Weekly Wrap

The market ended a solid week on a soft note. Some speculated that it was due to the Al Queda tape that came out, but I doubt it.

The market had been up every day this week. I think it was just profit taking at quarter-end and ahead of the weekend, combined with some short positioning ahead of what some think will be a pullback next week.

Here are how the indices fared this week:

• S&P 500: +1.6%
• Nasdaq: +1.8%
• Russell 2000: +1.0%

To read the entire Weekly Wrap, click here

Friday Humor

A friend sent this to me, and I got a kick out of it. So here it is:

25 SIGNS YOU HAVE GROWN UP

25. Your houseplants are alive, and you can't smoke any of them.

24. Having sex in a twin bed is out of the question.

23. You keep more food than beer in the fridge.

22. 6:00 AM is when you get up, not when you go to bed.

21. You hear your favorite song in an elevator.

20. You watch the Weather Channel.

19. Your friends marry and divorce instead of "hook up" and "break up."

18. You go from 130 days of vacation time to 14.

17. Jeans and a sweater no longer qualify as "dressed up."

16. You're the one calling the police because those %&@# kids next door won't turn down the stereo.

15. Older relatives feel comfortable telling sex jokes around you.

14. You don't know what time Taco Bell closes anymore.

13. Your car insurance goes down and your car payments go up.

12. You feed your dog Science Diet instead of McDonald's leftovers.

11. Sleeping on the couch makes your back hurt.

10. You take naps.

9. Dinner and a movie is the whole date instead of the beginning of one.

8. Eating a basket of chicken wings at 3 AM would severely upset, rather than settle, your stomach.

7. You go to the drug store for ibuprofen and antacid, not condoms and pregnancy tests.

6. A $4.00 bottle of wine is no longer "pretty good shit."

5. You actually eat breakfast food at breakfast time.

4. "I just can't drink the way I used to" replaces "I'm never going todrink that much again."

3. 90% of the time you spend in front of a computer is for real work.

2. When you find out your friend is pregnant you congratulate them instead of asking "What the hell happened?"

And the number one sign you are getting old is:

1. You read this entire list!

Investor Sentiment Check

Heading into the home stretch, measures of investor sentiment are mixed.

The CBOE put/call ratio is hovering at average levels around 0.80. But the ISE Index hit an extremely low level this morning at 64, and is currently still low at 75. Again, this shows that options investors remain skeptical and have yet to embrace this rally.

Here is a list of stocks making notable moves on rising volume:

• RYAAY
• FMCN
• ICE
• RSTI
• PTRY
• ISE
• CHE
• ESIO
• TKR
• EWBC
• ILMN
• ROG

Long EWBC, FMCN, ISE

Nice Week To Finish The Quarter

The market has been strong all week. Can it make it 5 in a row? So far, so good.

The Chicago PMI came in better than expected (62.1 vs. 56.0 consensus), which is bullish for the soft landing thesis. And Fed govenor Poole made dovish comments, saying that he will not hesitate to ease should inflation pressures subside.

Oil and gas are lower this morning, with the energy stocks mixed. Bond yields are up a bit, with the 10-year trading at 4.64%.

I think the strength this week was more than simple window dressing, it was managers actually putting money to work, and possibly some short-covering on all of the bearish bets that are likely still on the table. September turned out to be a good month, so prepare to hear all the pundits now start fretting over October and how scary of a month it can be.

In other news and notes:

• Terrell Owens said it was an "accidental" overdose. Huh?
• RIMM beats estimates handily; stock gaps higher
• Toshiba recalls 830,000 Sony laptop batteries
• Thomas Weisel expects strong quarter from RACK
• Janco initiates FMCN with $90 target
• NIHD extends supply agreement with Motorola
• SMOD reports strong earnings; stock up
• HMX misses earnings; stock gaps lower
• AMGN acquires privately held Avidia
• WAG announces Inkjet cartridge refills

long AMGN, FMCN; RIMM puts

Another Solid Session

The market closed higher for a fourth consecutive session, although volume eased back a bit today. Nonetheless, the market shook off mid-day weakness again, to close near its highs for the day. So the action was solid.

Investor sentiment remained skeptical, with the ISE dipping below the key 100 level before closing at 101. Normally, with the market hitting multi-year highs, you would expect to see readings above 200. But I am hearing about few managers that are embracing this rally.

Oil finished lower on the session, despite news that Saudi and a couple of other countries would cut production to support prices. This is another bullish development, or at least a continued one.

Semis, biotechs, financials, and retail were all higher today. This speaks to the nice, broad participation we are seeing.

RIMM reports earnings after the bell.

short RIMM

Does GOOG Still Have The 'Mo?

A note out today by Jeffries says that their channel checks and anecdotal data from a recent conference lead them to believe that ad spending for FY06 could exceed their estimates.

They said that there were comments made at the conference that some companies do not see the weakness in the auto and finance verticals that YHOO recently mentioned. This leads me to believe that the weakness at YHOO could be both YHOO-specific as well as pressured by continued incremental share gains at GOOG. The analyst also said that GOOG continues to have the best momentum.

