months of the year compared with 138 funds that closed down during the same period in 2007." (Reuters – 6/19/2008). Again, a challenging period to produce desired investment results.

The strength in commodities and weakness in Financials continue to resurface yet again. Basically, this relationship has captured the majority of investors' focus. This narrowing stock participation in global markets presents complacency and lack of conviction. Simply, there is a lot of money chasing few ideas. Momentum is a key factor, where holders of energy keep adding to winners. Similarly, those betting against financials profit from betting on downfall of Financials. That said, the tide can turn at a faster than expected pace but the dynamics are not clear. In the weeks ahead, these macro dynamics suggest pullbacks in emerging markets and further weakness in Europe. That said, US markets offer relative attractiveness in select areas.

In approaching month end, global inflation is playing a big role. These impacts are discussed in headlines and addressed by Central Bankers. European banks remain vulnerable with declines in investor sentiment and unraveling of credit crisis. For example, "the median CPI for the 71 countries is 5.83% (YoY) compared to the most recent CPI of 4.2% in the US." (Bespoke Investments 6-22-2008) Worries in Financials are increasing as seen by declines in stock prices. Interestingly, increasing investor demand for risk aversion has lead to a launch of new financial products. The recent launch of CDR Counterparty Risk index enables investor to hedge credit risks of banks/brokers via. This is an example where Innovative products are gaining popularity. On the other hand this showcases that skepticism continues to persist.

European Banks: Short ideas based on weakening fundamentals.

· STD (Banco Santander SA), AIB (Allied Irish Bank) and DB (Deutsche Bank).

Steel Producers: In a slowing global environment these names can present short opportunities.

· Brazil: SID (CIA Siderurgicia) and GGB (Gerdau SA)

· Argentina: TS (Tenaris SA)

Macro Levels:

S&P 500 [1317.93]: Near-term downtrend is established. Approaching key support level of 1300. Broke below annual range between 1350-1400.

Crude[135.36]: Momentum is overbought just enough to attract short-sellers. Forming a new two week range between $138-132.

US 10 Year Yield [4.20%]: A recovery back to December 2007 levels. Expect consolidation between 4-4.20% after a strong run.

Gold [907.50] : Glimpse of recovery after 3+ month decline.

DXY US Dollar [73.03]: Mostly in a sideways pattern in the past 4+ month.

Market Outlook | June 16th 2008

Weekly Results:

S&P 500 -.05%
NASDAQ -.81%
Russell 2000 -.92%
MSCI Emerging Markets -4.17%

Macro Dynamics:

It was last summer when investments regarding China, Credit and Crude appeared extended or at least began to cool off. Obviously, anticipating a peak in oil proved to be wrong. Meanwhile, credit risk materialized and China topped few months later in October 2007. In the same period, investors resorted to risk-aversion while volatility increased, uncertainty expanded. In a similar way, last week witnessed sharp sell-offs in Emerging markets and in groups related to credit. Perhaps it is a friendly reminder of weakening fundamentals in global markets.

Growing concerns over Global markets is strongly tied to rising inflation following a multi-year bullish run. In looking ahead, decisions by policymakers on interest rates will be closely watched as investors speculate the market impact of rising rates. Somehow, the S&P 500 has managed to stay above March lows of 1256. Nonetheless, indexes lack clear direction. This sideways behavior partially reflects the dichotomy between betting on a turnaround versus adding to winning themes. In other words, the cost of being long and wrong is rising while the risk of owning elevated commodity groups has its consequences.

Certainly, there are numerous reasons for directionless markets as most sectors have yet to stabilize. First quarter 2008, resulted in all 10 S&P sectors finishing in negative territory. Also, risk-aversion among participants is forcing most to shorten their holding periods. Once again, a reflection of lack of conviction and rising volatility. Given these dynamics, markets are awaiting for further catalysts.

Macro Levels:

Crude: [$134.86]: Short-term range developing between $132-138. All time highs reached on June 6^th at $138.80. Meanwhile, major support around $126.

Gold: [$866]: The commodity remains in a 3+ month decline and approaching its 200 day moving average of $849.

DXY -US Dollar [74.14]: Slowly showing signs of a recovery since March lows. Nearly 4% removed from annual highs.

US 10 Year Yield: [4.25%]: Making new highs last week with Intra-day highs of 4.27%.

S&P 500 [1360]: Steady trading pattern between the 1350-1400 range. Seeking catalysts for defined move as near-term momentum suggests a slight bounce.

Financials:

A reflection on the credit crisis:

"Capital cushions eroded as assets were sold into distressed markets. The force of this dynamic was exacerbated by the poor quality of assets—particularly mortgage-related assets—that had been spread across the system. This helps explain how a relatively small quantity of risky assets was able to undermine the confidence of investors and other market participants across a much broader range of assets and markets." (June 9, 2008. Speech by President & CEO New York Federal Reserve).

The bursting of the credit bubble continues to generate headlines in Global Financials. Meanwhile, domestically further deterioration. The BKX (Bank Index) reached new lows and is down over 25% since May 1^st 2008. Some participants view the recent downside move reaching toward a mid/late stages of credit crisis. Although the risk/reward is not as extreme as last summer there are rotational opportunities.

