Pre-Fed Selling

Morning News of Note:

• NAPS GOOG: PLAY FOR NAPSTER Internet giant Google is considering an extensive alliance with Napster, which could include an outright acquisition, as it plots its move into the digital music world, The Post has learned. According to sources within the music industry, Google has been pushing to align with Napster — rather than build its own online music store — a sign that Google sees subscription services, rather than the individual download model that Apple's iTunes is built on, as the future of digital music. (Full Story) NY Post
• AAPL: Marketers Aim New Ads At Video iPod Users Since Apple Computer Inc.'s video iPod made its debut less than four months ago, users have been able to download their favorite TV shows free from ads. Now, advertisers are scrambling for a way to subvert the sleek device for their own purposes. Some companies are attaching recycled TV spots to the beginning of video files, or podcasts, that can be downloaded from popular Web sites. (Full Story) WSJ
• Energy: OPEC President said output cut at March meeting unlikely; said group remains fairly confident in 2006 economic view // UAE anncd plans to raise oil capacity to 2.9m bbl/day this yr from 2.7m bbl/day // Venezuela said some oil co's may need to revise reserves // Nigerian oil minister said ouput to resume in two weeks // Norwegian govt wars oil and gas co's of possible platform flaws; said flaws may impact other platforms in Norway and globally; design and/or matieral flaw cause Visund Gas blowout // Iran plans to invest $14bln to expand refinign capcity 50% to 2.5m bbl/day
• L DISH: Liberty Media, EchoStar Invest In Start-Up for New TV Device Media giants Liberty Media Corp. and EchoStar Communications Corp. are investing in a small Silicon Valley company that lets people watch TV on their computers away from home. The high-profile start-up, Sling Media Inc. of San Mateo, Calif., said Liberty and EchoStar were two of the investors in a new, $46.6 million round of funding, which Sling Media will use for product development and international expansion. (Full Story) WSJ
• Mad Money Summary: Jim Cramer believes the drugs ACP-103 and ACP-104, which are made by Acadia Pharma (ACAD), can make some "mad money." The drug company makes antipsychotic drugs which Cramer believes could change the way we treat schizophrenia and bipolar disorder. ACP-103 is in trials to treat Parkinson's disease, while ACP-104 is in trials as an antipsychotic that could be a better version of Clozapine. If the drugs make their trials, the stock could hit $50, says Cramer, but if it fails he warns it could drop 3 points. A caller asked about American Shared Hospital Services (AMS), which is also working on a treatment for Parkinson's. Cramer responded that the company is both interesting and profitable, but has too small a market cap, with a cap of $31M. He prefers companies with a minimum market cap of $200M to $250M. Although Cramer still likes gold plays Goldcorp (GG) and Anglo America (AAUK), he believes its time to look at silver, specifically Pan American Silver (PAAS). Cramer also recommended Trinity Industries (TRN) as a play on coal. He did not like the company's competitor American Railcar (ARII) because it does not have the margins Trinity does. Cramer also said he would "bless" both Carnival (CCL) and Royal Caribbean Cruises (RCL). In the Lightning Round, Cramer was bullish on SYMC, AAPL, BRCM, CHK, FRK, SU, DRQ, HRS, FSH, WMGI, ZOLT, COP, WMT, HXL, WFMI, NBR, OLN and COST, and was bearish on KOPN, GMXR, EAGL, ENCY, JNPR, NDN, UNFI and JJZ.

Market Comments: Despite some better-than-expected economic reports (ECI, Consumer Confidence), it looks like investors are taking some profits ahead of today's FOMC meeting. While it is pretty much a done deal that the Fed will raise rates by 25 basis points, it will be interesting to see how the language in the ensuing statement changes.

Bond yields are flat so far this morning. Most of the major stock sectors are trading lower, led by semis. Materials stocks are slightly positive.

There is also the State of the Union speech tonight by the President. I am skeptical that this has any meaningful effect on the market, unless something truly surprising comes out of it, but nonetheless expect to hear it talked about in the media.

Quote of the Day

"Just as soon as people make enough money to live comfortably, they want to live extravagantly." - Anonymous
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Constructive Session

Not a bad day. The market closed up a little, on moderate volume. Breadth was slightly negative. Oil closed up at $68.50, and the 10-year finished at 4.54%.

I didn't expect much action ahead of the FOMC meeting tomorrow. Most investment managers don't like to get too aggressive ahead of these meetings. It's a done deal that they will raise rates another 25 basis points, to 4.50%, but there could be some changes in the accompanying statement that traders will scour for clues.

That's all for now. Have a great night--

Notable Stocks

Here are some stocks that are making standout moves today:

• CNQR - Mad Money mention causes gap higher
• ORCT - breaking out to new highs
• LEND - high short-interest stock getting close to new highs
• XOM - gaps higher on record earnings
• SYY - high-volume rally on better than expected quarter
• ZNT - extends recent breakout
• OCR - big selloff on potential Michigan AG probe
• VLI - sells off following earnings report
• CHS - acquires Fatigues brand
• AAPL - rallies back above 50-day
• QSII - looks like recent correction is over
• GILD - lower ahead of earnings report

long LEND, SYY, XOM

Monday Morning Musings

Morning News of Note:

• GOOG AMD: Google-GOOG and Advanced Micro Devices-AMD may have something cooking-The Inquirer. While The Inquirer has little information on the issue they are betting are on it being "1) Search accelerators 2) HT backplanes of a large scale 3) Power power power."
• TWX: Warner Bros. to Try File Sharing Of Films, TV Shows in Germany In a move that shows Hollywood is examining the benefits of a technology it long reviled, Time Warner Inc.'s Warner Bros. is expected to announce today that it will sell movies and television shows online in Germany using peer-to-peer technology. Warner Bros. is working with Bertelsmann AG and its subsidiary Arvato to create a service called In2Movies, to launch in March. (Full Story) WSJ
• EBAY: Seeing Fakes, Angry Traders Confront EBay A year ago Jacqui Rogers, a retiree in southern Oregon who dabbles in vintage costume jewelry, went on eBay and bought 10 butterfly brooches made by Weiss, a well-known maker of high-quality costume jewelry in the 1950's and 1960's. At first, Ms. Rogers thought she had snagged a great deal. But when the jewelry arrived from a seller in Rhode Island, her well-trained eye told her that all of the pieces were knockoffs (Full Story) NY Times
• WMT: sees January comps up approximately 4.7%
• Mad Money Summary: Jim Cramer opened his show discussing NMT Medical (NMTI), which he believes is a $17 stock that could trade at $100, if testing for the device is successful. The company is a medical device maker that has a stent-like device called CardioSEAL which is now in trials to prove its effectiveness. He said if the testing does not work out, however, the stock could trade below $10 a share. Cramer then discussed Concur Tech (CNQR), which has seen tremendous earnings growth and should continue to see more. The company automates travel expenses for businesses, and can help stop employees from expensing fraudulent charges such as strip club visits, a popular Wall Street "perk." He notes that the company has a 97% customer-retention rate. Cramer then discussed equities, and how he would take profits in International Securitites Exchange (ISE) and put it into Nasdaq Stock Market (NDAQ). He also likes Archipelago (AX), but likes Nasdaw better because it trades at a discount. While taking calls, Cramer reminded one viewer that the only reason he currently favors CVS Corp (CVS) over Walgreen (WAG) is because of the Albertson's (ABS) deal. He then told another viewer that it is too late to get into Broadcom (BRCM) and if viewers had gotten in when he urged them earlier, it was time to "ring the register" and sell half of their stake. In the lightning round, Cramer was bullish on WEN, SNE, BHI, MSFT, ADP, SKS, GT, BNT, RMBS, TM, REDF, CY, HAL amd ATI, and was bearish on CSC, SWKS, KOMG, CTB, WIT, PSUN, ANF and CTHR

Market Comments: The market opens up a little this morning. Energy stocks are higher on the blowout earnings from XOM. And the analysts are tripping over themselves to raise estimates and up price targets for HAL.

Retailers are getting a bounce also. Most other sectors are a mixed bag. Oil is trading down a bit ($67.65), and bond yields are up near 4.54%.

There are still quite a few more earnings reports on tap for this week. Also, the FOMC meets tomorrow for Greenspan's last meeting, and Friday is the big payroll report.

long HAL, XOM, TWX, WMT

Sentiment Review

Most of the sentiment indicators I follow showed improvement this week, in that they revealed a decrease in bullishness. This is good, from a contrarian perspective, because if everyone is bullish it usually means the market is near a short-term top.

Here is a look at where some of these indicators stand:

• All 3 bull/bear surveys I follow (Investor's Intelligence, AAII, and Market Vane) showed lower levels of bullishness. The bull/bear spread on the AAII survey actually fell to -3%
• The Rydex Nova/Ursa ratio is still low at 0.22
• The 10-day put/call ratio has moved back into moderate territory at 0.83

The big drop in bulls on AAII, and corresponding spike in bears, shows how skittish most of these bulls really are. Only 2 weeks ago this spread stood at +40. That's a great deal of volatility.

