Investments -

Longer term charts provide valuable perspective on the state of Large Cap Technology. Areas of interest : DELL, IBM, QCOM, and YHOO. Charts of these names demonstrate a consistent behavior of oversold patterns.

Since technology is an emerging sector, even a market correction should not amplify the risk on these names.
Financials: Continuing on a negative bias in the sector, Banks remain area of concern. Examples include : WB, WFC and BK. Other areas in financials don't present definitive messages. Taking an early interest in SLM and MMC as potential longs.

In Basic Materials, DD, DOW, AA, NEM. Oversold and offer attractive timely entry.

These extremes are rather appealing in Technology and Materials.

Continue to favor gold here - very glad the commodity is working along w/ GG - a personal favorite name.
Election noise might cause turbulence but I do like SLM on the long side.

Few ideas to consider:
Banks : PNC - long at attractive levels, Short CMA closer to 200 day, with weak momentumCOF: short failed resistance at 80 short closer to 77.SLM: holding $48 attractive bottoming level.Staples: CBP - attractive entry point for an investable idea TSN: closer to $14 worth a look.Healthcare: CAH at 64. SEPR and IMCL - extreme levels opening up long opportunities.Consumer: DG, FL -long at these levels, HD - part of home related overdone extreme for late year rally.Media: An emerging theme w/ following names appearing to turn: gmst, emms, siri, xmsrTechnology: stx, brcm, altr, adi mxim, mu mrvl, cien, tlab, wdc, and elnk.Short: perIndustrials: swft, yrcw,Bm: aa- of course additional gold on pullbacks.

Homebuilders -

Although not a big fan of mortgage lenders - there is an equity oppertunity in homebuilders.

HGX Homebuilder Index remains attractive based on the bottoming action in the group. Following support level 210 followed by 200.

Analyst on the street remain net/negative on estimates in this group. Certainly, contrarians have placed their bets since July. Moving the index from its lows.


Although, a call that might not be way ahead of the street, current levels still offer attractive upside potential.

Clearly aware that value guys have recognized these oversold condition even in mid- Summer.
Check out the following Analyst ranking on the street:
Buy/hold analyst rating on the street: Still net/negative -allowing for a recovery bounce as a trade.
TOL 5/7
PHM 4/9
HOV 3/6
KBH 3/8

mkt view--

I would also note if a shift in feds message from thr previous meeting than it might have a loud effect - I am sure monday/tuesday- many will shuffle in/out poistions and attempt to decipher beyond fed's action. While equities await for clarity from the 3/5 of companies yet to report earnings.

Based on recent upward move - any confusing or tone change should lead to a favorable oppertunity to short equities and long bond price. (Near-term trade)

What is the current tone that led this revival in markets and defeat on shorts? It is assumed to be soft- landing and low oil and end of geopolotical turbulance. All led to recovery from summer rally and rejected talks of four year cycle.

But steady rides and trends need more substance to justify these overbought levels. A prolonged run from here appeases shorts

QCOM-

Worth a closer look at these levels - attempting to bottom with attractive risk/reward.

QCOM Remains attractive - looking at the following trading ranges.

GG (gold play via equity)

GG: gold is oversold following a commodity decline – GG –several stock specific news drove stock lower

20.35- October 4^th lows remain a key trading support .

Looking for recovery both in Gold and GG – an equity play based on macro extreme. At the same time a high beta play in a overdone negative name.

Since May correction, and following a heavy correction, there is a solid trading opportunity here –with defined exit.

CVS- overdone -

CVS: Overdone on the sell side following a mega news announcement by Wal Mart entry to pharmacy business. Mispricing created here as price declines are too oversold and pending recovery with support around 30 level followed by 28. Look for recovery in a solid Large Cap name – looking for bearish expectation to moderated and recover from extremes.

Also, given the defensive theme of this stock – looking for stability around current trading range.

Valuation seems positive: (good investment entry point)

The trailing p/e is a very reasonable 19.95 (imho), with a forward p/e of 16.57 (as estimated for fye 31-Dec-07). With quick growth estimated, the stock appears to be an excellent value with a PEG (5 yr expected) estimated at 0.62.

PALM- (trade revisited)

PALM: Bouncing off strong support around $14. Apparent buyers when stock trades $12-14 range -- a level that has offered buying opportunity. This is exhibited in the weekly chart coinciding with a bottoming momentum.
Above $14, stock remains attractive given recent correction and heavy sell-off from April highs of $24. Despite broad technology rally and competitors RIMM exceptional upside move - PALM clearly lagged the sector but showing a bottoming signal.
Street appears too bearish on this name. -And there is opportunity from what appears to be over pessimism. 7 buys/ 8 holds/ 2 sells -
Company has : No debt and $4.82 excess cash, and upcoming buyback of $250mil.
Extreme oversold reading in the weekly data presents an attractive opportunity a long position.