I recently added to our GOOG positions as the stock began to emerge from its consildation earlier this month. So I may be biased towards the name, but the datapoints continue to support my thesis so far.

long GOOG

Don't Get Too Excited Over Dow Highs

The media is abuzz this morning with the prospect of whether or not the Dow will close at new all-time highs. I am amazed that people still pay such close attention to this lackluster group of stocks.

Now you are probably thinking, lackluster? Then why are they at new highs? But one of the reasons is that these stocks have done nothing for years. So the fact that they are finally getting a bounce this year is reasonable.

But do you think you have done well by owning T, PFE, GM, etc. for the last 4 years? The Dow is a traditional concept, but should not garner the headlines the way it did pre-1950, when it actually was an index of leading stocks.

The rest of the market is mixed to lower in the first hour of trading. Oil is hovering around $63, and the 10-year yield is up to 4.62%.

In other news and notes:

• FMCN reits guidance; featured in IBD today
• FDO beats earnings by 3 cents; stock lower
• AMGN gets FDA approval for colorectal Vectibix
• CHK shuts-in some production due to low nat gas prices
• CRAI beats earnings, raises guidance
• Final Q2 GDP revised to +2.6% vs. +2.9% consensus
• TXI beats by 5 cents
• MSFT: Zune to be available Nov. 14th
• ENER ups buyback, improves corp. governance
• Kerkorian files to buy more GM

long AMGN, FMCN, MSFT

Standout Stocks

Here is a partial list of stocks making notable moves on above-average volume:

• FMD
• RSTI
• ABAX
• CROX
• ICTG
• UARM
• RHAT
• MDCC
• CECO
• VZ
• ITG
• ALOG

Investor Sentiment Check

Yesterday, despite the strong rally, investors remained skeptical and did not embrace the rally. The CBOE put/call finished yesterday at 1.03, an above-average level. The ISE Index closed at a low 117. Normally, you would expect to see this index near 200 when the market is hitting new highs.

Today, there is slightly more optimism, but nothing shocking. The VIX is up a nickel, the TRIN is at average levels, and the CBOE put/call is at 0.80. The ISE is running at 127, still well down from the 200 level seen during prior strong rallies. Moreover, the 10-day ISE hit a new low last week.

So where are all the bulls that I am hearing about?

Today's Energy Stats

The E.I.A. reported that gasoline inventories had a build of 6.34 million barrels, versus the consensus for a build of 700K barrels. Crude oil had a draw of 109k barrels vs. consensus of 1.7M draw.

So this report shows that inventories are running higher than expected, and that should weigh on the prices of the underlying commodities. For consumers, this should help falling prices at the pump, which is a good psychological indicator for consumer spending.

This could also help put a bid under the equity markets, away from the energy complex.

Weak Durable Goods Orders Weighs On Market

The market is opening under a bit of pressure this morning after the durable goods report showed a decline of -0.5%. This is helping push bond yields lower again, with the 10-year falling to 4.55%.

Oil is trading higher, which is pushing up energy stocks for a second straight day. The semis are also getting an early bid.

In other news and notes:

• RHAT gaps down -22% after reporting earnings
• PAYX also lower on earnings report
• DIVX gets a boost from Cramer's comments
• Nikkei rallies +2.5%
• RUTH lowers guidance for Q3
• Judge dismisses part of AMD case against Intel
• RBC raises GILD target to $78, growth accelerating
• Jeffries ups INTC target to $24
• Wedbush raises CROX target to $40

long GILD, INTC

Another Solid Session

For the second day, the market shook off early weakness and rose throughout the day. Today the markets closed at session highs. Volume levels rose on the Nasdaq, making for back to back accumulation days.

Breadth was solid, and net new highs expanded. Investor sentiment remains skeptical, with the ISE Index closing at the low level of 117. This indicates that many investors continue to fight this rally. At some point, performance anxiety could kick in and exacerbate things on the upside.
As the chart above shows, the COMP has been lagging its larger SPX bretheren, and is now trying to play catch-up. The growth stock index has broken above its 200-day moving average, which it successfully tested yesterday. Bulls want to see this former resistance area coverted to solid support in the near future.

As for the SPX, it closed at another yearly high (1336). The last time the SPX was at these levels was February 2001.

Oil closed flat around $61.25, while bond yields finally rose, with the 10-year closing at 4.58%.

After the close, RHAT reported earnings, but the stock fell sharply as investors were disappointed.

Standout Stocks

Here is a partial list of stocks making notable moves on rising volume:

• CROX
• ISE
• IAAC
• MLHR
• PCAR
• CMI
• EYE
• AVID
• PNR
• LFC
• KOSP
• PJC
• JTX

Long ISE, PNR

News and Notes

Here is a quick roundup of newsworthy items this morning:

• North Korea "likely to test nuclear bomb"
• LEN see Q4 $1.00-$1.30 vs. $1.58 consensus
• PMCS lowers guidance due to soft demand in Asia
• AVID warns of lower revenue in audio division
• AAPL: Cingular to be exclusive iPhone carrier
• LOW expects earnings at low-end of guidance
• FORM: Goldman adds to Conviction List
• EYE down -13%; lowers guidance, downgrades
• PNR lower guidance on weak pool business

long AAPL, PNR

Opening Look

The markets are mixed at the open, with energy stocks trading mostly higher.