On the technical side, the SPX had a solid week. On Friday, the NYSE registered 402 net new highs. This is the highest number since last July, and indicative of broadening leadership in the market. That means there are more candidates breaking out to new highs, which is where we should be looking for new market leaders.

Good luck this week. And thanks for reading--

Weekly Recap

The market finished strong on Friday, punctuating a solid week. Especially given that after the previous Friday's sharp selloff, it looked like the market had more consolidating in store. But the strong action last week makes it more likely that the market may challenge new high ground sooner than later.

Here is a link to the weekly wrap--

Notable Stocks

Here are some high-volume standouts today:

• FCFS - spikes higher on Mad Money mention last night
• NTRI - can you believe this stock is up +1000% over the last year?
• HAL - gaps higher on strong earnings report
• VAR - strong earnings report
• BRCM - beats estimates, raises guidance, ups buyback
• WFR - more strong earnings
• MSFT - are people really excited about Mr. Softee again?
• AVID - big gap lower on disappointing earnings/guidance
• GYI - gaps lower on weak guidance, downgrade
• EMN - gaps lower on earnings miss

long HAL, MSFT

GDP Slowdown Welcomed by the Market

Morning News of Note:

• PG: Procter & Gamble's Net Rises 29% Procter & Gamble Co. said its net income rose 29% in the fiscal second quarter, amid strength in its P&G and Gillette businesses The consumer-products giant, whose products include Tide laundry detergent and Crest toothpaste, also raised the midpoint of its fiscal full-year earnings outlook, due to strength in its P&G and Gillette businesses. (Full Story) WSJ
• GS AXP AZ: Goldman, Allianz, AmEx to Buy 10% Stake in Biggest China Bank Goldman Sachs Group Inc., Allianz AG and American Express Co. will sign agreements today to buy 10% of China's biggest bank for $3.78 billion, people familiar with the matter said, as Beijing's drive to overhaul its banking system shows no sign of ebbing. Goldman Sachs and its private-equity funds will invest $2.58 billion for about 7% of state-owned Industrial & Commercial Bank of China, Allianz will buy a stake of about 2.5% for $1 billion, and American Express will invest $200 million, according to two people with knowledge of the plans. (Full Story) WSJ
• UNP BNI CSX NSC: Boom times for railroads-FT. The US rail industry has been performing very strongly over the past two years as stable growth in the economy has given rise to increased demand for freight transportation. Despite higher fuel costs rail operators have been able to pass on those increased expenses to customers as well as maintain pricing power. Jim Young, CEO of Union Pacific (UNP), was optimistic about the prospects for 2006, after the company more than tripled its net profits in the fourth quarter. “We expect demand will continue to be strong."
• Fund Flows: equity funds rptd outflows ($4.2bln), ex-ETF funds rptd inflows $2.2bln; ETFs rptd outflows ($6.455bln) from all sectors but intl and utilities; ETF flows: QQQQ $690m, XLU $284m, XLP $137m, EEM $131m, EWJ $121m, SPY ($2.139bln), MDY ($1.526bln), DIA ($1.225bln); taxable bond funds rptd outflows ($244m), HY funds rptd outflows ($270m); money mkt funds rptd outflows ($7.635bln) -- AMG Data
• Mad Money Summary: Cramer believes it is time to enter drugstore stocks. He says to look at CVS (CVS), even though it is not best of breed like Walgreen (WAG), because the stock looks cheap. He says he would not sell Walgreen to get into CVS, however, because Walgreen is "a winner." Discussing the recent headlines on Teflon, Cramer said the best way to play the chemical's link to cancer is to find the chemical's replacement and buy it. According to Scientific American, Omnova Solutions (OMN) is making a chemical for nonstick coating that it less problematic than Teflon's Perfluorooctanoic Acid. Cramer said that the earnings for Lyondell (LYO) did not bother him, and lead him to believe the stock may be cheap because the price of natural gas is rising slightly. Cramer then discussed bankruptcies and the erosion of the middle class, saying this creates an opportunity in the form of First Cash Financial Services (FCFS), a pawnshop. The stock will do well, he said, because people have such bad credit that they are unable to get bank loans. Cramer then welcomed Steven Rowley, the CEO of Eagle Materials (EXP), to his show. In November, Cramer highlighted the stock. It has risen 50 points since that time. Rowley said that shareholders were positive on Eagle's earnings and that there was still plenty of upside. In the lightning Round, Cramer was bullish on BMD, UNH, KLAC, CDIS, GLW, URBN, DYN, MIR, SHLD, OXPS, MRVL, NBIX, ABB, ET and GW. He was bearish on PIR, PKS, LTXX, BEBE, PGN, SNDK and CREE

Market Comments: 4Q GDP came in at a much slower than expected +1.1%, the slowest pace in three years. But the market rallies huge on the news. I think this is the market saying that now the Fed has to stop raising rates soon or risk causing economic contraction.

There were also some very strong earnings reports that helped get things going. BRCM crushed estimates and guidance; MSFT was a very positive surprise; PLAY reported a good quarter; and PG beat and raised guidance this morning. The only real letdown was SNDK, who said that next quarter would be "seasonally soft" as they instituted significant price cuts.

This is a lot of strength at the open, especially for a Friday. Let's see how much profit taking sets in ahead of the weekend, or if short covering keeps the market at these levels.

long MSFT, PG

Quote of the Day

"Last year I went fishing with Salvador Dali. He was using a dotted line. He caught every other fish." - Steven Wright
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Strong Volume Trends

Solid rally today on very strong volume. More than 2 billion shares on the NYSE and nearly 2.5 billion on the Nasdaq. That marks a nice accumulation day. Also, there were nearly 300 new highs on the NYSE.

Chips stocks and brokers were the strongest, but all sectors were positive today. Despite the rise in crude oil prices and bond yields.

BRCM reported a strong quarter after the market closed, and its shares are rallying. PLAY also reported a strong quarter and raised guidance. SNDK said that next quarter would be soft, and the shares are down $5 after-hours.

I have to go hop on the SNDK conference call. Have a great night--

Notable Stocks

Earnings season has made for a lot of huge moves, in both directions. Here are some stocks that standout so far today:

• FDC: +6%; spinning off its Western Union division
• EXP: +26%; beat estimates, raised guidance, upped dividend, & 3-1 stock split
• PLXS: +31%; beat estimates and raised guidance
• VAR: +6%; strong quarterly earnings
• ditto OXPS, CVD, TRID
• AMGN: -4%; in-line earnings, but delays news on new pipeline drug
• JNPR: -20%; poor earnings
• USAK: -12%; misses EPS estimates and lowers guidance
• CNXS: -20%; another trucker reporting poor earnings/guidance

Market Comments: Bond yields continue to push higher (4.53%), but it has not halted the rise in equities. Maybe the market is saying that a steeper yield curve is a bigger long-term benefit than the short-term pain of rising yields.

long AMGN, FDC

Earnings Season Mania

Morning News of Note:

• FDC: First Data to Spin Off Western Union to Shareholders First Data Corp. said it plans to spin off 155-year-old Western Union, the world's largest money- transfer business, in a transaction that may be valued at more than $20 billion. Western Union, which built the world's first trans- continental telegraph line during the Civil War, will become a separate company led by Christina Gold, 58, Denver-based First Data said today in a statement. First Data expects to complete the transaction as a tax-free distribution to shareholders in the second half of this year. (Full Story) Bloomberg
• GM: General Motors Has Fifth Straight Quarterly Loss Amid Cuts General Motors Corp., the world's biggest automaker, reported its fifth straight unprofitable quarter and first annual loss since 1992 as market share losses to Toyota Motor Corp. and other rivals force plant closings and job cuts. The loss was $4.78 billion, or $8.45 a share, compared with a loss of $99 million, or 18 cents, the same quarter a year earlier, Detroit-based GM said in a statement today. (Full Story) Bloomberg
• MSFT: Microsoft to Expand Web Research Microsoft Corp. is opening two research labs focused on Internet-related technologies, a sign of the company's determination to catch up to Google Inc. and other Web rivals. The Redmond, Wash., software maker yesterday said it will pull engineers from its MSN online service and central research labs to form two new research groups. (Full Story) WSJ
• WMT: Greenspan Opposes Bank Loophole As Wal-Mart Seeks Charter, Fed Chairman Aims to End Exemption for Corporations Federal Reserve Chairman Alan Greenspan is opposing a regulatory loophole that allows corporations to own banks, thrusting himself into the middle of an effort by Wal-Mart Stores Inc. to establish a bank. Mr. Greenspan's salvo, outlined in a 12-page letter to Congress that was reviewed by The Wall Street Journal, is the latest in a controversy over the separation of commerce and banking. Wal-Mart, the Bentonville, Ark., retailer, is trying to obtain a state banking charter in Utah, using precisely the exemption in the banking laws opposed by Mr. Greenspan. (Full Story) WSJ
• Mad Money Summary: Cramer believes that Sirenza Microdevices (SMDI), which makes Sirius' hardware, may be a good way to play Sirius Satellite (SIRI) without paying for Howard Stern's huge salary. When asked if there was a similar derivative play for XM Satellite Radio (XMSR), Cramer said the play would be STMicroelectronics (STM), but since he is not as concerned with XM's costs, he believes the best way to play XM is to just buy XM. The positive earnings from Jacobs Engineering (JEC) led Cramer to discuss companies in infrastructure, such as Foster Wheel (FWLT), Fluor (FLR) and Shaw Group (SGR). He said that the best overlooked infrastructure play is Willbros Group (WG). Asked about Suncor (SU), Cramer said that the company is levered into alternative energy, and when oil comes down, the sector could weaken slightly. Cramer also suggested another way to make money in India, by buying Reliance Industries in Bombay. The company said it will invest in retail, and should not have much competition in the market because of laws against investment from foreign department stores. Answering his Mad Money mailbag, Cramer told a reader that he still believes that Google (GOOG) will hit $500 on its way to $600 despite its run in with the Justice Department. He told the viewer if he was worried, he should take a little off the table before Google reported earnings. In the lightning Round, Cramer was bullish on APPB, E, JDSU, AMTD, EPEX, BTU, RHEO, CHK, IGT, AHC, OXY, MO, DESC, CBS, SAP, CRM, GRP and TXN and was bearish on MFB, AFL, ECA, PGIC, PANC, DIS and NOVL

Market Comments: A better than expected durable goods report helped the market open nicely higher this morning. Of course, earnings season continues to be a mixed bag, or a minefield if you will.

