BETWEEN THE HEDGES

Tuesday, April 11, 2006

Wednesday Watch

Posted by Gary .....at 11:55 PM

Late-Night Headlines
Bloomberg:
- Legg Mason(LM) will replace Guidant Corp.(GDT) in the S&P 500, S&P said.
- China made several concessions to US demands today, agreeing to start the process to lift its ban on US beef imports, open up its mobile phone and medical devices market and crack down on software and music piracy.
- The cost to lease an oil tanker in the Persian Gulf may drop in the next three months because of an expanded fleet and reduced demand.

Wall Street Journal:
- Steelmakers such as Mittal Steel, the world’s largest producer, are opposed to the London Metal Exchange’s plan to create steel futures.

Late Buy/Sell Recommendations
- None of note

Night Trading
Asian Indices are -.75% to unch. on average.
S&P 500 indicated +.04%.
NASDAQ 100 indicated -.04%.

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Earnings of Note
Company/EPS Estimate
- (AMD)/.30
- (CC).77
- (CBH)/.40
- (GCI)/.99
- (GTK)/.47
- (HDI)/.86
- (IFIN)/.56
- (LRCX).62

Upcoming Splits
- None of note

Economic Releases
8:30 am EST
- The Trade Deficit for February is estimated to shrink to -$67.5 billion versus -$68.5 billion in January.

10:30 am EST
- Bloomberg consensus estimates call for a weekly crude build of 1,200,000 barrels. Gasoline inventories are estimated to fall 2,100,000 barrels, and distillate supplies are expected to decrease by 1,550,000 barrels. Refinery utilization is expected to rise .55%.

2:00 pm EST
- The Monthly Budget Deficit for March is estimated to widen to -$82.1 billion versus -$71.2 billion in February.

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and commodity stocks in the region. I expect US equities to open modestly lower and to trade modestly higher into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

Stocks Finish Near Session Lows on Heavy Volume and Poor Breadth

Posted by Gary .....at 4:58 PM

Indices
S&P 500 1,286.57 -.77%
DJIA 11,089.63 -.46%
NASDAQ 2,310.35 -.98%
Russell 2000 742.11 -1.44%
Wilshire 5000 12,994.31 -.84%
S&P Barra Growth 604.20 -.76%
S&P Barra Value 679.42 -.79%
Morgan Stanley Consumer 598.57 -.77%
Morgan Stanley Cyclical 822.89 -.30%
Morgan Stanley Technology 547.74 -.66%
Transports 4,619.04 -1.03%
Utilities 384.42 -.98%
Put/Call 1.0 +20.48%
NYSE Arms 1.32 +46.02%
Volatility(VIX) 13.0 +6.64%
ISE Sentiment 151.00 +.67%
US Dollar 89.38 -.30%
CRB 340.48 +.14%

Futures Spot Prices
Crude Oil 68.90 -.12%
Unleaded Gasoline 205.65 +.10%
Natural Gas 6.88 -.33%
Heating Oil 195.55 +.52%
Gold 597.50 -.32%
Base Metals 192.05 +.73%
Copper 271.00 -.42%
10-year US Treasury Yield 4.92% -.58%

Leading Sectors
Gaming -.12%
Restaurants -.26%
REITs -.45%

Lagging Sectors
Oil Tankers -1.84%
Oil Service -1.88%
Gold & Silver -2.46%

Evening Review
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Afternoon Recommendations
Goldman Sachs:
- Upgraded HSY to Outperform.
- Initiated Coal sector with Neutral.

Afternoon/Evening Headlines
Bloomberg:
- News Corp.’s(NWS) MySpace.com appointed a security chief to police its network of 70 million personal Web pages, responding to concerns from child-safety advocates.
- Federal Reserve Bank of Dallas President Richard Fisher said he hasn’t seen evidence that companies are able to pass along increases in the price of metals, oil and other commodities to customers.
- Genentech Inc.(DNA) said first-quarter profit climbed 48% as more doctors prescribed the Avastin and Herceptin cancer drugs.

Nikkei English News:
- Kobe Steel Ltd. is forming a joint US venture with steelmaker Steel Dynamics(STLD) and Cleveland-Cliffs(CLF), an iron ore producer, for a new plant to make low-cost, high-grade steel products.

BOTTOM LINE: The Portfolio finished mixed today as losses in my Semi longs, Networking longs and Medical longs offset gains in my Index ETF shorts and Energy-related shorts. I covered some of my (IWM) and (QQQQ) shorts in the final hour, thus leaving the Portfolio 50% net long. The tone of the market was very negative today as the advance/decline line finished substantially lower, sector performance was negative and volume was heavy. Measures of investor anxiety were mostly higher into the close. Overall, today's market performance was bearish. Afternoon weakness was mainly related to selling in commodity stocks. I continue to believe the major averages will further consolidate recent gains before another push higher commences.

