Market Thoughts - 10-13-2008

Weekly Results:

S&P 500 899.22 -18.20%

NASDAQ 1,649.51 -15.30%

Russell 2000 522.48 -15.65%

MSCI Emerging Markets 24.66 -21.2%

Powerful weekly moves as investors digest the high magnitude of intra-day swings. Participants await impact of global interventions and pending confidence restoration.

Sentiment/ Reactions:

Its commonly known that trading on emotions leads to overreaction and enhances overall investment risk. At this point, sentiment gauges boldly illustrate extreme panic. The VIX (Volatility Index) spiked 54% on the week and reflects less rational reactions. Through this inevitable consolidation phase, the results of "negative headlines" have worsened. Not to mention, weak economic data and Financial systems have yet to stabilize. Thus, a reminder that calling "bottoms" is a dangerous process. In the past year, several indicators have numerously signaled overextension and contraction. Following the multi-year bullish run, we've approached an era of de-leveraging. This process is visible in the chart of NYSE Margin Debt which has been contracting since July 2007.

"Unwinding of margin has accelerated this week, and when that happens, prices fall as fast as positions are being unwound to meet margin calls. Those who invest using extremely high leverage are speculators, and these kind of market conditions end up squeezing speculators out of the market." –(Marty Chenard -StockTiming.com)

Cycles & Perspective:

In this current period, risk is unclear and requires reassessment. Meanwhile, participants wrestle to identifying entry and exit points. Nonetheless, general principals of human trading patterns repeat themselves in various cycles. This wave of panic selling is a powerful force to outsmart. The lows of 2002 might serve as gauge or support level. Then, the S&P 500 hit a low point of 768 , which sparked a new cycle upside move. Perhaps, declining below those lows is necessary to flush out multi-year gains from 2002-2007. Important to note, that markets have tendency to exaggerate. That said, even for the most optimistic, its difficult to overlook downside surprises. On the other hand, few await for natural exhaustion of sellers and increasing confidence among major participants. At this point, the disruption of natural market flows increases the number of unknown variables. Nonetheless, investors can cut their losses and exploit extremes for next cycle recovery. In other words, these are two behaviors investors can control.

Market Mechanics:

The mechanics of asset management suggest that selling pressure is not fully complete. For one thing, fund redemption lead to further downside pressure. In addition, liquidation by hedge funds is an ongoing trend. For example, "About 350 funds were liquidated in the first half of the year and if the trend continues, the number of closures would be up 24 percent this year from 2007" (Perpetual Interests, LLCTM). The current environment of "forced selling" and limited leverage continues to contribute to a readjustment process. That said, one can expect frantic market behavior. Thus, it becomes important to stay in liquid assets and manage portfolio's on a near-term basis.

Money Management:

Few points to consider:

· Additional patience is required for those seeking to buy as stocks decline/stabilize.

· The natural flow of markets is still disrupted.

· Many Technical indicators signal oversold readings, but sustainability is unclear.

· Volatility can breed opportunity, but requires intensive short-term risk management.

· Sole reliance on traditional valuations might not provide an accurate measure in cycle downturns.

· Investor psychology cannot be underestimated in which fear plays a major role.

Macro Levels:

Crude [$77.70]: Broke below a major support level of $80. Crude is down, over 47% since mid summer peak. In the near-term oversold and poised for a minor rally. Nonetheless, heavy resistance around $90.

Gold [$900.50]: Since September lows of $740, the commodity has jumped nearly 22%. Long-term trend is positive despite March 2008 peak at $1011. At this point, a break above $950 can confirm the strength of multi-week move.

US Dollar – DXY [82.99]: Yet another explosive move last week. Again, since March 17^th lows, the index witnessed technical improvement following several years of downtrend. In the near-term, the Dollar Index is extended as global investors piled on for risk-aversion. Despite sharp run up this year, the Dollar is few points removed from its 17 year moving average of 93.45.

US 10 Year Yield [ 3.87%] Trading in a narrow range between 3.60%-3.80% range. Attempting to stabilize, while hovering at the lower end of a 6 year range (3.50%-5.00%).