AMGN reported okay earnings and the stock sells off. CVD reported pretty good earnings and the stock is up big.

JNPR reported disappointing results and the stock is getting hammered. DOW reported disappointing results and the stock is even.

Energy stocks continue to sell off, while financials are rallying. Tech and retail remain mixed. Tonight we get important reports from MSFT, BRCM, and SNDK.

long AMGN, FDC, MSFT, WMT

Quote of the Day

"People will listen a great deal more patiently when you explain your mistakes than when you explain your success." - Wilbur D. Nesbit
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Outside Day Averted

The SPX briefly dipped below yesterday's lows, but rallied a bit into the close to avoid an outside day. That does not mean that the market is saved. It just means the technical action was not as bearish as it could have been.

I still believe the market may probe lower levels before it embarks on another rally. Bearish sentiment has not really built up that much. The put/call ratio is still at fairly low levels. And energy stocks, which have been market leaders, are under selling pressure. Not to mention that bond yields look like they have broken out to the upside (4.48%).

We are still in the thick of earnings season, so things will likely remain jittery. Take for example GLW, which sold off hard at first reaction, but then rallied back to close at highs for the day. BJS also reacted very negatively to what I thought was a solid quarter. So overreactions are creating buying opportunities, if you're nimble.

Four Steps to Spotless Credit

Imagine being rejected for a credit card because you once forgot to return a library book. Or not landing a job because you were late paying bills while you were unemployed. Or finding you can't refinance your mortgage at a low rate because a thief (or your cousin) opened accounts in your name. All of these scenarios are outrageous, but none, unfortunately, are far-fetched.

Money Magazine suggest 4 steps to improve your credit score. To view the article, click here--

Hump Day

Morning News of Note:

• GOOG: Version of Google in China Won't Offer E-Mail or Blogs Google is bringing a special version of its powerful search engine to China, leaving behind two of its most popular features in the United States. In an effort to cope with China's increasingly pervasive Internet controls, Google said Tuesday that it would introduce a search engine here this week that excludes e-mail messaging and the ability to create blogs. (Full Story) NY Times
• Retail in India: India Approves More Involvement By Foreign Stores Single-Brand Retailers Can Directly Invest to 51%; Critics Foresee Loss of Jobs India's cabinet approved foreign direct investment in its retail market by single-brand stores, in a first step toward opening the booming sector to outside competition. The move advances the current policy, under which foreign brands such as Reebok and Nike are permitted to do business in India only through franchises or wholesale trading. The new rules will allow foreign retailers selling their own brand to own 51% of their operations in India, as long as they sell only their own merchandise. (Full Story) WSJ
• PIXR DIS: Pixar's Magic Touch Upstart Animation Shop Became the Industry's Benchmark When Apple Computer Inc. founder Steve Jobs bought what became Pixar Animation Studios for $10 million in 1986, it was a small animation-systems firm with a few alumni from Walt Disney Co., not the least of whom included creative director John A. Lasseter. Yesterday, Disney secured the return of Lasseter and his talented team as part of a $7.4 billion deal for Pixar aimed at jump-starting the media giant's animation empire. (Full Story) Washington Post
• Bulls vs. Bears: Bulls 53.7 vs 57.3, Bears 25.3 vs 22.9, Correction 21 vs 19.8
• Mad Money Summary: Cramer believes its time to add Danone (DA) to your portfolio, citing a USA Today article that states we are in a yogurt-eating renaissance due to the health benefits. He was not positive on Martek Biosciences (MATK), a company that produces the omega-3 acids that are added to foods including yogurt, saying the company has been a poor performer. He was also positive on Dean Foods (DF), which makes soy yogurt, but likes Danone better. Cramer then discussed an Internet play in India, Rediff.com India (REDF), referring to the company as the Yahoo! (YHOO) of India, or perhaps even the Google (GOOG) of India. Talking about Indian banking, Cramer said he would sell half of HDFC Bank (HDB) and ICICI Bank (IBN). Cramer was then joined by MarketWatch columnist Herb Greenberg, who was negative on Netflix (NFLX) because the company did not raise its pretax guidance and gave "irresponsible" guidance too far into the future. Greenberg was also negative on Energy Conversion Devices (ENER), which he called a "retread stock," and Rambus (RMBS), which he believes is overvalued. In the lightning Round, Cramer was bullish on AXP, GNSS, DO, BHP, RTP, TRST, LEND, NEOL, AMGN, EOG, MSA and PALM, and was bearish on IGT, AES, BLS, SUF, ADBL, UMPQ, IRBT, PTIE and LEA.

Market Comments: The market opened higher, but has since reversed into negative territory. Existing home sales declined -5.7%, while crude oil inventories came in higher than expected. That has oil trading a touch lower, and bond yields higher at 4.43%.

JNJ bowed out of the race to acquire GDT. The shares are trading higher, but this company sure is dealing with rough times. I think they will look to make another acquisition in the medical device area. Maybe a company like STJ or BCR.

The SPX rallied just above yesterday's high, and then fell a little below yesterday's low. This sets up for a potential outside day, which would have some negative implications for the near-term direction of the market. It's still early, so let's not jump the gun. Just something to keep on your radar.

Quote of the Day

"Take the course opposite to custom and you will almost always do well." - Jean Jacques Rousseau
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Closing Thoughts

Not a bad day. But the SPX was not able to break above 1270 nor its overhead 20-day moving average. I have a feeling that it might be setting up for another probe lower. As such, I am holding off on new buys for the moment.

Disney announced it is buying Pixar after the close. Bummer for PIXR holders. Who wants to be part of the Disney beaurocracy?

On the plus side, volume was quite robust today. Breadth was positive, and the Hi/Lo indexes expanded as well. Retail stocks fared the best today. Maybe the consumer isn't dead yet. Oil finished lower, while bond yields closed at 4.39%.

Have a great night--

Notable Stocks

Here are some stocks making big moves today:

• MCRS - breaking to new highs on new Burger King contract
• ASPV - multi-day run to new highs
• CVD - also breaking out to new highs (no news)
• BNI - high-volume breakout (rail group strong today)
• VIVO - high-volume breakout
• MFE - big gap down on earnings warning
• ADTN - huge volume gap down
• HW - high-volume reversal (earnings related)
• JNJ - hits new lows after lackluster earnings and guidance
• GOOG - back above its 50-day
• CME - strong breakout to new highs

long JNJ, VIVO

Morning Look

Morning News of Note:

• AAPL EBAY: Preloaded iPods prompt legal ponderings A blossoming trade in Apple iPods and other digital devices pre-loaded with movies, TV shows and thousands of songs is raising alarms and legal questions. For the past couple of years, people have sold their used iPods and other music players filled with music on eBay and other auction sites with little notice. (Full Story) USA Today
• F: Ford Will Shed 28% of Workers In North America Car Maker to Close 14 Plants As It Joins GM in Overhaul Of Detroit's Business Model Ford Motor Co. has made it official: Detroit is ditching its business model of the 1990s, and the cost now totals more than 60,000 jobs at Ford and rival General Motors Corp. Ford yesterday announced plans to close 14 North American factories, including seven assembly plants, and slash up to 34,000 North American jobs over the next six years. (Yesterday) (Full Story) WSJ
• GOOG: Google-GOOG executives agree to $1 salaries again-CNet.com. Google's three top executives, chairman and CEO Eric Schmidt, and co-founders and co-presidents Larry Paige and Sergey Brin, have agreed to be paid annual salaries of $1 each for 2006, the same salaries they received last year. The three will rely on stock options and grants from the company's stock for their pay.
• TGT: Target-TGT sees January comps up 4.5%-5% vs prior for up 3%-5%
• US Economy: Fed Gov Olseon said Fed watching factory use, energy and housing market; said US has dynamic and very stable economy; sees serious consequences if deficits last long term (Monday)

Market Comments: The market is bouncing at the open. Oil is trading lower so far, and bond yields are up to 4.38%. Semis are leading the way in early trading, followed by housing stocks and brokers. Retailers are also catching a little bid (TGT affirmed strong sales).