Avaya: Worth a look

Although, CSCO –gets the front cover and positive mention on Barrons; I have noticed AV on the positive momentum list.

In the same article the following was mentioned on AV.

Sticking to the discipline: Positive weekly momentum and a breakout from recent range make this name attractive.

Building momentum given the fundamental action on this group. Not fresh or timely idea as a trade here but actionable on pullbacks.

Worth adding to a watch list. postive above $10- use as exit....but for longer-term investors actionable.

All this said , same goes for csco - the leader in the group.

DD: attractive basing pattern

DD: Since 2000 stock trades in a narrow range between $50-40.

Aattractive consolidation pattern: suggesting a favorable odds for a pending breakout above $50. An upside move above $50 can trigger upside momentum.

Longer-term bet and might carry an opportunity cost of capital. A set up for an attractive reward given an emerging cyclical theme. (Chemicals and other large cap basic materials/industrials).

Near-term entry point: after a run up from $40-44--- not timely but at early stages of recovery. Not a trade but a 3-6 months play with an exit at $40.

fundamentals outlook: lower raw material costs and higher average prices will offset softening demand, and also thinks the stock is modestly undervalued. **JP Morgan comments**

I also like this name because of a value like approach and nice to have those names in the portfolio in an uncertain / less trending market.

Beta short / Long VIX

Chart Explanation:
Blue: Beta index (OSX, SOX, HUI and XBD)

Black: VIX Index:

Takeaway: Since 2003 as volatility declined; beta related themes appreciated.
Further Thoughts:
Equally weighted beta index suggests that oil services, brokers and gold stocks have all contributed to significant upside move. These groups have outperformed other areas in the marketplace. But leadership will be challenged.
We are at key junction as volatility remains oversold and due for recovery. Chart suggest in the upcoming months shorting beta themes might be worthwhile. OSX has shown recent declines tied with Oil weakness in the past few weeks. Brokers have had a sharp run up and benefited greatly in the low interest rate environment. Earnings were positive, but not sure if higher expectations await. Plus various strategies in the marketplace might be too crowded with similar tactics in minimizing risk. Therefore, beta index glory days of outperformance are worth a sharp look. As liquidity is drained out of the marketplace with rising rates from central banks, beta strategies risk or at least the game might change. Any change leads to uncertainty - not to be confused with general risk. Uncertainty caused turbulence which can result in a rising VIX - As commodity related themes reshuffle their outlook and hedge funds restructure their strategies – this can cause a shift in the market place.

Trim / short - Bank holdings - Oct 3, 2006

BKX Index: Showing signs of slowing with peaking momentum at these levels.

Strong run since Oct 2005 -(given new fed announcment)

Use Sep 29 highs as resitance level -of 114.

Vulnerable area in the market place - and usually has served as a good gaudge for broader market direction.

Stock specific area worth a note here as we start october -

Revisiting lenders short…..AHM (American Home Mortgage Investment Corp)

Revisiting lenders short…..AHM (American Home Mortgage Investment Corp)

AP STORY READS LIKES THIS:

The long-expected first sign of cracks in the mortgage loan market may have surfaced this week, as the Mortgage Bankers Association issued their quarterly report on home loan foreclosures.

MBA said Wednesday that loans entering foreclosure during the second quarter rose 29 percent from the first quarter. While analysts have long anticipated an uptick in mortgage defaults, Merrill Lynch analyst Kenneth Bruce said this report may mark the beginning of an era of weaker credit.

Lets make it actionable:

Revisiting the fundamental short on credit lenders as highlighted several times. A short which materialized heavily on HRB’s earnings announcements last month.

NOW….actionable trade with an attractive risk/reward enables us to short AHM.
Assuming that the recent rally in September is not sustainable.

AHM – stock has run up recently from $30-35 range – as October begins, here is a shorting opportunity given the overbought momentum levels. Timely entry point, in a fundamental biased call.

Looking for an attractive risk/reward trade here along with macro declines heading into earnings season. Also, a rising yield can help the case with further econ #’s pending especially this Friday. – Worthwhile, to get ahead of the trade despite attempted recovery.

Other names in that space also worth a consideration but at this point recommending short on AHM – trim candidate for long-term investors. (FED, BKUNA, CFC )

Additional industry perspective:

"This is the first sign of meaningful weakening in the prime mortgage space," Bruce wrote in a note to clients Thursday. "A downturn in credit may be just around the corner."

What does this mean for mortgage lenders? If consumers start defaulting on mortgages, investors who buy mortgages in the secondary market through loan-backed bonds will lose their appetite for risky loans. Mortgage lenders will then either make less profit when they sell their loans through securitizations or be stuck with portfolios of undesirable loans.