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 | October 6, 2008

Market Thoughts | October 6, 2008

S&P 500 1099.23 -9.4%

NASDAQ 1947.39 -10.8%

Russell 2000 619.40 -12.1%

Emerging Markets 30.72 -15%

Sell-offs across the board despite politically driven announcements. Investor psychology is greatly consumed with "Fear". At this stage, there is an increasing fixation with indicators showcasing panic such as VIX (Volatility Index) and TED Spread. Clearly, both signal extreme bearish readings. Negative sentiment is understandable at this junction of this cycle. The weak economic and credit environment confirm this downtrend. Even the most optimistic investors, recognize that we are in a period of readjustment. A decline in (ISM) manufacturing index further reflects contraction in economic sectors.

As we begin the fourth quarter, commodities remain in a downtrend, labor markets seem vulnerable, and earnings can provide more clarity in investors' expectations. That said, bottom seekers are looking for a confirmation as odds increase for a sharp trading bounce. As for the longer-term outlook, more clues are desperately needed. Investors are confused, especially given recent disruption of market flow. In other words, the undefined regulatory landscape and pending elections force many participants to stay on the sidelines. In looking ahead, discussions of a Federal Reserve rate cuts should spark further discussions.

In March 2000, the S&P 500 topped at 1552. Similarly, last October the index peaked at 1576, just few points away from tech-bubble highs. Charts remind us, how the S&P 500 reached lows of 768 in October 2002 before a multi-year rally. Today, the index is 331 points removed from those market lows. In other words, there is room for further downside based on historical pattern. This decade's worth of run up in Credit, China and Crude is pulling back from excess levels.

Reconstruction in Financials continues to reshuffle ones valuations and expectations. Since the first short-sale ban in July, Large Cap financials have made a strong recovery. For example, XLF (Financial SPDR) has held above its annual lows of July 15^th. Sector consolidations appears to favor Super Regional Banks. For example, JP Morgan (JPM), WFC (Wells Fargo) PNC (PNC Financials) and USB (US Bank) are trading near yearly highs.

Macro Indicators:

Crude [$93.88] Holding above annual lows of $90.80. Downtrend intact from mid-summer highs. Despite, near-term trading recovery technical outlook remains negative.

Gold [828] Following a sharp recovery in recent weeks, index failed at $900. Although, a flight to quality in the current crisis, there is less upside momentum at current levels. Visible consolidation between $800-550.

US 10 Year Yield [3.60%] Sideways pattern forming between 3.60-3.80%. So far this year, yields held above 3 key lows (Jan 25 -3.28%, March 21 3.30% and Sep 19- 3.24%). Perhaps, this signals potential rise in yields from a technical basis.

DXY – US Dollar [80.31] Strengthening momentum since March 2008 lows. Extended in the near-term. Early signs of a breakout with further evidence needed. Potential pullbacks around 50 day moving average of $76.

Stock Specific:

Financials: Long: BX (BlackStone Group) | Sell: COF (Capital One)

Commodity Related Shorts : TS (Tenaris SA): STLD (Steel Dynamics), SID (Companhia Siderurgica) and GGB (Gerdau S.A)

Healthcare: BLUD (Immucor), GENZ (Genzyme) and ILMN (Illumina Inc), and TECH (Techne)

Other Long Ideas: WMT (Wal-Mart), LUV (Southwest Airline) and WTR (Aqua America).

Market Update – September 29, 2008

Weekly Results:

S&P 500 1,213.27 -3.33%
NASDAQ 2,183.34 -3.98%
Russell 2000 704.79 -6.49%
MSCI Emerging Markets 35.49 -2.21%

Awkward times indeed!

Clearly, a bizarre period when investors eagerly awaited results of government decisions. Basically, policymakers continue to play a major role in market reaction.