TXN did not report great earnings, but I think the selling pressure in chip stocks has dried up for the time being. BRCM and MRVL continue to rally, as does SNDK.

I am watching for Friday's selloff to lead to a couple of up days in the market. But after that I want to see if there is another stab lower for the indexes. I want to see if Friday's lows hold, or where the market has to trade down to in order to find support.

Quote of the Day

"The greatest mistake you can make in life is to be continually fearing you will make one." - Elbert Hubbard
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Notable Stocks

Here are some standout stocks on my screens today:

• PETS - strong breakout on huge volume
• CRI - 2-day spike on rising volume (great baby clothes)
• SLB - day 3 of this spike; getting extended on the upside
• AMGN - further weakness; approaching October lows
• GOOG - nice 23-point bounce, but still below 50-day moving ave.
• QSII - breaking down below 50-day
• RIMM - breaking down on Court refusing to hear its case
• UNH - further weakness; approaching attractive levels

Monday Morning Musings

Morning News of Note:

• Oil: Heard on the Street... Oil Sector's Next Big Test: 2006 Strong Profits Again Expected, But Challenges Await Industry; Dodging Capitol Hill's Bullet How long will the gusher last? Most oil companies are likely to shatter records when they post fourth-quarter earnings over the next several days. But the market already is looking beyond those results to the challenges the industry will face trying to maintain its boom. (Full Story) WSJ
• SBUX: Starbucks to Sell Music Downloads for Portable Players The move is a further step by the coffeehouse chain into an industry beset with problems Starbucks Corp., seeking to expand its entertainment business at a time of music industry "chaos," plans to move beyond compact disc sales and CD burning to allow customers to transfer songs onto MP3 portable music players. "A lot of our customers are asking for device fill-up, and going forward we'll do that," Ken Lombard, president of Starbucks Entertainment, said Saturday in an interview at the Midem music-industry conference in Cannes, France. (Full Story) LA Times
• ATHR BRCM MRVL: Wi-Fi Gets Set to Fly THE ENGINEERS OF THE IEEE endured the rigors of Hawaii last week so they could design you a next generation Wi-Fi. Fighting their way down the beach of Waikoloa, the Institute of Electrical and Electronics Engineers established a standard for Wi-Fi wireless networking that will run five times faster than the network you've got now. Mine only pokes along at 54 million bits of data per second. The newly proposed format -- called 802.11n -- will cruise at 300 million bits per second and reach 600 in a sprint. (Full Story) BARRONS
• GRMN: Digitimes reports Garmin International on January 20 announced that Ford Lio Ho in Taiwan is expanding its program offering a StreetPilot c320 with every Ford vehicle purchased before the Chinese Lunar New Year. The program began in November 2005 with just one model, and has been extended through the end of the Chinese Lunar New Year to include a number of different Ford vehicles, including the Focus, Activa, Tierra, RS Mondeo, Metrostar, and Escape series. Garmin International is a member of the Garmin group of companies, which designs and manufactures navigation, communication and information devices -- most of which are enabled by GPS technology.
• US Economy: Fed Gov Poole said forecasts for one or two more rate increases are sensible; US economy in balanced position and inflation stable; said anecdotes show economy is good but not gangbusters; sees no precipitous decline in housing // Fed Gov Geithner says US current acct deficit unsustainable, said closing gap could slow growth and riol markets; said substantial cuts in US fiscal deficity needed; sees some risk of slower gorwth in US and globally

Market Comments: The market has found some support after the open, but it is still early. Biotechs are weak this am, while brokers are strong. Everything else is pretty mixed.

Oil is trading down to just below $68, and bond yields are up to 4.38%.

Ford just announced that it will no longer give any guidance, quarterly or annual, to analysts. The company is announcing some major restructuring plans today. I hope they help, as Ford is badly in need of something to help them compete.

Weekly Recap

Boy, things should did get ugly in a hurry. The market finished Friday at its lows for the day. That likely means there is more selling pressure to come on Monday. If Monday morning turns out to be an up open, I wouldn't get sucked in. Better to wait for the market to prove itself.

Here is the weekly recap--

Bears Have Their Day

Today seemed like the perfect storm. First, you had the poor earnings from Citi, GE, and Motorola. That started the selling early. Second, today was options expiration, so I think that exacerbated the selling. Third, you had a big spike in oil prices, so that didn't help. And you had leaders like GOOG experiencing their biggest drops in quite some time.

All of the above led to the largest declines for the major indexes in roughly two years. Could you have seen it coming? Not really, but if you have been reading my concerns about bullish sentiment in things like the put/call ratios, you might have surmised that there was too much complacency in the market. And that sets you up for a day like today.

So if you raised some cash recently, then you can let the selling bring down the stocks you have been watching, and take advantage of the pullback.

Thanks for reading, and have a great weekend.

More Disappointing Earnings

Morning News of Note:

• GE: GE Net Falls 46%, Hurt by Loss At Discontinued Operations General Electric Co.'s fourth-quarter earnings fell 46%, hurt by a loss at its discontinued insurance operations. But adjusted earnings rose slightly as five of the company's six units delivered double-digit growth, and GE boosted the lower end of its 2006 earnings outlook, saying the "economic environment remains positive." (Full Story) WSJ
• PIXR: Animated Shorts Pixar got its start as an independent company with a short movie about a friendly looking desk lamp. It may conclude its independence by punching out the lights of short sellers. A report in The Wall Street Journal yesterday that Walt Disney may buy the digital-animation studio and maker of movies such as "Finding Nemo" sent shares of both companies higher -- a sure sign that many investors applaud the idea. (Full Story) WSJ
• FNM FRE: Greenspan Seeks to Recast Debate On Fannie and Freddie Portfolios Federal Reserve Chairman Alan Greenspan in a letter released yesterday sought to recast arguments to cut Fannie Mae's and Freddie Mac's investment portfolios as a way to refocus the government-chartered mortgage companies on their public housing mission. Mr. Greenspan reiterated his previous concerns, and those held by the Bush administration, that Fannie's and Freddie's vast mortgage holdings pose a threat to the U.S. financial system which "normal market forces are unable to resolve." (Full Story) WSJ
• Japan Markets: Heard on the Street... Tokyo's Bulls Stay in the Ring As Day Traders Lick Wounds, Fund Managers Remain Upbeat; Nikkei Halts Skid, Gains 2.3% For many global investors, this week's shakeout in the Tokyo stock market was almost welcome. A rush of sell orders forced the Tokyo Stock Exchange to shorten its sessions Wednesday and yesterday. This mass selling, sparked by scandal surrounding the Japanese Internet company Livedoor, sent the blue-chip Nikkei Stock Average skidding nearly 7% in three days, though there was a partial rebound yesterday that continued early Friday, Tokyo time. (Full Story) WSJ
• Mad Money Summary: Cramer said that it may be time to look at debt collection as stories of how a good amount of bankruptcies hit right before the new laws went into effect. Cramer sees this as a positive for Portfolio Recovery Associates (PRAA). Cramer said that Portfolio Recovery Associates likes to buy debt from credit card companies for pennies on the dollar and then collect; he added that debt was a long-term story and expects the stock to stay strong. Cramer said there could be "a lot of money in curing cancer" and he is recommending Varian Medical Systems (VAR) as a radiation play. Cramer said that Varian's new machine, the Image-Guided Radiation Therapy system, could change the harmful way that cancer is treated. Herb Greenberg and Cramer both agreed that investors should stay away from AMR (AMR). Greenberg said that AMR will probably lose money and the company has a lot of debt. Cramer wrapped up his show with a hearing aid play, which is not based in the U.S, Amplifon. Amplifon trades on the Milan Stock Exchange, where Cramer recommends buying shares, but also has shares that trade on the pink sheets under symbol AMFPF

Market Comments: The market opened lower this morning, on poor earnings reports from GE, Citi, and Motorola. So far, it seems that earnings have not been as strong as the market was hoping for.

Oil is again trading higher, topping $67 this morning. Bond yields are down a bit to 4.37%. When the Fed takes short rates to 4.25%, there will only be a 12 basis point spread between overnight rates and 10-year Notes. Talk about a flat yield curve!

FFIV reported strong earnings and is bucking the weakness this morning. Other than that, the only group that is up are the energy stocks.

long C, GE

Quote of the Day

"If you think nobody cares about you, try missing a couple of payments." - Steven Wright
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Solid Rally

The market finished the day with a solid rally, on strong volume. The rally was all the more surprising considering the lackluster economic reports (Philly Fed), rise in yields (4.38%), sharp rise in oil (~$67), as well as the new tape with threats from Bin Laden.

Despite these concerns, the market scaled the 'wall of worry' most of the day. Leading sectors were semis, energy, and brokerage stocks.

Retailers continue to struggle, for the most part, while plenty of tech and healthcare continue to provide leadership. New highs bounced back to +224 on the NYSE and +210 on the Nasdaq.