Yesterday was a very solid day, on rising volume (accumulation day), making for a nice start to the week.

Bond yields are up slightly (4.57%), after hitting 7-month lows yesterday.

Earnings estimates are predicting a 13th consecutive quarter of double-digit growth for the S&P 500 companies. This morning, there were profit warnings from LEN and LOW, but considering the state of the housing market this is not a big surprise.

I'll be back with the news roundup in a bit--

Big Market Rally

Today is one of those days where the market is rallying stronly, despite oil moving higher as well. Measures of investor anxiety (put/calls, etc) were running at high levels this morning, and likely helped the market put in an early bottom.

Nearly all sectors are higher right now, with small-caps getting a nice bounce (+1.3%). Big-cap tech is also faring well. Bond yields are still lower at 4.55%.

Here are some stocks making notable moves on rising volume:

• KNOT
• HWCC
• ANEN
• JCG
• CROX
• GEF
• MSCC
• SPN
• WAG
• MO
• FOXH
• LUFK
• CRYP
• CHAP

News and Notes

Here is a quick roundup of this mornings headlines:

• HANS ups share buyback to $75 million (from $50M)
• AAPL target raised to $100 at ThinkEquity
• Bin Laden tries to pull a Kaiser Sose (death rumors)
• Energy stocks start to hit 52-wk lows (SUN, APC, COP, etc)
• WAG plunges after reporting earnings a penny light
• SNDK downgraded to Neutral at Merrill
• Fed's Fisher says he frets more about inflation than growth
• Existing home sales 6.30 mln vs. 6.20 mln consensus
• Crude prices dip below $60
• Opec says no plans for emergency meeting yet

long AAPL

Monday Morning Musings

The market opened on a positive note, but has since faded in the first hour of trading, as selling pressure exerts itself. Financials are still mostly higher, which is positive for the overall market. Most other sectors are mixed, save energy which continues to decline sharply.

The bond market continues to signal worry over economic growth, with the 10-year yield plunging further to 4.55% this morning. This further exacerbates the inverted yield curve, which has now exhibited a negative slope for 9 of the last 10 weeks.

I am still in the rough soft-landing camp, but I think the bond market is saying that the Fed will need to cut rates sooner than many think possible. Stay tuned.

This is the last week of the 3Q, so there may be a bid under the market as we head into quater-end. Of course, that means fund managers will want to dress up their portfolios with more of what has been working (tech, financials) and unload what hasn't been working (energy).

This is also a week that could see some earnings preannouncements, if there are going to be any. But so far it has been pretty benign.

I'll be right back with a news roundup--

Amaranth Hedge Fund Exits Energy Trading Business

I read the letter sent by Amaranth to its investors, and also was able to listen to the conference call. The letter discussed the transfer of its energy portfolio to a third party, and that it's leverage has been reduced to 1.3:1. It also stated that its Multi-Strategy fund lost approximately -65% in September, and approx. -55% ytd.

The conference call discussed how market events and liquidity caused the large losses in the fund. The Amaranth representative said that the market "provided no viable means of exiting positions". This is when the contacted 3rd parties to transfer their energy positions, or faced the prospect of not being able to meet margin calls. If the bids they received weren't' accepted, it could have resulted in a total loss for investors. Scary.

What bothered me about the call was how eerily reminiscent it was of LTCM. They blamed it on market events, illiquidity, and the fact that their VAR risk models predicted that the likelihood of such a scenario was remote. But as we all know, remote does not mean impossible. The fund lost $560 million in one day on Sept. 14th.

The most surprising statement I heard: Amaranth will be eliminating energy trading as a strategy within the fund.

They did not offer any details about the trader who put on these positions, the true size of these positions, whether he averaged down or doubled up, etc.

long risk mgt.

Has The Market Put In A Double Top?

The market has opened under pressure during the first hour of trading, and barring a big upside reversal it looks like the indices will finish lower for the week.

The 10-year yield continues to plunge, falling to 4.60% this morning. The bond market is the best predictor of future inflation, and as I have been saying for quite some time, it has been signaling more concern about future growth rather than inflation.

It seems that more market participants are now coming around to this point of view, and that weighing on yields. There is also likely some short covering going on in the bond market, at the margin.

In other news and notes:

• PALM lowered Q2 guidance, announces buyback
• SBUX to raise coffee prices next month
• BSX misses earnings, stock gaps lower
• MSFT refunds repair costs for Xbox users
• WMT warns studios about movie downloads
• New CDC recommendations on HIV positive for GILD

Technicians will be asking if the SPX has put in a double top, since it reached its May highs and has now backed off. But this will only be knowable in hindsight, so I wouldn't sell based on this assumption. More likely, the market will consolidate around these levels and go on to make new highs in the near future.

long GILD, MSFT

Thoughts On Google

GOOG has seen its stock take a hit over the last couple days on the news from YHOO's CFO that ad revenue was a bit weak within its financial and auto verticals.

Now, it is difficult to speculate on GOOG making its quarter due to the secrecy that the company employs. I suspect even if GOOG was experiencing the weakness YHOO is that the Street would likely not even hear about it, at least from management.