Market tampering, increasing headline materials and political posturing contribute to edgy markets. For the most part, the last 18 months have demonstrated slower growth, decreasing investor confidence and a cycle peak. We've reached a point where panic and risk-aversion are dominant market themes. During an election year, political rifts can disrupt the general flow of markets, especially with changing regulations. In addition, restructuring of the financial sector seemed inevitable given the fundamental weakness. This unresolved matter greatly contributes to key investors sitting on the sidelines as risk-aversion. One can expect more unusual trading given the approaching religious holiday and quarter-end. Also, an eventful economic calendar this week, where many await for clues on the condition of labor markets.

Reaching stabilization remains unclear from a regulatory and policy viewpoint. Some argue that the natural process of a global slowdown is a force that corrects itself naturally. Taking a step back, participants are reminded that a year ago emerging markets peaked after a sharp upside moves. EEM (Emerging Markets Fund) is down 56% since last fall's peak. A reflection of retracement from overvalued themes related to Credit, Crude and China. Therefore, previous relationships and expectations have entered a readjustment period. This leaves few sectors attractive in terms of rotational beneficiaries. In other words, there are few ideas for those willing to chase positive momentum. That perhaps, explains the results of excess capital in the marketplace. Now, further decline in Financials can appeal to value buyers. Trust and confidence restoration is a pivotal step in reaching market bottoms. The Federal Reserve continues to inject liquidity into the system and for the most part has yet to create a bottom.

"Discount window borrowing (also known as primary credit to banks) increased $20.4 billion between September 3, 2008 and September 24, 2008). Funding through the Primary Dealer Credit Facility was up sharply during the past two weeks amounting to $105 billion." Paul L. Kasriel – Northern Trust.

Financials:

In one sense, this month has featured an unprecedented failure of financials. On the other hand, indexes have reached extreme bearish levels. This sets the stage for the next cycle. Perhaps, larger Banks are poised to benefit from a fundamental view. Interestingly, XLF( Amex Financials Index) has stayed above its annual lows. In fact, a sharp rally since July 15^th lows which serves as a technical barometer. Given the volatile landscape, overall trend is too speculative especially given early headline reactions and pending mergers. Again, investor psychology should determine investor sentiment as managers reassess overall risk.

In terms of the credit crisis and intervention – here is one view.

"Instability is not necessarily harmful; indeed, if it were described as dynamic adjustment, it would sound positively benign. But carried to extremes, it can give rise to sudden reversals that may take on catastrophic proportions. That is particularly the case where credit is involved, because the liquidation of collateral can lead to sudden compression of market prices. The prevention of excessive instability is therefore a necessary condition for the smooth functioning of the market mechanism." George Soros -"The Alchemy of Finance (1987).

KEY MACRO LEVELS:

Crude [ $106.89] :Remains in a downtrend from its summer peak. Attempting to hold around $104-106 and below its 200 day moving average.

Gold [$902.00]: A sharp two week rally from annual lows of $740. After a 9 month decline, index is attempting to trade in a consolidating range.

US 10 Year Yield [3.85%]: Similar to Gold, an accelerated upside move in past few trading days. Trading in a multi-month range between 3.60%-4.00%.

US Dollar DXY [76.95] Following a summer rally, index is consolidated from overbought levels. Staying above it's 50 day moving average of 76.23.

S&P 500 [1213.17] Oversold in the near-term after testing July 15^th lows of 1200. Next key resistance stands at 1300.

Themes & Ideas:

Larger Cap companies offering attractive entry point.

Consumer Related: WMT (Wal-Mart), HSY (Hershey), LUV (Southwest Airlines), and SBUX (Starbucks),

Innovative and neglected groups that present longer-term upside.

Technology/Media: GMKT (GMarket Inc), SAP (SAP AG) and INTU (Intuit).

Healthcare: BLUD (Immucor), GENZ (Genzyme) and ILMN (Illumina Inc), and TECH (Techne)

WTR (Aqua America): Attractive on a relative basis. A leading water utilities provider with solid fundamentals. Favorable entry point at current trading range between $15-17.

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 futurinvestment performance of any securities or strategies discussed.

