Wednesday, August 22, 2007

Stocks Soar, Finish at Session Highs, on Merger Speculation and Less Fear

S&P 500 1,464.07 +1.17%
DJIA 13,236.13 +1.11%
NASDAQ 2,552.80 +1.25%
Russell 2000 798.56 +1.29%
Wilshire 5000 14,711.25 +1.22%
Russell 1000 Growth 584.25 +1.35%
Russell 1000 Value 825.92 +1.11%
Morgan Stanley Consumer 714.11 +.97%
Morgan Stanley Cyclical 1,026.66 +2.06%
Morgan Stanley Technology 622.76 +1.21%
Transports 4,924.57 +2.12%
Utilities 496.08 +.94%
MSCI Emerging Markets 126.22 +3.15%

Total Put/Call 1.09 +22.47%
NYSE Arms .77 -27.91%
Volatility(VIX) 22.89 -9.35%
ISE Sentiment 92.0 -31.85%

Futures Spot Prices
Crude Oil 69.32 -.36%
Reformulated Gasoline 188.80 +1.30%
Natural Gas 5.61 -3.52%
Heating Oil 195.04 -.08%
Gold 670.50 +.65%
Base Metals 232.07 +2.56%
Copper 324.05 +2.39%

10-year US Treasury Yield 4.64% +5 basis points
US Dollar 81.24 -.30%
CRB Index 300.63 +.29%

Leading Sectors
Steel +5.37%
Gaming +3.16%
Airlines +3.02%

Lagging Sectors
Biotech +.58%
REITs +.48%
Banks +.14%

Evening Review
Market Performance Summary
WSJ Data Center
Sector Performance
ETF Performance
Style Performance
Commodity Movers
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Timely Economic Charts
PM Market Call
After-hours Commentary
After-hours Movers

After-hours Stock Quote
In Play

Afternoon Recommendations

- Rated (BPA) Buy.

Afternoon/Evening Headlines
- US stocks climbed for a fifth day on growing speculation the summer breakdown in credit markets won’t derail the economy or pending company mergers.
- US banks will be the “victors” of the turmoil affecting home lenders and owners of some mortgage securities in a market shift spurred by more borrowers becoming delinquent on subprime debt, a Bear Stearns(BSC) analyst says.
- Morgan Stanley(MS), the second-biggest securities firm, is “best positioned” to withstand the credit crunch and will make the quickest recovery among Wall Street brokerages, Sanford C. Bernstein said in a research note.
- US two-year Treasury notes led the bond market lower on speculation the Fed will cut its benchmark interest rate no more than a quarter-percentage point in the next month.
- Crude oil in NY fell to a two-month low after an EIA report showed an unexpected increase in inventories.

BOTTOM LINE: The Portfolio finished higher today on gains in my Retail longs, Computer longs, Internet longs and Medical longs. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was very positive today as the advance/decline line finished substantially higher, every sector rose and volume was about average. Measures of investor anxiety were above-average into the close. Today's overall market action was very bullish. Many market-leading “growth” stocks posted gains of 3%-4% today, again substantially outperforming the broad market. If you didn't panic out of these types of stocks at the lows and added to them, you are probably back near your high-water mark for the year, with the S&P 500 still 5.6% off its highs. That is what makes market timing so tricky and why I like to use ETF short hedges instead of selling my favorite long positions during periods of market stress. Notwithstanding the pullbacks that have occurred since the major 2002 market bottom, that have always been seen as the beginning of a new bear market by many, the S&P 500 is up over 100%. The yen is near session lows vs. the dollar, which is a positive. Nikkei futures are indicating an up 250 open in Japan tonight. My intraday gauge of investor angst was at above-average levels throughout the day, despite gains, which is also a positive. The underlying tone of the market today was the healthiest since the pullback began. We are getting overbought short term, and there is more negative news to come, but it is unlikely, given how many are looking for a retest or new lows, that a sell-off of that magnitude will occur.

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