MOT and FFIV report after the close.

Have a great night--

Notable Stocks

Here are some stocks making big moves in the market:

• BLK - big breakout on huge volume
• ANTP - continues to add to its recent breakout
• STX - gaps higher on strong earnings report
• TS - steel stock making a new high
• EBAY - up nearly 15% from its after-hours selloff yesterday
• LOGI - big gap down on huge volume
• CHIC - another gap lower on big volume
• AAPL - trading down after giving disappointing guidance
• BGG - another gap lower on big volume
• EMR - breaking out to new highs

Market Comments: The market is enjoying a nice rally today, despite news about a supposed Bin Laden tape as well as a weak Philly Fed report. So far, the support we saw the market test yesterday held up, and buyers are getting busy.

long EMR

SPX tests support

Morning News of Note:

• KO PEP: Coke ads to kick off Super Bowl with pregame show Rival Pepsi-Cola, which has two minutes of ad time in the game Feb. 5 on ABC, has had the Super Bowl to itself for eight years. Coke still didn't spring for in-game ads this year, but is paying to make its Full Throttle energy drink the primary sponsor of the last 30 minutes of pre-game programming before the coin toss. The Full Throttle Kickoff Show will include three ads for the drink Coke hopes can take sales from top-selling Red Bull, as well as PepsiCo's Mountain Dew Amp. (Full Story) USA Today
• GOOG: Tech Stocks' Latest Boom Hits Backlash '90s Booster Blodget Joins Voices of Caution Skepticism is growing over highflying tech stocks like Google Inc. The stock price has soared in the past year, boosted by cutting-edge software and an enormous consumer following that some say could raise the share price to $600. But a chorus of naysayers is emerging, including former Internet stock enthusiast Henry M. Blodget, who this month called the stock a potential loser whose future value could plummet to a quarter of its current $445-a-share price. (Full Story) Washington Post
• DIS PIXR: Walt Disney Is In Serious Talks To Acquire Pixar Stock Deal for Animator Would Make Jobs Top Holder Of Entertainment Giant Walt Disney Co. is in serious discussions to buy Pixar Animation Studios after months in which the two animation giants have been exploring ways to continue their lucrative partnership, according to people familiar with the matter. In the deal under discussion, Disney would pay a nominal premium to Pixar's current market value of $6.7 billion in a stock transaction that would make Pixar Chairman and Chief Executive Officer Steve Jobs the largest individual shareholder in Disney, according to people familiar with the situation. (Full Story) WSJ
• CX: U.S., Mexico Set Tentative Accord On Cement Imports The U.S. and Mexico have tentatively settled a dispute over antidumping duties that Washington has imposed for 16 years on Mexican cement, a move that could help alleviate cement shortages that have become chronic in some states. The two countries are expected to announce the agreement today, subject to final details being worked out, said two people familiar with the situation. (Full Story) WSJ
• PCs: Worldwide PC shipments grows by 16.4% in 2005-CNET.com. PC shipment growth as measured by total units was robust in 2005. The popularity of notebooks, low cost systems, and international sales fueled the expansion. Estimates for 2006 peg growth at 10.5%, but the total value of PC’s shipped are expected to increase by only 3.6% to $226B

Market Comments: The SPX declined yesterday, but found support near the 1275 level. This level coincides with the market's recent breakout earlier this month. It is also where the 20-day moving average currently resides, which can also act as support. So while the market has bent, it certainly hasn't broke.

EBAY reported earnings last night but offered weak guidance. The stock traded lower in after-hours, but this morning it is trading higher. While this doesn't make a lot of sense, I think investors might be concluding that management is being too conservative with guidance given how strong the recent quarter was.

AMD reported a really strong quarter, and that has the semis up big this morning. Brokerage stocks are getting a nice pop also, as LEH upped its dividend.

long PEP

Back where we started

The market essentially finished the day about where it had opened. The SPX fell -0.4% while the Nasdaq declined -1.0%. Volume rose on both exchanges, making for the 2nd consecutive distribution day.

The market is still working off that overbought condition. I suspect it could bounce and then come back down again, which would offer a more attractive entry point. If the market is then unable to get back to new highs, it could indicate a more prolonged correction is in order.

But we need to take it one step at a time, and guage the price/volume action day-by-day. The put/call ratio hit the 1.0 level today for the fist time in quite a while. A rebuilding of bearish sentiment would help support any future rally attempt.

Gotta hop and listen to EBAY. Have a great night--

Notable Stocks

Here are some stocks that stand out today:

• YHOO - down 12% on a penny miss. ouch
• GLW - bucking today's weakness and nearing another new high
• MDT - breaking out to new highs
• CRM - another breakout to new highs
• PGR - breaking down on heavy volume

Market Comments: The markets are breaking down to new lows for the day. The volatility index and put/call ratio are picking up a bit, as fear enters the investment landscape. How the market closes will be important, as well as whether volume finishes higher than yesterday (read: distribution).

long MDT

Ugly Open

Morning News of Note:

• AAPL: Beating the Buzz Earnings season can pose a challenge to fast-growing companies: Even if their sales and profits top analysts' estimates, if they don't beat the still-higher "whisper numbers" that have been circulating on Wall Street, their shares can slip. At Apple Computer, which reports results today, this problem is taken a step further: If it doesn't deliver on the splashy new products that people are buzzing about -- its "whisper ware" -- then it risks disappointing investors. (Full Story) WSJ
• WMT: Wal-Mart Trains Sights On India's Retail Market U.S. Chain Lobbies For Chance to Sell To Huge Population Wal-Mart Stores Inc. is knocking at the door of India, whose billion-person economy is largely untouched by modern retailing but might soon let foreign competitors into the sector. India's prime minister and finance minister recently suggested that movement toward opening the country's retail markets would begin over the next six months. (Full Story) WSJ
• C: Citigroup Plans Electronic Trading Citigroup Inc. plans to launch its own electronic stock-trading network, a move that could siphon some trading volume from the New York Stock Exchange and Nasdaq Stock Market Inc. The venture, expected to be rolled out this spring, follows Citigroup's acquisition last week of OnTrade Inc., an electronic communications network, also known as an ECN. OnTrade had been operated by closely held NexTrade Holdings Inc., Clearwater, Fla. (Full Story) WSJ
• Bulls/Bears: Bulls 57.3 vs 56.8, Bears 22.9 vs 22.1, correction 19.8 vs 21.1
• Mad Money Summary: Cramer said that sometimes the market makes a mistake and that the heavily owned Israeli stock Teva Pharmaceutical (TEVA) is one of them. He said that shares are down due to the medical condition of Israeli Prime Minister Ariel Sharon. Cramer said that Teva Pharma is about to complete its acquisition of Ivax (IVX) that will increase the company's exposure to America and that business is solid as well. Cramer said another international play is Hutchison Whampoa (HUWHY), but he recommends buying the shares in Hong Kong. Cramer said that Hutchison Whampoa is a play on the company's exposure to ports as he believes that that is the best way to play China and globalization. Cramer also invited Doug Kass of Seabreeze Partners to join him on his "Mad Money" show to discuss his article on TheStree.com; Granville, Cramer and the Second Coming. The article compared Jim Cramer to Joe Granville a big stock guru that faded away in the mid-1980's. Kass said that while Granville was a "one-trick pony," Cramer had the goods to back up his call due to his past accomplishments at Goldman Sachs (GS). Kass said what worried him was how investors followed Cramer's word zealously and how this may not be preparing some investors for a decline in the market.

Market Comments: The markets opened under heavy selling pressure this morning. Japan's market had been down a lot also before the US. Last night's earnings from INTC, YHOO, and IBM were a trifecta of disappointment. While IBM is trading up this morning, YHOO and INTC are both down 10%+. The analysts are falling over themselves to downgrade INTC.

Surprisingly, the whole market isn't falling apart. I see more than a handful of retailers, industrials, and healthcare stocks that are bucking the weakness.

There are plenty of big earnings reports out tonight, including AMD, AAPL, and EBAY. It is still too early to say if last nights reports set the tone for the rest of this earnings season, or if it will get better going forward.

long C, INTC, WMT

Sentiment Review

Recent sentiment indicators reveal an uptick in bullishness. This is one of the reasons, in addition to the current overbought condition, that I have moved to a bit more cautious stance on the market.

I use sentiment as a secondary indicator. My primary indicator is the price/volume action of the market and leading stocks. But I do pay close attention to sentiment. I have found that extreme bearish sentiment is better at identifying bottoms, while extreme bullish sentiment can persist for a while as the market continues to push to new highs.

That said, here are some of the indicators that currently give me pause:

• The bulls on Market Vane hit a multi-year high at 73%
• The bull/bear spread on AAII moved up to +40%, an elevated level
• The Rydex Ursa/Nova ratio has moved back up to 0.24
• The 10-day put/call ratio has moved down to 0.72, its lowest reading since November 04

As such, bullish sentiment is signalling caution here. I would like to see more bearish sentiment works its way back into the market. Unfortunately, this usually only occurs after a correction. The market has not flashed much distribution lately, but we need to stay alert to this possibility, and maybe raise a little cash.