Market Update - September 22, 2008

Weekly Results:

S&P 500 1,255.08 +.27% 
NASDAQ 2,273.90 +.56% 
Russell 2000 753.74 +4.65%
MSCI Emerging Markets 36.29 +.52%                                                                                                                                                                                                         

A memorable and historic week!  In an election year, investors react to temporary policies while digesting intense headlines. Since last Sunday, anxiety increased for banks, regulators and money managers. At times, traditional risk assessment were being challenged. Especially, with interventions playing a greater force. Clearly, macro indicators reached significant multi-year ranges. For example, flight to safety and spike in volatility reached extreme levels. For optimists, these events can set the stage for a turnaround. As for the sustainability, it appears too early to call. In fact, confidence restoration might have led to more confusion. For the most part, "panic" was the dominant theme. Some characteristics of last week were a reminder of previous market crisis.

Importantly, the old adage "Don't fight the Fed" holds true. Friday's relief announcement sparked a sharp rally. Of course, most trading disciplines seemed not applicable given these violent swings. Nonetheless, effective money management requires one to adapt to changing landscape. The challenge ahead is not to overreact and overtrade in this unclear regulatory and market environment. Perhaps, this is another inflection point in global markets. This year, we've witnessed a series of events pertaining to cycle tops. 

In taking a step back, there are few things to consider in these times. The financial meltdown in this capacity was unprecedented. Nonetheless, from an investor's view, hints of a cycle peak were mildly visible from various angles. Leading up to this decline, homebuilders peaked in 2005. Hard assets (Gold/Crude) soared most of this decade while "paper assets" were out of favor. Credit concerns and weakening economy have been a reality for the past year and a half. In March, the Bear Sterns failure sent alarms with lingering effect. This Summer lows were not enough to create a market bottom. At the same time, mid week sentiment and panic selling further decelerated an oversold market. Therefore, interventions have contributed to short-term recoveries. This time, the compounding effects resulted in a reaction of higher magnitude.

Looking Ahead:

As the dust clears, there are cycle/sector themes are poised to reestablish. Interestingly, despite wild swings, weekly results don't reflect impact of recent events. For example, S&P +0.27%, Nasdaq 0.56%  and CRB (Commodity Index) -.12%. 

From a regulatory perspective there are lots of moving parts. This includes weekends approval of Goldman and Morgan Stanley becoming bank holding companies. Most portfolios look to readjust to liquidity injections by Federal Reserve. Indexes tracking US financials have seen major changes in the past few weeks (Ie. AIG, Merrill, Lehman, Fannie and Freddie).Chart readers can observe that BKX (Bank Index) is showcasing a bottoming recovery since July 15. In fact, a stunning 79% gain for the index since the summer lows. Therefore, those reassessing risk and tracking relative strength can view this as a recovering signal. Similarly, (RLX) Retail index is up over 25% since July 15. Next few weeks, will showcase if positive sentiment continues to unfold.

 

Stock Specific Ideas:

Consumer related Long:

HSY (Hersheys), LUV (Southwest Airlines), WMT (Wal-Mart) and SBUX (Starbucks).

Healthcare Long:

BLUD (Immucor), GENZ (Genzyme) and ILMN (Illumina Inc), and TECH (Techne)

MACRO LEVELS :

Crude [104.55]:  Sharp recovery from annual lows of $90.80.  Next resistance level at 200 day near $111 as it remains oversold in the near-term.

Gold [869]: Intermediate-term downtrend intact despite a two week rise. Attempting to stabilize around $850-900.

US 10 Year Yield [3.81] : Up 9 basis points last week. Trading at a lower end of a multi-year range. In the near term, 200 day avg is the same as Friday's close.

US Dollar DXY [77.68]: Retracing from yearly highs of 80.25. Overbought in the near-term with next major support at 76.

S&P 500 [1255.08] Attempting to stabilize around 1250. Holding above extreme lows of 1133 (Sep 18) and July 15th lowest point of 1200.