That said, I don't think GOOG is experiencing the same weakness. Today I heard that YHOO's ad display revenues were the ones affected, while GOOG is far less exposed to ad displays versus traditional search. Also, I have heard that GOOG's international revenues are strong this quarter.

Moreover, YHOO gapped lower after reporting in July, so some carryover weakness should not be surprising. This didn't happen to GOOG. GOOG has beat estimates handily the last 2 quarters, YHOO has not.

Yet YHOO is still given a premium valuation relative to GOOG (39x vs. 31x on 2007, respectively). I think this is absurd, given GOOG's superior growth and better execution of late. Put YHOO's multiple on GOOG and you get a $500 stock price. Go figure.

long GOOG

Will Bearish Sentiment Continue To Erode?

The market is slightly lower in the first hour of trading. But financials are fairly strong, which is a good sign. The bank index (BKX) is close to breaking out to a new high of its own.

Volume was good yesterday, which made for a nice accumulation day on both the SPX and COMP. I think most investors believed the market would pull back coinciding with the FOMC meeting, since it had been up so much going into the meeting.

But the market rallied hard leading up to the announcement, sold off for a bit afterward, but closed at strong levels. Bullish action. They say one of the characterstics of a strong market is that it does not offer those on the sidelines good opportunities to get in. Eventually they have to step up and pay to play.

Bond yields are lower again today, with the 10-year down to 4.70%. Inflation? Nope.

In other news and notes:

• BBBY reported in-line earnings and revenues
• YHOO looks at buying Facebook
• WMT offers generic drugs for $4
• GIS beats estimates; stock gaps higher
• TSCM featured in IBD
• FDX beats estimates; stock lower
• GYMB raises guidance; stock gaps higher
• CRS announces $250M buyback
• BRCM added to Top Picks list at FBR
• INSP gaps lower on loss of large customer

Stock Of The Day

My stock of the day, actually it should have been for yesterday, is Focus Media (FMCN).

The stock traded very "dry" yesterday, and did not succumb to the overall weakness in the markets. It closed at the highs for the day. In addition, volume levels rose substantially.

I am hearing that the selling from private equity firms is drying up. The money flow indicator on the chart above would seem to confirm this.

The stock is just peaking above its overhead 50-day. Recapturing this level would be a bullish sign, and would be the first step in the stock working its way back to previous highs.

long FMCN

Who Needs To Wait For The Fed?

Despite the markets often marking time ahead of FOMC meetings, the market rallied strong out of the gate this morning. Not only has the SPX quickly recouped yesterday's losses, but it also matched its yearly highs (1326).

Of course, I would have preferred to see a quiet open, and for the market to build strength into the close. We are now set up for a potentially bearish development where the market could sell off after the Fed meeting today.

Oracle (ORCL) reported strong earnings last night, and that is what helped get the market going. The stock gapped +12% higher at the open, and took many Nasdaq stocks with it.

Bond yields continue to move lower, breaking below their recent lows (4.72%). The yield curve has now been inverted for several weeks, and is signaling the Fed is being too restrictive.

In other news and notes:

• BRCM's CFO announces his immediate retirement
• Airbus announces further A380 delays
• MAS announces lower earnings for 2006; housing weakness
• MSFT reaffirms Xbox live subs
• KMX beats earnings, raises guidance
• MS beats earnings by 38 cents; stock up
• ISE plans to list foreign currency options

long ISE, MSFT

Market Recoups Most Of Its Losses

The market rallied strongly late in the day to erase most of its losses. The SPX erased most of a 9 point loss to close down less than 3 points (1318). The Nasdaq fell 36 points intraday, but closed with a loss of 13 points (2222).

So what looked like it could be a big selloff today turned out to be a very mild pullback. This is the kind of day that is very frustrating for the bears, as any downside bets that were put on today are already underwater.

As the charts above show, both oil and bond yields moved significantly lower today. This should bolster sentiment on inflation, and could make its way into the Fed comments tomorrow.

I mentioned earlier how high the put/call ratios were today. So there is a lot of people betting on more weakness, and this could add additional upside pressure for the market at some point if these bets continue to be underwater.

The brokerage and retail sectors finished higher today, which is a good sign. Semis and energy stocks were the weakest groups.
'

Gauging The Decline

The markets have accelerated to the downside today on news that there is a potential coup in Bangkok. Also YHOO reported that it expects its Q3 to be at the low end of its forecasted range, and this is weighing on techs and Internet stocks.

Of course, the market was poised for a pullback, so today's news could just be the excuse for profit taking. The YHOO news is company specific, and the reaction in GOOG looks overdone, as GOOG is likely taking market share.

Oil is down another $1.75 today to roughly $62, and bond yields are falling precipitously to 4.74%. So there are more signs of moderating inflation.

As for investor sentiment measures, the VIX/VXN indicators are popping, as are the put/call ratios. The CBOE put/call hit 1.80 today, and is still running near 1.50. The ISE Index is running at the equivalent of 0.98, an elevated level.