Monday Morning Musings

Morning News of Note:

• ANF: Towering Over Retail Rivals Abercrombie & Fitch, helped by shifts in its strategy, saw holiday sales jump while other apparel stores dragged. With the holidays behind them, retailers get serious about clearance sales in January — posting signs in their windows that shout 50% off and more. But at the Abercrombie & Fitch store at the Grove shopping center in Los Angeles a few days after New Year's, nothing was on sale. Nothing. The "too-cool-for-school" retailer, as one customer calls it, took a similar approach the day after Thanksgiving, offering sparse discounts on one of the most ferociously competitive shopping days of the year. (Full Story) LA Times
• TWX: For Icahn, Fielding a Team May Be as Tough as Playing the Game At a lunch for the American Film Institute in Los Angeles on Friday, the tableside chatter was about more than who might snag a Golden Globe Award on Monday. The other gossip concerned who in the room - and in the entertainment business - had received a call about being on Carl C. Icahn's slate of proposed Time Warner directors, according to an executive who attended the event. (Full Story) NY Times
• AAPL: More Polish Likely for Apple OVER THE PAST TWO YEARS, shares of Apple Computer have risen eightfold, pushing the stock to an all-time high and lifting the company's market cap to more than $70 billion. Like Google, Apple has befuddled Wall Street's attempts to predict its financial performance or strategic direction, but instead has continued to delight believers with remarkable performance. Some on the Street have grown nervous. But it's too early to call the top. (Full Story) BARRONS
• BKS SBUX: Books and Brew Insiders Sell Stock MR. AVERAGE JOE IS READING more books while guzzling down cups of premium coffee. This is good news for insiders at Barnes & Noble and Starbucks, who are taking advantage of strong stock price gains to do a little sipping off the top of the cup. Last week, five Barnes & Noble sold 1.1 million shares for $47.4 million following options exercises, according to Securities and Exchange Commission filings. (Full Story) BARRONS
• Mad Money Summary: Jim Cramer said Friday on his show that he sees US Steel (X) as a takeover target. He sees the company as a takeover target as three other companies are about to bid for Dofasco, a Canadian company that is the same size and in the same business as US Steel. Cramer did not that Us Steel is not worth owning if it is not a potential takeover target. Responding to a callers question on which stocks were good carbon fiber plays, he said to be careful when investing in carbon fiber but did recommend Cabot (CBT). Cramer believes it is time for International Securities Exchange (ISE) to catch up as the options market grew about 17%, which is faster than the equity market. Cramer also added the seventh and last member to his "Seven Samurai," Matsushita Electric Industrial (MC) as the company is making itself strong in the flat-screen market. Responding to mail, Cramer said that JDSU (JDSU) is growing faster than CMGI (CMGI) as CMGI has not turned around. Cramer agreed with one viewer’s mail who said that shares of Occidental Petroleum (OXY) was very cheap. Cramer said that he would stay away from shares of Guangshen Railway (GSH) as he was bearish on the Chinese equity market altogether. Cramer commended a viewer on Matria Healthcare (MATR) as there is still upside due to the rise in diabetes. Cramer said that Under Armour (UARM) still has upside and can make you money. (friday)

Market Comments: The market is under selling pressure this morning, following declines in Japan over a raid of a popular internet company. Oil is trading sharply higher over concerns out of both Nigeria and Iran. And bond yields are slightly higher at 4.37%.

Earnings season starts in earnest this week, with INTC and YHOO reporting tonight. WFC and NCC reported this morning, with the former coming in a penny light and the latter beating by 8 cents. Not bad considering the worrisome sentiment for the banking sector.

WMT and TGT both maintained their sales forecasts. And BSX again upped its bid for GDT.

long INTC, TWX, WMT

Quote of the Day

"Some people are so afraid to die that they never begin to live." - Henry Van Dyke
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Weekly Recap

Here is the recap of last week's market action--
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Another benign day

The market was weak most of the day, but although it bent it never broke. By the close, the SPX and Nasdaq actually clawed their way back to flat. Volume ran below yesterday's levels, and breadth was positive.

Bond yields fell further, with the 10-year finishing at 4.35%. Oil was slightly lower, but looks to be coming down further if it is to follow in the footsteps of natural gas, which has basically collapsed recently.

Sentiment has reached highly bullish levels though, so I still think the market needs more consolidation before rallying further.

Check back this weekend for an updated sentiment review (I had trouble accessing the data last weekend). And enjoy the holiday weekend--

Notable Stocks

Here is my homegrown list of notable stocks today:

• HANS - big 12% move on analyst upgrade and $130 price target
• CME - bucking today's weakness; near new high
• GLW - refuses to go down, despite recent parabolic rise
• EMR - breaks out to new high
• FDG - 5% rally takes it back above 50-day
• GS - bucks weakness; close to another new high
• UNH - downgrade takes it below 50-day on rising volume
• GILD - another new high
• TRLG - said they are about to become "hot" in Europe
• HYDL - strong breakout to new highs

long EMR, UNH

Happy Friday

Morning News of Note:

• WFMI: Whole Foods Fare's Pricey? Check Out Shares Upscale Organic Chain Presents Solid Growth, but Rivals Loom And Analysts Turn a Bit Jittery Shares of Whole Foods Market are as pricey as the organic fare that the grocery chain sells, leading some analysts to wonder whether investors might start putting the stock back on the shelf. It is easy to see why investors are interested in looking. The Austin, Texas, company, which started with a single grocery store in 1980, now has 180 stores in mostly metropolitan areas, including a huge, flashy flagship store in Austin, and plans for another in London. (Full Story) WSJ
• Hedge Funds: Hedge Funds' Wizardry Will Trickle Down WHILE HEDGE FUNDS STRUGGLE to differentiate themselves in a crowded field, traditional fund companies are bringing to the masses some of the inventions cooked up in hedge funds' kitchens -- and they're concocting some exotica of their own. Products such as commodity funds; new exchange-traded funds (ETFs) that try to beat popular benchmarks instead of matching them; and even mutual funds that behave like hedge funds should help individual investors smooth returns and diversify their portfolios better in 2006. (Full Story) WSJ
• GM: GM Says GMAC 2005 Net in $2.5 Bln `Range' After Goodwill Charge General Motors Corp., the world's largest automaker, said its finance unit's 2005 net income will be ``in the $2.5 billion range'' after it lowered the value of a commercial finance business acquired in 1999. General Motors Acceptance Corp. will take a $450 million charge for the fourth quarter to reflect the lower worth of the unit, GM said in a filing with the Securities and Exchange Commission. (Full Story) Bloomberg
• Fund Flows: equity fund flows $5.9bln, ex ETFs outflows ($3.925bln); ETF flows: IWM $381m, IYR $305m, EWT $178m, XLY $159m, EWY $135m, QQQQ ($703m), IWD ($129m); bond funds rptd inflows $773m, corp funds rptd inflows $580m, MBS fuds rptd outflows ($244m); money mkt funds rptd inflows $2.828bln -- AMG Data
• Mad Money Summary: Cramer said that it was time to buy the greatest medical stock you have ever heard of, OccuLogix (RHEO). Cramer said that the company has a treatment for dry macular degeneration, which usually comes before age-macular degeneration. Cramer added that this was a speculative call and investors should use limit orders. Cramer recommended buying JDSU (JDSU) back in September and said that if you did buy the stock at $2, he would recommend taking some off of the table. Cramer said that if you did not get in at $2 like he suggested, the shares are still a buy, especially if shares fall to $2.50. Cramer noted that the Chinese government said it wants to spend trillions of dollars to improve the country's energy and transportation sectors. Cramer sees shares of Fluor (FLR) as the way to play this call, since the company is one of two American companies incorporated in the country. Bob LaPenta, chairman of Viisage Technology (VISGD), joined Cramer on his show last night to discuss the company's acquisition of Identix (IDNX). Mr. LaPenta said the integration would integrate some key law enforcement and homeland security products under one platform

Market Comments: The market opened up a little this morning. The core PPI came in below expectations (+0.1% vs. +0.2% consensus). Oil is back down below $64, and bond yields are lower at 4.38%.

Stocks had their first correction day of the year yesterday, and I would expect something of a modest down day today also. The bond and commodity markets close early ahead of the holiday weekend, while the stock market closes at its regular time.

So far its a mixed bag in terms of stock action. Analysts seem to be more willing to downgrade stocks after the nice run we've had. Except for HANS, which is spiking on Citi's new $130 price target.

Quote of the Day

"A fool and his money are soon partying." - Steven Wright
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On the 8th day, the market pauses

The market closed near its lows for the day. But volume did not exceed yesterday's levels, so it was not a distribution day. The indexes also did not rise above yesterday's highs, so it was not an outside day either.

The advance/decline line was weak, but the Hi/Lo index wasn't that bad. Overall, it was just a pullback on an overextended market. This market still needs to put in more time to work off its overbought condition.

I want to be patient before committing to new buys. I don't think this pullback will be severe, but I hope it lasts more than just a day. And don't forget, earnings season starts in earnest next week. So there is bound to be additional volatility.