 

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: 9/15/2008

Weekly Results:

S&P 500 1,251 .70 +.76%
NASDAQ 2,261.27 +.24%
Russell 2000 720.26 +.20%
MSCI Emerging Markets 36.10 -2.09%

A chaotic and confusing week with key shifts in Macro dynamics. There were growing anxiety and major headline announcements over the weekend. Lehman's bankruptcy, Bank of America's acquisition of Merrill Lynch and liquidity expansion by the Federal Reserve. Now, participants have to manage their expectations before placing bigger bets.

Key questions to reexamine:

· Do themes in Commodity and Emerging Markets recover from multi-month downtrends?

· As Credit risk continues to persist; are recent interventions enough to spark a short-term rally?

· Are US Treasury yields headed lower?

· Is the US dollar overbought and fundamentally poised to go lower?

Investors are forced to digest a new playing field and risk assessment. Clearly, these dynamics contribute to volatility, irrational behavior, political discussions, and interventions. Putting these various pieces together partially explains the uncertainty in the marketplace. Since August 22^nd, Volatility index has risen nearly 40%. The last few weeks have demonstrated the difficulty of navigating through a turbulent markets. Overall sentiment reflects fear with increasing speculations. For the week ahead, there is further suspense given upcoming FOMC meeting, key earning announcements and option expirations.

For chart pattern observers, recent market lows have coincided with policy-makers' actions. Since the start of the credit crisis in 2007 there are five key bottoms within the current downtrend. These dates include Aug 2007, Nov 2007, March 2008, Jan 2008, and Jul 2008. In all these cases, a stock market rebound was fueled by cuts in the discount and fed funds rate, changes to lending system or bailouts. As for last week's rescue of Fannie/Freddie the answer remains to be seen. That said, odds for a recovery appear feasible in the near-term as markets are deeply oversold. Again, confidence restoration does take time and policymakers are using various tools.

Commodities/Emerging Markets:

Trend followers would argue the cycle reached an extreme. Interestingly, with lower commodity prices overall inflation worries are less of a concern than previous months.

Crude [101.18]: Nearing a psychological support level of $100. Oversold in the near-term with 200 day average at $111.64.

Gold [750.25]: Retracing back to October 2007 levels. Attempting to stabilize after a 6 month decline from March 2008 highs. Long-term uptrend is intact despite this steep correction. Mean-reversion and a short-term bounce appears feasible.

EEM [36.54]: Nearly a 40 % decline since October 2007 highs of $55.88. Major support around $35 level, where bullish conviction will be retested.

Rates/ Currency:

Observers and industry pundits are noticing the Dollar dig itself out a multi-year decline. Key participants are taking notes of recent moves. Now, if this recovery persists, money managers should look to readjust themes in portfolio holdings. On the other hand, credit concerns and overbought technicals can lead to short-term decline in US dollar.

US 10 Year Yield: [3.71%] Currently yields remain above annual lows of 3.28%. Sharp declines since October 2007. Further evidence needed for stabilization.

DXY (US Dollar): [78.96] A sharp recovery since March, resulting in overbought levels above $80. A weak finish last Friday as worries of financial weakness take hold. One can expect near-term corrections given overall uncertainty.

Financials:

In this environment, safety appears to be a precious commodity. This can result in a continuing "wait and see" game . For those looking ahead, there are bargains in US equities. The headline concerns over Lehman and AIG escalate Fear to a new level following Fannie / Freddie takeover. For those seeking positive signals, the HGX (Housing Index) is up significantly since July 15^th lows. Same argument is made for BKX (Bank Index) where it remains above annual lows. Nonetheless, a fundamental turnaround in banking and real estate groups requires some patience.

Money Management:

Its apparent in the past year that risk-aversion is a dominate global theme. Investors have flocked back to developed markets and value players are awaiting favorable entry points. Now, shorts will look to hedge as volatility increases yet again. Risk in Equity markets is too unclear. Nonetheless, a recovery in pending months presents few stock specific opportunities.

Consumer related Long;

HSY (Hersheys), LUV (Southwest Airlines), WMT (Wal-Mart) and SBUX (Starbucks).

Media/Tech:

DTV (Direct TV), and PMTC (Parametric Tech).
Healthcare Long:

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

Commodity Related Short :

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

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.