All of the above should limit the extent of this selloff, even as it is healthy for what was becoming an overbought market. I still think that you can buy the dips.

long GOOG

More Signs of Moderating Inflation, Weak Housing Data

Stocks are a little soft in the first hour of trading, after opening slightly higher. This morning's report on core PPI showed it actuall fell -0.4%, the first back-to-back monthly declines since 2002. That is very bullish for inflation.

Also, housing starts fell more than expected (-6%), which is weighing on the homebuilder sector and causing many to bring up the argument again that weak housing data will weigh on consumer spending.

The combination of this data likely means that the Fed will be on hold longer than most currently believe.

In other news and notes:

• Piper downgrades AKAM on valuation
• Motorola confirms acquisition of SBL
• Toshiba recalls 340,000 SONY batteries
• AZO beats estimates by 13 cents; stock up
• WMT prices Zune at $284, slightly below iPod
• Rumor that AAPL could start selling ads on iTunes

long AAPL

Standout Stocks

The markets remain solid as we head into the afternoon half of the session. Energy has continued to rally as crude oil bounces above $64.

Here are some stocks making strong moves on above-average volume:

• FSL
• ANEN
• ICE
• GROW
• DIOS
• HITT
• NVEC
• TRID
• GVHR
• FDC
• ATAC
• HS
• WYNN
• USNA

Monday Morning Musings

The market opened under a bit of selling pressure, but has since climbed back into positive territory. Last week was options expiration week. Many people in the industry talk about the options-related hangover the market often experiences following expiration, so we will have to see if it rings true.

Tech is strong out of the gate this morning, while retail stocks are lagging. Commodities and the energy stocks are also getting a nice bounce. Even the CEO of Shell Oil said he thinks oil is going lower. We further lowered our energy exposure last week to add to more growth ideas.

In other news and notes:

• Merrill said they see a -15% to -20% correction this fall
• Pru upped their equity weighting to 90%
• SBL is up on news it seeks to sell itself
• E-coli spinach cases reported has reached 109
• SMTS beats earnings estimates; stock up +15%
• GVHR lowered guidance; stock down -17%
• LEH added to Focus 1 list at Merrill
• Amaranth hedge fund loses nearly 50% on nat gas losses

That's A Wrap

The market didn't close at its highs, but it didn't give back all of its early gains either. For the week, the action was very solid. The SPX gained +1.6%, while the Nasdaq rallied +3.7%.

Bond yield remained low, finishing the week at 4.80%. And oil was probably the story of the week, finishing around $63.50. Other commodities have rolled over as well, with significant weakness showing up in the CRB Index. All of the above should help inflation expectations moderate, which is bullish for the broader market.

The ISE Index closed at 70 today, which is the equivalent of a 1.42 put/call ratio. Option investors continue to show disbelief in this rally.

With the markets short-term overbought, a pullback could surface at anytime. But with the macro picture improving and sentiment still negative, I believe buying the dips will be profitable.

Indexes At Interesting Junctures

The major indexes are both at interesting junctures right now. The SPX is right at its highs for the year, which were made back in May. A bullish scenario from here would be for the index to consolidate a bit around these levels, and then breakout to new highs on good volume.

Also, you can see that the 50-day moving average is in the process of breaking back above the 200-day average. This is a good sign to technicians. If the SPX does have a pullback, you want to see it find support at its now rising 50-day.

As for the Nasdaq, the COMP spent the last two sessions probing its overhead 200-day. Today, it has broken above this resistance. It would be bullish to see this key moving average begin to act as support, as opposed to resistance.

The markets look short-term overbought right now, but don't necessarily need to go all the way back to oversold levels. Some sideways consolidtion would be just as good to work off any short-term excess.

And under the surface, we should continue to be watching for individual stocks breaking out on high volume. Earlier this week, I highlighted a handful of stocks breaking above their respective 50-day averages. This is a good place to look for beaten down stocks that could continue to enjoy a rally.

More Signs Inflation Has Peaked

The market opened on a strong note, and has since built on its gains. The CPI came out this morning in-line with estimates at +0.2%. That got the market excited that the Fed will be on hold longer than previously thought.

Also, oil and gas prices continue to fall. Crude oil is now trading below $63. All of these are good indications that the peak in inflation is behind us. Of course, if you have been reading this site you know that we have been saying that this is what the bond market has bee telling us for quite some time.

The participation is broad so far. Homebuilders are spiking (+3.0%). Semis are also getting a big bounce (+1.8%), followed by brokers and tech. Energy is the sole group down again.

In other news and notes:

• ITW issues downside guidance for Q3
• ADBE gaps up on strong earnings
• SCHW says that EPS to "handily exceed" prior forecast
• Ford says Jaguar brand not for sale
• Matrix downgrades URBN to Sell
• Goldman ups MSFT price target to $33

long MSFT, URBN

Investor Sentiment Check

Despite the recent rally in the averages, options investors have not jumped on the bandwagon.

Today, the CBOE put/call ratio is above-average at 0.95. The ISE Index opened at the equivalent of 1.11 and has fallen only slightly.

I would expect to see much lower readings as investors scrambled to buy call options and provide themselves with some upside exposure. But no one seems to believe in the sustainability of this rally.

Wall of worry?

Stocks Are Mixed At The Open

Stocks are mixed in early trading, even though the major indexes are lower. Energy stocks are getting a little bit more of a bounce, but I expect it to be short lived.