Have a great night--

The Mo Is Gone

At least that's the tune for the moment. The market looks like it is finally embarking on some sort of correction. The market began to break down around 1:30pm EST, and really picked up steam.

Yesterday's low of SPX 1288 has been breached. The next logical area of support is at SPX 1275.

Some recent high-flyers like FMCN, BRCM, MRVL have also reversed lower.

It will be interesting to see if the market rallies again into the bell, or if the sellers will finally get the upper hand for a day.

Be back after the close--

Trade Deficit Declines

Morning News of Note:

• BSX JNJ GDT: Boston Scientific May Raise Guidant Bid After J&J Boston Scientific Corp. may sweeten its buyout offer for Guidant Corp. after Johnson & Johnson added more cash to its bid for the troubled cardiac-device maker. Boston Scientific vowed to pursue its plan to pay $25 billion after Guidant accepted an increased J&J bid of $23.2 billion. Johnson & Johnson added $4 a share in cash, increasing its offer to $68.06 a share. (Full Story) Bloomberg
• NFLX: FTC fights terms of Netflix settlement The U.S. Federal Trade Commission has blasted Netflix, saying the company has tried to turn a class-action settlement into a marketing opportunity. The agency filed an amicus brief last week asking a San Francisco judge to reject or restructure the terms of the settlement, which Netflix proposed in October after facing charges that it broke customers' service agreements. (Full Story) CNET
• SBUX: Starbucks Plans to Make Debut in Movie Business Chain Will Promote Films, Sell DVDs Alongside Lattes; Ads on Coffee-Cup Sleeves Starbucks Corp., having conquered the coffee business and staked a claim in music, is setting its sights on Hollywood. The Seattle-based coffee-shop chain is expected to announce today a sweeping promotional deal for a coming film, "Akeelah and the Bee," that marks its opening foray into the movie business. (Full Story) WSJ
• 2006 Drug Outlook: Five New Drugs May Ease Pharma's Pain BIG PHARMA STILL HAS SOME big plans for 2006 -- even though 2005 had the second-lowest number of new drug approvals in 15 years, and this year could be the worst ever for patent expirations. Still, this could be one of the best years for new drugs awaiting the green light from the U.S. Food and Drug Administration, which approved just 19 drugs in 2005, according to Merrill Lynch. (Full Story) BARRONS
• Mad Money Summary: Jim Cramer introduced his newest biotech picks last night on his show; they are ZymoGenetics (ZGEN), Myogen (MYOG), Alkermes (ALKS), Neurocrine Biosciences (NBIX) and Progenics (PGNX). Cramer believes there will be a lot of press coverage for ZymoGenetics' blood-clotting treatment and he believes it will be approved by 2007. Cramer said that while shares of Myogen were up 30% in 2005, he still believes they can go to $40 and even to $50 in a takeover. CBS'S (CBS) CEO Les Moonves joined Cramer on his show last night to discuss his company. Cramer believes that shares of CBS are cheap and Mr. Moonves said, with content being king, his company will be able to deliver decent revenue with the newly signed deals with Google (GOOG) and Verizon (VZ). The deals with Google and Verizon mean that viewers will pay to have the content delivered to them and CBS will be able to make money through subscriptions, ads and video-on-demand. Cramer said that the third world is one of the hottest markets right now, but hard to invest in. Cramer said that there is one way to make money in Mozambique and that is through Petroleo Brasileiro (PBR) and Rio Doce (RIO). Cramer answered calls to try and help investors with bad unhealthy investments. Jill-Marie said that she bought Ameritrade (AMTD) for a trade but also owned E*Trade Financial (ET) and Charles Schwab (SCH), Cramer recommended diversification and that she should do some selling. Russell said that he owned shares of Cendant (CD) even though Cramer was bearish on the shares; Cramer recommended that Russell sell his shares of Cendant. Teresa said that she owned Home Depot (HD) and Lowe's (LOW), but wanted to trim her positions. Cramer said that he would "ring the register" on shares of Home Depot and stick with Lowe's.

Market Comments: The market opened soft again this morning. So far this year, each down open has found dip buyers to support the market by the close. Will today be #8 for the Nasdaq? Some of the chip stocks look very extended, given their near parabolic rise.

The trade deficit actually narrowed last month, falling 5.8% to $64.2 billion, as the price of crude oil eased, exports grew and the deficit with China declined for the first time in seven months.

Worries over Iran are keeping oil prices and energy stocks higher this morning, even as the price of natural gas is declining. Bond yields remain low at 4.43%.

long JNJ

Quote of the Day

"Wealth, after all, is a relative thing since he that has little and wants less is richer than he that has much and wants more." - Charles Caleb Cotton
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2006 Market Predictions poll

To recap, (my informal poll of portfolio managers and hedgies I speak with) last year the group produced an average forecast for the S&P 500 of +2.2%. The actual result was only slightly better at +3.0%.

This year, while the media is trying to portray the investment community as far more bullish, my pollsters produced an average forecast of only +2.4%, or SPX 1278. Not too bullish, huh?

• The high forecast came in at +27% (SPX 1580)
• The low forecast is for -20% (SPX 1000)

These survey results reinforce my belief that most investment managers came into the year with high cash positions, conservative asset allocations, or low net long exposures. And I think the public, for the most part, hasn't even begun to re-embrace the stock market since 2000-01.

7 in a row? Say it ain't so.

Of course, that's the bears I'm referring to in my title. The Nazz just posted its seventh consecutive up day, and its forth straight day of 2 billion+ shares traded. Not bad, not bad at all.

Interestingly, the advance/decline line on the Nasdaq doesn't look so hot today. But its hard to argue with the price and volume action.

Energy stocks rallied back from todays early losses, as there seems to be a lot of concern about what's going on in Iran. Retailers and financials also had a very good day. I think that financials are beginning to discount the end of the Fed tightenings.

Check back later for the results to my 2006 Market Predictions poll--

Energy Tips

If you are one of those consumers that is dealing with much higher energy bills versus last year, Smart Money has some extreme savings tips for you.

And if you are feeling the pinch, I would like to hear from you and where you live. Thanks.
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Bears On The Run

Morning News of Note:

• INTC: TCL to Offer a TV-Like Computer TCL Corp., a Chinese electronics company and the world's largest manufacturer of television sets, is producing a personal computer developed with Intel Corp.'s help that looks and acts more like a flat-panel TV. The company unveiled the product at the International Consumer Electronics Show in Las Vegas last week, joining 40 other computer manufacturers by quickly adopting crossover technology concepts from Intel, maker of the main chip in most PCs (Full Story) WSJ
• GOOG: Google-GOOG possibility of shares losing value-Internet Outsider: In a Henry Blodget article titled "Google: The Bear Case," he lays out a scenario where Google could fall to the $100 a share range from its current range. He clarifies that he is not predicting this will happen nor making a recommendation, just stating a possibility. Mr. Blodget says the problem with Google is that it is dependent on a single, high-margin revenue stream. If revenue growth slows, which it inevitably will due to market saturation and flattening price increases, Google's price multiple will fall from its current 50X-70X to an eventual 20X-30X. If this occurs quickly, due to a more disastrous scenario, such as a problem like click fraud, this would be even more detrimental to the company's economics. Mr. Blodget does not believe such a scenario would kill Google, but it would transform the company "from a symbol of the American dream to yet-another get-rich-quick hallucination."
• GM: GM Cuts Prices On Most Vehicles Strategy May Spark Similar Moves by Rivals; Fewer Incentives, at Least for Now In an attempt to rewrite pricing rules in the highly competitive U.S. automotive market, General Motors Corp. will slash the base sticker prices for nearly 80% of its U.S. models. GM is expected to soon report that it lost more than $5 billion in 2005, weighed down by heavy costs related to health care and pension obligations as it struggles to revitalize brands such as Buick and Pontiac. The move marks the auto maker's latest attempt to settle on a pricing strategy that will help it lure customers and regain share in the U.S. market. (Full Story) WSJ
• Bulls/Bears: Bulls 56.8 vs 55.7, Bears 22.1 vs 23.7, Correction 21.1 vs 20.6
• Mad Money Summary: Cramer said it is time for investors to turn their heads away from financial news if they want to make money. Cramer believes it is time to buy Medicis Pharmaceutical (MRX) after Oprah Winfrey revealed the next play for the artificial youth movement, Restylane. On her show doctors demonstrated the antiwrinkle injection Restylane, Cramer believes it is superior to Botox and it is time to buy Restylane's maker, Medicis Pharmaceutical. Cramer also mentioned three $2 stocks that have big risk and big reward. Cramer mentioned Zarlink Semiconductor (ZL), as he believes the company will make a load of money if it can pull off its turnaround. He also mentioned Crystallex (KRY), which he said is a stock for "crazy people" and believes that the company will strive if Hugo Chavez does not destroy the private mining industry. Lastly Cramer mentioned Conexant (CNXT) as shares are cheap and a speculative play on low-end tech. Herb Greenberg appeared on Cramer's show last night to talk about Garmin (GRMN) and Omnivision (OVTI). Cramer said that he continues to be bullish on Garmin, but Greenberg is still taking the other side of the story as he believes that the popularity of portable GPS will ultimately hurt shares of Garmin. Cramer and Greenberg both teamed up on Omnivision, Cramer was originally bullish on the shares but believes that they are up on a short squeeze that will not hold up longer-term. Cramer ended his show by commenting on Mirant (MIR), which will come out of bankruptcy Wednesday morning. Cramer believes that investors should "own it for a week, and then get out." Cramer does not believe the company will be able to perform and is a trade, not an investment.