In Europe, select regions are more vulnerable than others. In the early part of the decade, Spain and Ireland greatly benefited from rise in housing. An integral part of their economies growth came from favorable years of real estate cycle. Now, in a period of consolidation, these markets are more susceptible. That said, in the near-term European Banks might provide further downside move especially with US Financials become deeply oversold.

"Ireland, the US, the UK, Spain and Ireland face recessions of up to two years because inflation will prevent interest-rate cuts, Howard Davies, a former deputy governor of the Bank of England, has warned." (Independent I.E – June 14, 2008).

• Short Ideas in Europe: STD (Banco Santander SA), AIB (Allied Irish Bank) and DB (Deutsche Bank).

US Technology & Healthcare – Innovative Groups

Macro trends bode well for US Technology especially with a bias toward larger cap and growth stocks. Given the current environment, there is a compelling reason to seek a turnaround bet in US markets. After several years of market leadership China and India are clearly slowing. Year to data, the Chinese's stock market is down 45% and India is down 23%. In addition, rising global inflation and risk-aversion should contribute to upside catalyst in Technology names.

From a cycle viewpoint, neglected themes are poised for a recovery. Innovation themes remain attractive on a relative basis and are appealing yet again. At the same time, frustrated investors know too well that these groups require patience. Nonetheless, the challenge is identifying specific companies and identifying timely entry points.

Long Ideas:

• Technology :
• SWKS (Skyworks), PLCM (Polycom), AMAT (Applied Materials) and LSI (LSI Corp)
• Media/Telco:
• AMT (Amer Tower) and DTV (Direct TV)
• Healthcare:
• TECH (Techne), CBST (Cubist Pharma) and EYE (Advanced Medical Optics)

Vulnerable Emerging Markets:

Slowing global shipment in commodities can have an inverse affect on fundamentals of steel producers. The Baltic Dry Index which measures cost of shipping commodities is showing early sings of weakness. Also, bullish run in emerging markets has resulted in speculation. This has led to over-optimism in growth estimates for years ahead. For aggressive investors, few opportunities in betting on a downturn of steel producers in Latin America.

Steel Producers:

• Brazil: SID (CIA Siderurgicia) and GGB (Gerdau SA)
• Argentina: (Tenaris SA)

Market Review – June 9, 2008

Market Review – June 9, 2008

Weekly Results:

S&P 500 -2.84%
NASDAQ -1.91%
Russell 2000 -1.06%
MSCI Emerging Markets -3.02%

Macro Reactions:

Just a week ago, Crude traded below $130, US 10 Year yield closed above 4%, S&P 500 finished above 1400 and VIX (volatility index) held-in below 20. Nonetheless, these five key indicators reversed their near-term direction and resumed back to their multi-year trends. Reoccurring big picture topics include weakening economy, sideway markets, historic rise in Crude and lower Financials. A furious back and fourth action which showcases that, turnarounds are sharp, information is abundant and yet macro themes are intact. Clearly, these are not new trends in the marketplace, but rather a reiteration of ongoing cycle.

Looking ahead, deciphering numerous headline noises and maintaining a long-term focus are primary concerns for investors in the upcoming weeks. The current environment should test various strategies and conviction levels. In addition, the summer months present other catalysts such as the upcoming elections, Federal Reserve decisions and developing geopolitical events.

Certainly, it is difficult to ignore the price action of Crude prices especially last Friday. At this point, "peak oil" theory appears as popular as those arguing "supply shortage". Either way, these discussions do not distort the ongoing bullish run. At the same time, Financials offer shorting opportunities as global fundamentals continue to deteriorate. On the other hand, innovation based US themes are worth a closer look. In the past 6 months, it's evident that making a sector and directional bets has been difficult. Importantly, fighting existing trends does not pay out as much as looking ahead.

Key Macro Levels:

Crude: [$138.80]: Closed at all-time highs. Intra-day highs stood at $138.80 which is nearly a 4% upside move from previous peak.

Gold: [$890.50): Signs of stabilization between $850-900. Interestingly, 50 day and 15 day moving averages stand at $898.

DXY US Dollar [72.39]: Since March, index is attempting to bottom. Currently, far removed from 200 day moving average and trend reversal remains questionable.

US 10 Year Yield: [3.90%] : Consolidating after a 90 day upside move. Trading in a narrow range between 3.80-4%.

S&P 500 : [1360.68]: Nearly 6% removed from annual highs reached on May 19^th (1440).