Brokers are also bouncing again, as Bear, Stearns (BSC) was the latest broker to beat earnings. This is helping other financials as well. Retail stocks are seeing some profit taking, and tech is mixed.

There is more profit taking in defensive names, like food and beverage stocks, and money flowing into tech. See the runs in AAPL, GOOG, SNDK, RIMM, etc.

In other news and notes:

• DIOD raises Q3 revenue guidance
• BSC beats earnings by 15 cents
• HANS: Goldman adds to its conviction list
• STLY: gaps down on lower guidance
• MSFT: announces release of its new Zune multimedia player

long AAPL, GOOG, MSFT

Another Solid Day

The market put in another solid day. Small and mid-caps led the rally. By sector, brokers and energy stocks were the strongest, followed by retail and industrials.

Semis took a breather today (-0.8%), but the Nasdaq was still up on the day. AAPL and GOOG both had very big days, and closed at their highs for the session.

Breadth was positive, and investor sentiment was still skeptical, as the ISE index finished at the low level of 108. Managers are obviously putting money to work here, but there are still tons that are skeptical. Have you seen Liz Ann Sonders' year-end target lately?

Oil got a small bounce, but still closed near $64. Bond yields finished lower at 4.76%. Inflation? Not.

I now need a pullback to put more money to work. But a strong market often doesn't give you that chance. That is the dilemma on the minds of many investors right now.

long AAPL, GOOG

Interesting Wireless Data

A blurb that ran in IBD yesterday highlighted the cities with the most calls per wireless customer per month.

The top 2 cities were no surprise: Miami and Los Angeles

But the #3? You would have never guessed-- Detroit! Can someone make sense of this for me?

And #8? Cleveland. Huh?

Notable names missing from the top 20 included: Chicago, Boston, and Washington D.C.

The study was done by Verizon Wireless, so maybe it was skewed by provider. Now back to your regularly scheduled program...

Stock of the Day Update

A few weeks ago, when Energy Conversion Devices (ENER) was first peaking above its 50-day average, I highlighted it as my stock of the day and commented that I was taking a long position in it.

Today, the stock is gapping more than +12% higher on a huge volume spike following yesterday's earnings. The company beat earnings estimates by 12 cents on higher revenues and increasing margins.

Sales of 6.7 MW was strong. There was also an announcement that Samsung said it would use ENER's technology for a flash memory prototype that could be ready by 2008. So there is a lot of positive newsflow there, and the stock is reflecting this today.

long ENER

Mixed Start for Stocks

The market is mixed in early trading. But yesterday was a very solid accumulation day, on the heels of Monday's upside reversal. You can see the rotation out of energy and material stocks into more traditional growth areas (tech, retail, healthcare).

Energy stocks are getting a bounce today, but I think that is a given since they have been sold off so hard lately. I used yesterday's early strenght to further reduce our exposure to the group.

I also added to Google (GOOG) yesterday, as the stock looks to be pulling away from its 50-day. Cramer is back on the GOOG bandwagon (nice to have you back, buddy), saying it could hit $500. That may have helped boost the stock this morning, as it is challenging the $400 level.

In other news and notes:

• ENER is up ~15% after beating earnings by 12 cents
• GLW: Thomas Weisel is positive on the LCD supply chain environment
• AAPL: Lots of updgrades following the company's unveiling of iTV
• OXPS: positive DART data for August
• LEH: beats earnings by 8 cents; stock higher

With literally everyone looking for a September pullback, it would be in character for the market to merely offer a 3-day pullback before resuming its rally. My colleague at TheStreet.com, Jeff Cooper, had a great quote yesterday from legendary trader Jesse Livermore:

"The diabolical purpose of the market is to continue higher with as few people on board as possible."

long AAPL, ENER, GOOG, OXPS

Bullish Action

There is some very bullish action among stocks today. Specifically, I am looking at a number of stocks that are breaking above their respective 50-day moving averages. This should increase confidence among investors that view this key technical gauge as a maginot line.

Here is a short list of some examples:

• NTRI
• URBN
• WFMI
• GOOG
• LRCX
• MRVL
• CTRN
• LM
• BBY
• GNSS
• PWAV
• LEN
• LSS
• PNRA
• BRCM

Long GOOG, URBN, WFMI

Monthly Market Monitor

Our firm's most recent Monthly Market Monitor is available on our website. You can view it by clicking here.
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Goldman Trounces Estimates

After the SPX broke support at 1292 yesterday, it looked like a test of the 50-day average might be in the cards. It also was shaping up to be a large-range outside day, but the market reversed its early losses to avoid said technical damage.

I could comment about the statement the market was making on the anniversary of 9/11, but I won't go there.

Yesterday, I mentioned that I wanted to buy any weakness on the heels of Goldman Sach's (GS) earnings. Well, not only was there no weakness, but the company again trounced estimates ($3.26 vs. $2.98 consensus) and announced a $60 million buyback. I will still likely use any pullback to add to my position.