Market Comments: The market closed flat yesterday, after being down in the morning. I've used the term benign consolidation before, and yesterday was a perfect example. The market easily could have pulled back due to profit taking, but instead the dip was quickly bought.

Retail and chip stocks continue to bounce (see ANF, CHS, BRCM, MRVL, etc). Energy stocks are lower so far, while financials are up across the board.

Can you believe that article by Henry Blodget (see above)? What a joke.

long INTC

Quote of the Day

"Life is what happens to us while we are making other plans." - Thomas La Mance
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Short Interest Update

Briefing.com just released its updated heavily shorted stocks list. Here are the top 3 changes in short interest (as a % of float):

Top 3 increases:

• MOVI - from 49% to 67%
• FORD - from 37% to 45%
• PCYC - from 27% to 41%

Top 3 decreases:

• BOOM - 59% to 47%
• TZOO - 48% to 41%
• TRLG - 51% to 35%

Notable Stocks

Here is a list of stocks moving on above-average volume:

• High-volume advancers: TRMA, ITRN, ANGO, PCU, AAPL, NTRI, MRVL, DXPE, TDW

• High-volume decliners: RRGB, LPNT, ACV, WRNC, CGNX, MOGN, ENDP, PD, CPKI

Market Comments: The market is quickly erasing this mornings declines, placing more pressure on the bears and underinvested managers. Remember, there was a lot of selling done in late December, so cash balances could have been a little high coming into the year. Performance anxiety is a real phenomenon, and I think we are seeing it in action.

Soft Open

Morning News of Note:

• AAPL: "Saturday Night Live" fans looking to watch classic skits from the show may not have to depend on reruns and DVD compilations for long. Apple is set to announce today that it will sell a limited number of archived "Saturday Night" skits through its iTunes Music Store for $1.99 each, for viewing on video iPods or personal computers. (Full Story) NY Times
• WFMI: Whole Foods goes with the wind Whole Foods Market is about to put some serious wind in its sales The trend-setting, natural foods grocery chain on Wednesday will announce plans to become the largest buyer of wind energy credits in North America by purchasing credits equal to 100% of its projected energy use for 2006. (Full Story) USA Today
• EOP: Heard on the Street... Equity Office Uptick Baffles Analysts But May Flag End of Poor Performance Of all the REIT stocks, Equity Office Properties Trust would seem to be the least appealing. Yet some investors are buying up shares in the Chicago-based company, buoying the stock. In the past few weeks, trading has been active, and the stock price -- which fell 5% after the company cut its dividend last month -- has crept back up. A 5% drop and bounce-back is a significant change. So far, Wall Street analysts remain unimpressed. (Full Story) WSJ
• Mad Money Summary: Jim Cramer believes that solar stocks will jump if the California Public Utilities Commission votes for a $2.8 billion solar power energy program. Cramer said that the best way to play this would be ATS Automation, a Canadian company, whose second business is solar power. Cramer also notes that SunPower (SPWR), Evergreen Solar (ESLR) and Suntech Power (STP) are solar plays as well. Responding to a caller’s question who bought shares of Energy Conversion Devices (ENER) at $36, Cramer said he would take a little off of the table here. Cramer believes that shares of Mine Safety Appliances (MSA) is poised to go up as the Bush administration is to blame for the easing of mine safety enforcement investigation. Cramer believes shares of Mine Safety Appliances to go higher once the Bush administration starts to feel the heat. Cramer also noted that the Sago mine tragedy will not hurt coal stocks and he likes Peabody Energy (BTU). Cramer's picks of the week are Broadcom (BRCM) and Marvell Technology Group (MRVL) and Qualcomm (QCOM) and Conexant Systems (CNXT) could also go higher. Cramer believes that with all of the gadgets that are going wireless, these are the stocks to be in. Cramer said that he would stay away from Wendy's (WEN) Tim Hortons IPO as it is being offered in installments. Cramer also said that he would ring the register on ATI Technologies (ATYT) and Canadian Natural Resources (CNQ), noting that he would replace Canadian Natural Resources with Southern Copper (PCU) if you were looking for a copper play.
• TGT: Target-TGT sees January SSS rising within 3%-5% forecast

Market Comments: After five consecutive days of gains, the market opens down this morning. This is logical, as profit taking sets in. But if the market begins to rise again as the day progresses, you could see more short-covering and buying by underinvested managers.

That said, I would like to see the market digest its recent gains and work off its overbought condition. Energy stocks are up this morning, but most other sectors are mixed. Check out the parabolic run in BRCM. MNST is breaking out to new highs also.

long MNST

Quote of the Day

"You never know where the bottom is until you plumb for it." - Frederick Laing
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Dow Closes Above 11,000

Your response to this title should by 'who cares?'. Why the DOW still gets so much press time is beyond me. To me, it still has too many old school stocks, and is really not that representative of the market or our economy. Investment managers focus mostly on the S&P 500 Index, which is a much broader basket of stocks.

In any case, the market put in another solid day. The strength of this market so far this year is really surprising some, and certainly annoying others -- namely the bears.

Breadth was also strong again, as the number of net new highs expanded. There was 332 net new highs on the NYSE, and 239 on the Nasdaq. That's higher than those numbers have been in months, and a good sign that the leadership in this market is broadening.

Of course, we will still get the inevitable shakeout at some point, but this is a necessary ingredient to keep bullish sentiment from getting out of hand.

Have a great night--

Monthly Monitor

Our January Monthly Market Monitor is up on our website--
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SOTD

Actually, this was my stock of the week from last week. It is Microstrategy (MSTR). I highlighted this stock a couple of times last last year as one of my high short-interest stocks that looked poised to move higher.

The stock slowly began to breakout in late December with little fanfare. But last week it exploded higher on a burst of volume. Given the short interest in this stock, I think it could rest briefly but the continue to move higher.

Inverted Yield Curve

Does an inverted yield curve always signal a coming recession? Not always.

Don Luskin has an interesting article on the topic on SmartMoney. Click here to read it--

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Monday Morning Musings

Morning News of Note:

• MSFT VZ VOD AAPL: Calling All iPods TWO FIENDS ARE GRABBING at the halo of Apple's iPod. They are Microsoft and Verizon Wireless, and on Jan. 16 they'll start their cellphone assault on the portable music miracle that canonized Apple Computer (ticker: AAPL) in the eyes of Wall Street. Sales of the iPod rose 250% in Apple's fiscal year ended September. With the digital music player on everyone's holiday wish list, Apple's music-related sales probably accounted for half of the company's total revenues in the just-completed December quarter. Apple was the best tech stock in 2005, rising 123%. It closed Friday at an all-time high of 76.30. (Full Story) BARRONS
• BBY: A Headline Sings a Happy New Year THE YEAR-END RALLY that wasn't became a four-day New Year's party for stocks in the first week of 2006. Last year, the market immediately took a spill in its first week after having sprinted to new heights into the end of 2004. But with the latest turn of the calendar, the indexes followed their late-December stagnation with an energetic rally, with refreshed hope of an end to Federal Reserve rate increases as the undisputed excuse for the buying. (Full Story) BARRONS
• SIRI: MORE HOWARD LAUNCH ADS SCARCE IN BID TO BOOST DEMAND Sirius Satellite Radio is selling just a handful of ads during shock jock Howard Stern's show in hopes of pumping up demand and eventually prices. The satellite broadcaster is telling advertisers it will air no more than six commercials an hour to avoid clutter and keep audiences tuned in. (Full Story) NY Post
• BSX GDT: Boston Scientific Formalizes Bid To Buy Guidant Boston Scientific Corp. made a formal offer to buy Guidant Corp. for $72 a share, and said it had found a buyer for several Guidant units -- a move that it expects will allow for quicker antitrust clearance if its offer is accepted. The formal bid, valued at $25 billion in cash and stock, takes the Natick, Mass., medical-device company one step closer to becoming one of the world's largest cardiac-device makers. (Full Story) WSJ
• ISRG: Intuitive Surgical-ISRG target raised on bullish survey and robotic conf-Buy@DBAB The firm is raising its target to $135 from $90 as the results from their proprietary survey suggest that the "number of robotic surgery procedures could increase by 50% over the next 12 months."
• WMT: Wal-Mart Stores-WMT sees January comps up 3%-5%

Market Comments: The market popped higher at the open, but has faded back since. URBN got a couple of upgrades, and is getting a nice bounce. Biotechs are also higher, along with select tech (SNDK, PLAY). Energy and financials are mixed.

Oil is still hovering around $64, and 10-year yields are flat at 4.38%. Mighty low. I wouldn't be surprised to see a little pullback in the market at some point this week, but I have a feeling dip buyers will be there for support. Happy trading.

long MSFT, WMT