Weakening Financials:

The downtrend in US Financials is clearly defined and highly publicized. In fact, the most frequentlyshorted name in the NYSE last month included the California lender FED (First Federal). Others Financials Top 10 heavily shorted stock list includes DSL (Downey Savings) and GHL (Green Hill & Co). This reflects how investors have recognized the impact of the credit crisis in US banks. Perhaps, optimists can argue that negative sentiment has reached extreme levels. NYSE Short interest continues to reach new highs :"At current levels, short interest represents 4.3% of all shares outstanding and has now risen by more than 40% from its levels in October when the S&P 500 peaked." – (Bespoke Investment Group).Nonetheless, a sustainable trend reversal in Financials requires additional time. Before last week, BKX (Bank Index) held above $75 range four times in 2008. Recent breakdown demonstrates a technical weakness and compounding impact in the psychology of investors. In addition, underestimated weakness in commercial real estate can have an inverse impact on REITS.

In terms of portfolio management, one can rotate short positions from US banks into vulnerable European Banks. Select areas present additional downside opportunities overseas especially from a risk/reward perspective. Of the $387bn in credit losses that global banks have reported since the start of 2007, $200bn was suffered by European groups and $166bn by US banks, according to data from the Institute of International Finance, a Washington-based banking group." (Financial Times – 6-05-3008).

• European Banks Shorts: AIB (Allied Irish Bank), BCS (Barclays) and DB (Deutsche Bank).

Neglected Innovative Groups:

Despite a nearly 3% decline in broad markets, groups in technology held in and showcased relative leadership for the week. For example, leading groups included Computer Hardware +1.24% and Disk Drives +1.12%. There are plenty of choices for those willing to make a turnaround bet in Technology. Especially as odds for a sector rotation become more favorable. Fundamentals across the sector are poised to recover after stagnant performance for the most part of this decade.

Technology:

SWKS (Skyworks Solutions): Attractive relative strength as Company plans to expand its market share. Growth in wireless communication creates demand for 3G broadband technology. Use pullbacks as buying opportunity near $10 per share. Momentum is positive in the past two quarters.

PLCM (Polycom): Continues to benefit from growth in video conferencing. Stabilizing around $24 with a positive long-term outlook.

Media/Telco: AMT (Amer Tower) and DTV (Direct TV)

Healthcare: CBST (Cubist Pharama), JNJ (Johnson & Johnson), and EYE (Advanced Medical Optics)

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 Outlook: June 2, 2008

Weekly Results:

S&P 500 +.43%
NASDAQ +2.36%
Russell 2000 +2.08%
MSCI Emerging Markets -.10%

Macro Review:

As May draws to an end, higher Crude and lingering Credit Crisis are at the focus of investors, pundits and observers. Perhaps, most are anxious for the emergence of new themes and directional changes. In some cases, these trends are becoming a socio-political issues just as much as portfolio management. This illustrates the power of multi-year cycles, where momentum and psychology play larger roles. Outside of the big picture, early signs of trend reversals resurface occasionally. Interestingly, the past three months have showcased a rise in yields, weakness in Gold, stabilization in US dollar and sideways pattern in equity markets.

For those optimistic about the equity markets generally watch the behavior in Financials. Banks' stocks generally lead to overall market direction. In the short-term, the implementation of the Federal Reserve lending facilities have contributed to some stabilization. Optimists argue, that credit markets are witnessing improvement. For example, XLF (AMEX Financial Index) has traded in a range since the start of year. BKX (Bank Index) has held above $75 range four times in 2008. Once again, buyers are being tested as the index revisits levels near annual lows. Nonetheless, weakening fundamentals require additional time for a sustainable recovery.

Key Levels:

Crude (127.32) : Recent pullbacks from intra-day highs of 133.70. Momentum is extended in the near-term as 50 day moving average stands at $116.64.

Gold ( 885.75): Attempting to stabilize between $850- 900. After reaching all-time highs in March, the commodity is in a 3+ month decline.

DXY US Dollar (72.87): Signs of bottoming between $72-73. Holding above March 17^th lows and seeking an upside catalyst.

US 10 Year Yields (4.05%): Yields breaking above key 4% level. Currently trading above 200 day moving average.

S&P 500 (1400.38): Closed at 1400 with next resistance level at 1425. (200 day moving average). Volume in recent weeks is steady as index remains in a sideways pattern.

Portfolio Strategy:

A potential pause in commodities, presents rotational opportunities into innovative based themes. Although, it is too early to call tops in Crude, a shift into select neglected areas provides favorable odds. In other words, performance chasing at elevated levels has its costs on overall portfolio performance.

"A sell-off in oil could spell big losses for the pension funds, municipal funds, college funds, unions and other groups that jumped out of equities-market plays and into the indexes, but have little experience or flexibility to deal with fundamental changes in commodities." (Reuters: 5-30-2008).

On the other hand, Technology, Media and Communication are attractive on a relative basis. Upside catalysts for cycle shift include, decline in Gold prices, rise in US Dollar and less market volatility. Importantly, select ideas in Large Cap Technology are more appropriate for 6-12 months.

Stock Specific Ideas:

Technology: CSCO (Cisco), LSI (LSI Corp), NICE (Nice Systems), ORCL (Oracle), and FLEX (Flextronics)

Media/Telco: AMT (Amer Tower) and DTV (Direct TV)

Healthcare: GENZ (Genzyme), JNJ (Johnson & Johnson), and EYE (Advanced Medical Optics)