In other news and notes:

• QCOM is up on buzz surrounding mobile TV adoption
• BRCM gets upgraded to buy at Pac Growth
• Piper ups EWBC with a $44 target
• Amtech ups its target to $120 on RIMM!
• BBY rises on stronger earnings
• IBB/TIPP Econ. Optimism Index rises 10.7%, after 6 negative months

Energy stocks are getting a small bounce, after being sold relentlessly over the last few days. I would use any strength to reduce exposure here until crude prices (and nat gas) stabilize.

Bond yields are up a bit at 4.82%. Stock indexes are up across the board.

long BRCM, EWBC, GS, QCOM

Corporate Bond Market Optimism

Overall, this was a solid session for the market. We shook off the early weakness and avoided another distribution day. And the gains in tech and retail more than offset the severe weakness in energy.

I get the sense that many investors are taking the last of their profits in energy and rolling them into other growth areas, including retail, healthcare, and technology. I think this is a healthy trend, and should continue into year-end.

Tomorrow morning, Goldman Sachs (GS) reports earnings, and should give us an early glimpse of what earnings for the group could look like for Q3. As I have said, I would be a buyer on any weakness.

Last week, we saw a surge in corporate bond issuance, and it was very well received. Yet stock investors don't seem to care. This is a big difference between now and 2001, when the corporate bond market was more worried than the stock market.

MS Howells has done a lot of work on this area, and the optimism in the corporate bond market right now makes it more likely that stocks will again go to new highs on the heels of a wave of mergers, buybacks, and LBOs.

long GS

Investor Sentiment Check

With an hour to go, investor sentiment has grown more bearish today. The CBOE put/call ratio rose to 1.02, while the ISE Index rose to the equivalent of 1.08. The VIX/VXN indexes are roughly flat.

The major indexes have shaken off this morning's weakness, and moved into positive territory. Semis are getting the biggest bounce, followed by retail. Energy is by far the weakest group.

Also, here is a list of stocks making high-volume moves of note:

• FSL
• MWRK
• CXW
• NTRI
• DRIV
• ERF
• PWE
• PLLL
• DNA
• SU
• IPS

Weekly Volume Gainers

One of the screens I ran over the weekend was for stocks that showed outsized volume gains for the one-week period.

The names that caught my eye were:

• IDWK
• CLG
• TINY
• SYX
• PCCC
• GILT
• TAR

I still need to do more work onthese names, to see if their fundies pass the snuff test. Here is a link to the CandleGlance charts for these stocks.
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Monday Morning Musings

The markets have opened weak, and remain under pressure in the first hour of trading. The energy complex is getting hit the hardest, as momentum seems to be leaving the oil & gas stocks.

Crude oil is down for six days in a row, the longest streak since October 2003. Mild weather and the lack of any severe hurricanes has also continued to push natural gas lower. And gold is off more than $20 on a weakening of geopolitical fears. So the schmeissing of commodities could be weighing on the overall market.

Other news and notes:

• UBS raises S&P 500 target to 1450 - expects broad year-end rally
• RBC likes GOOG near-term - high likelihood of intl. revs upside
• DELL off -5% on further SEC probe; share buyback suspended
• FSL +20% on news of possible takeover
• Amtech ups SNDK price target to $90
• FMCN: CIBC says block trades weighing on shares, creats buying opp

The brokers report earnings this week, and I still intend to use any weakness to add exposure to the group. I think analyst estimates are too low for 2007, and reflect too much negativity.

long GOOG

Standout Stocks

The market is bouncing and showing some surprising strength as we get into the final stretch before the weekend. It will be interesting to see if the market can close at its highs.

The put/call ratios have been running at high levels, with the CBOE at 1.04 and the ISE at the equivalent of 0.80.

Here are some stocks making strong, high-volume moves:

High-volume gainers

• GROW
• IAAC
• ANN
• VIP
• CVD

High-volume decliners:

• SHFL
• VOL
• FORM
• CMG
• PLCE
• DJ

Early Look

The market is getting a little bounce at the open, but I would expect this to be tested at some point.

NSM said the Q2 sales will miss forecasts, but it does not seem to be weighing on the semis too much.

Energy stocks are getting a bounce as well, given how hard they have been hit. SLB got an upgrade, and is up nicely. But it is not pulling up some of the other oil service stocks.

AAPL continues to run higher, and seems to be pricing in a lot of the good news. This does look like it is setting up a 'sell the news' event no matter what the news is out of their meeting next week.

Gold is falling again today (GLD short?), as are most commodities. Bond yields are also lower, with the 10-year around 4.76%. Inflation worries? Not in the bond market.

Is it Friday? I like these short weeks.

long AAPL

Another Distribution Day

The market tried to rally back, but faded again late in the day. Volume levels rose, making for another distribution day.

Breadth was also pretty negative, both the A/D line and the Hi/Lo indexes.

Oil, gas, gold, etc. all finished lower on the day. Bond yields also reversed on the day, with the 10-year finishing at 4.80%.

Financials were the weakest group, with the BKX -1.0% and the brokers -1.2%. The brokers report next week. And while estimates for the current quarter have been trimmed, I think sentiment is too negative. I will be looking to add exposure to the group after the earnings reports.

I am also looking for this pullback to run its course, and to add some beta to the portfolios.
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Turnaround Thursday?