MKT THOUGHTS 9-27-2006

Looking at the BKX index - Approaching -May 8th highs - a full recovery from the equity sell-off.
May critical resistance level, given BKX weakness has been an indication for the broader market.
It works key barometer of the market given the dominance of financials in the S&P 500.

Technology :focused on three shorts that offer beta: AMD, NVDA and WFR.- A near-term trade.

Decline in commodities markets has fueled a return back to bonds sparking this near-term rally. A defensive rotation that compiled staples and healthcare to move higher. Nickel for some reason has survived the storm.

Crude Factors

1) Global central bankers are lifting interest rates in unison, and slowly draining global liquidity.

2) Beijing is tightening its grip on the yuan money supply, leading to exaggerated fears of a hard landing for China's economy.

3) Crude oil traders unwound a $15 per barrel Iranian "war premium" after Europe's big-3 signaled a split from the Bush administration's campaign for UN economic sanctions against Iran.

4) Weaker crude oil prices triggered a rout in the gold and silver markets.

Gary Dorsch: http://safehaven.com/article-5916.htm

Crude: Search for Support

Crude: Accumulate closer to 58-60/ in the next two + week.

A sharp decline from 77 to 61 ---clearly catches the attention of both bull and bears. Given a bearish stance on crude, I am glad to see this decline. I must say as a rational investor this downside action is highly surprising.

Near-term recovery pending as stated last week but clearly buyers are stepping away and selling near-term bounces. At this stage, looking for consolidation with worst case scenario of $58.

One has to look at current levels closer to February 2006 and October 2005 levels to get a clearer long-term perspective.

Again crude did go from 20 – 70 and that move is still intact. I wonder if the summer mid-east conflict was a key contributor to a climbing irrational move closer to$77.

Perhaps, $68 is the key resistance level and $58-60 is an area of interest in the next two weeks.

Net/Net: Next two weeks I would stay away from this trade and find further downside extremes. Then one can step in and accmulate or bail out of a trap.

Commodity vs Stocks: 9-20-2006

Oil has declined over 20 % in the summer. Tech and Consumer related names have recovered signifgantly since the July lows. There has been a rotation into technology.

Tech, consumer and financials dominate the US markets and early signs of rotation out of commodities and into stocks.

Chart demonstrates recent sell of in Oil and Gold - and the recent diveragence. Woth a look:

Black: CRB VS SPX Red: Real Price SPX Blue: Real Price CRB Index

Small Cap : Ideas and methodology

Consolidating patterns: TIBX, USTI, CMTL, VSEA, SONS, BRCD, and MDCO.
Questions to ask.
Are we hoping for breakouts? Are these value traps.
Attractive risk/reward: extremes that can be exploited :

Momentum Extremes: CYMI, ATHR, WGO, RATE, BCEN, CENT, ECLP, KYPH, AMMD.
Questions to ask.
After acknowledging oversold weekly momentum; are these names all worth taking the risk/reward

Leadership Momentum: MW and PSSI

Questions to ask.
What are the risks of sticking with momentum names? Any reason

Early rotation to tech:

Further upside move in the markets clearly shown by advancers expanding from 57,318 to 176,522 in CBOE put/call data. Looking for pullbacks this week in tech/retail related themes.

Coming into September, I was looking for further upside move in the VIX - but volatility has been tame in this upside move.

Clearly, the fed speak day will offer further uncertainty and volatility. A decline in VIX from 14-11 is visible in near-term charts.

CHART: Last week clearly tech rally continues exhibited by acceleration in semis. OSX - sluggish performance continues and this inverse correlation is shown in the above charts.
Rotation into tech out of commodity related names.

Decline in crude: a theme which has worked and due for a near-term recovery.

mkt thoughts - ahead of CPI and FED

Broadly speaking: Weekly momentum remains positive from deeply oversold levels. Near-term pullbacks pending but how much downside does the anticipated downside move offer?

Rotation out of defensive themes Since the May's correction, defensive themes have outperformed XLG - (top 50) outperformed most groups in the market by recovering 9% since July 18th low. ` further on Large Cap out performance like the Dow Jones + 7% YTD.
In the past few weeks further confirmation of beta related rally. Further showcased by weakening relative strength iin utilities and Consumer Staples.

Searching overdone themes:

Recovery in Tech and Consumer - Along with other severely underperforming sub-groups. (like homebuilders, retailers etc).

Approaching upcoming 'daily sell' might be an an opportunity to reiterate working themes
Given the abundance of attractive charts, perhaps focusing on established leaders with strong relative strength can identify quality names. For example in technology...DRIV, ATML, ASML, MU, AKAM, WEBX, ORCL, CTSH, and VARI.

Plenty of Econ data approaching along with Fed decisions. And the start of earning season can all create shifts in Macro/broad market behavior. Making sectors themes even more significant.