The markets have shaken off their early weakness, and moved into positive territory on the session. The SPX bounced off of support at 1292 and has climbed back above 1300.

Credit investor sentiment, with the CBOE put/call hitting 1.17 before reversing lower. And the ISE index hit the equivalent of 1.56! The VIX/VXN also spiked above their 50-day averages before reversing lower.

With so many expecting a pullback in September (including yours truly), the damage is likely to be contained.

Also, oil, gold, and the commodity complex continue to move lower, which is bullish for the overall market and the economy, as it should help ease inflation pressures. GLD looks like a good short here.

I still haven't put any of the money we raised recently to work, but am eyeing a handful of names, including: WFR, CTSH, GILD, LIFC, ISRG.

Long ISE

Market Under Early Pressure Again

The market is selling off in early trading, following yesterday's high volume pullback. That made for a distribution day, the first we have seen in a while. While one distribution day is nothing to get overly concerned about, we don't want to see too many of them. The selling in tech stocks yesterday was particularly harsh.

Tech is mostly lower again today, though some stocks are bucking the weakness. Excitement over what Apple (AAPL) might say at its upcoming meeting has that stock rallying strongly. MRVL and SNDK are also positive today.

The energy complex is lower, as inventories showed a build, pushing crude oil and natural gas prices lower.

There is also more weakness in the housing stocks, as companies like BZH and KBH said the order cancellations are up as sentiment is worsening. This is likely causing some angst as investors mull whether a hard landing in the housing market spills over to the rest of the economy.

Poll: What is your favorite stock for the rest of the year?

long AAPL

Profit Taking Turns Into A Rout

The selling in the market accelerated after the Fed's Beige Book was released. It really revealed what we already know: labor markets are steady, consumer spending rose slowly, and housing to remain weak.

Nonetheless, the markets are taking it on the chin. Big cap tech is down roughly -1.9%, with the semis -2.9% and the energy complex off -3.2% as oil makes new lows (below $68).

But investor sentiment is quickly spiking. The volatility indexes are rising sharply, nearing their overhead 50-day averages. The CBOE put/call ratio is running at 1.28 and the ISE Sentiment Index is at the equivalent of 1.01.

My screens are basically a sea of red today, but as I mentioned before, I have built cash to put to work on any pullback.

Profit Taking Sets In

The market is under pressure this morning, most likely due to profit taking given the run that we have had. The Nasdaq has been up in 7 of the last 8 days.

Bond yields are moving higher on a report that wage inflation rose a bit (unit labor costs). But at 4.83%, the 10-year is still well below the fed funds rate, and still below the T-bill rate as well.

The semis are down -1.7% so far, but biotechs, homebuilders, and energy stocks are down just as much.

The volatility indexes and put/call ratios are rising, which could put a bid under the market. But the market is also short-term overbought, so some consolidation would be healthy.

I, for one, have raised quite a bit of cash taking profits and would welcome a pullback to put money back to work at lower prices.

Standout Stocks

There are a lot of stocks making big moves over the last few days. Here is a partial list of both gainers and losers showing rising volume:

• IAAC
• GROW
• VIP
• CHAP
• NVEC
• DRIV
• VIA
• SIE
• RBAK
• HSY
• TSCO
• FTO

Long RBAK

Mutual Fund Monthly

I track the performance of a lot of mutual funds, both to see what's working in the market and to compare my own performance (we also use them in client accounts).

Here are the top and bottom 5 performing funds in our stable ytd (as of 8/31):

Top 5

• Driehaus Emerg. Growth (+18.6%)
• Ivy Asset Strategy (+15.1%)
• T.Rowe Emerg. Europe (+13.9%)
• CGM Focus (+13.4%)
• Third Ave. Internatl. (+10.3%)

Bottom 5

• Marsico Focus (-2.5%)
• Turner Mid-cap Growth (-0.15%)
• T.Rowe New Horizons (+0.2%)
• Quaker Strategic (+1.1%)
• Hennessy Cornerstone (+1.2%)

Fed's Poole Speaks

Here is a summary of his comments:

• Housing weakness close to what he expected
• Consumption may soften a little
• Core inflation to come down in coming months
• Lower bond yields will prevent dramatic slowdown
• Very unlikely we will have housing crash
• August jobs report suggests "even keel"
• Fed will take wait & see approach

Comments seen as benign to the market, which has rallied into positive territory.

Back In The Saddle

That was a nice, long weekend; one of the longest I've taken in a while. But it's time to get back to business and capitalize on what I think should be a strong Q4.

Oil and gas prices are down again today, but the energy stocks are mixed. The big news in the oil patch is a significant oil discovery by CVX that should add to supply over the next 5 years.

Bond yields are up slightly to 4.77%, but still well below the fed funds rate (5.25%).

European stock markets are mostly all lower today.

In U.S. news:

• QCOM wints the first round of its suit against BRCM
• Amtech says they would sell GRMN, due to increasing competition
• Amtech says get into AAPL, as new cell phone could revolutionize industry
• Cowen says chip correction over, best ideas are MRVL, BRCM, SIRF, & PMCS

I have some catching up to do on posts from late last week. Should be a busy day.

long AAPL, QCOM; net short GRMN, SIRF