Stocks Lower into Final Hour on Energy Worries and Continued Profit-taking

Posted by Gary .....at 3:30 PM

BOTTOM LINE: The Portfolio is about even into the final hour as gains in my Index shorts and Energy-related shorts are offsetting losses in my Semi longs, Networking longs and Medical longs. I added to my (QQQQ), (EEM) and (IWM) shorts today, thus leaving the Portfolio 25% net long. The tone of the market is very negative as the advance/decline line is substantially lower, every sector is falling and volume is heavy. I am seeing some signs of stabilization the tech sector; however, there is still quite a bit of short-term complacency given today's losses. The Johnson Redbook same-store sales index rose 3.30% year over year last week vs. a 1.7% rise the prior week. This is the strongest reading since the first week of February. The long-term average is a gain of around 2.5%. I continue to expect retail to perform more in line with the market going forward. I also still expect stock selection within the sector to become even more important as consumer spending is likely in the initial stages of slowing to average levels. I expect US stocks to trade mixed-to-lower into the close from current levels as more economically sensitive companies see further profit-taking.

Today's Headlines

Posted by Gary .....at 2:29 PM

Bloomberg:
- GM’s Saturn division, whose sales peaked a dozen years ago, is turning to new models with European styling to shake up its humdrum image and boost profit with higher-priced vehicles.
- UBS AG, Europe’s largest bank by assets, agreed to buy the private client network of Minneapolis-based Piper Jaffray Companies(PJC) for as much as $875 million to expand its wealth management business in the US.
- Heartened by increased hiring and wage growth this year, economists raised their 2006 US growth forecast, according to the latest monthly survey on the economy by Bloomberg.
- The benchmark index in Saudi Arabia, the world’s largest oil producer, continued its recent plunge for a third day on concern that prices don’t reflect prospects for profit growth after a three-year rally.
- Nokia(NOK) said handset prices in the first quarter exceeded the company’s forecast as more advanced models were sold.
- Federal prosecutors will charge people who worked for Merrill Lynch(MER) and Goldman Sachs(GS) with insider trading.
- Merck(MRK) should pay $9 million in punitive damages to a man who blamed the drug for his heart attack, a jury ruled.
- The IRS is examining some electronic-payment transactions processed by EBay’s(EBAY) PayPal unit to find US taxpayers who keep unreported income in offshore accounts, officials said.
- Fidelity Investments bought 12 million shares of United Airlines parent UAL Corp., becoming the carrier’s biggest stockholder with a 13% stake.
- Iranian Presidetn Ahmadinejad said his country completed its first enrichment of uranium two days ago.
- Nasdaq Stock Market(NDAQ) bought 15% of London Stock Exchange for $781.5 million, less than two weeks after withdrawing its takeover offer.

Wall Street Journal:
- Alcatel SA’s(ALA) proposed acquisition of Lucent Technologies(LU) could prompt a similar offer by another telecom technology company for Juniper Networks(JNPR).
- The US is preparing plans to cut the number of troops in Iraq and hand over responsibility for security to local forces, citing military officials.
- Humana Inc.(HUM) is marketing consumer-directed plans that offer various deductible-premium combinations, and is making contacts with potential customers as a way to keep down medical costs.
- Carnival Corp.(CCL), Royal Caribbean Cruises(RCL) and other cruise lines are offering deep discounts to draw customers as industry growth slows amid hurricanes and safety concerns.

NY Times:
- China’s population, recognizing the power of independent organization, are increasingly challenging what is a totalitarian system of government in their country.
- McDonald’s Corp.(MCD) is beginning to use call centers in other parts of the country to take orders from drive-through windows.
- The United Farm Workers, the biggest US union of agricultural laborers, plans to announce today that it has signed the first nationwide contract covering agricultural guest workers.

CNet News.com:
- Lenovo Group Ltd. will sell its ThinkPad notebook computers and 3000 line desktop systems in Best Buy’s(BBY) stores.

Atlanta Journal-Constitution:
- Georgia’s tax revenue is more than $1 billion ahead of the same period a year ago, spurred by double-digit growth in sales and income tax receipts.

Financial Times:
- Walt Disney’s(DIS) plan to offer hit ABC television shows free on the Internet is a sensible way of experimenting with ways of boosting advertising using technology.

Reuters:
- Time Warner’s(TWX) cable unit is in early-stage discussions about developing an auction system that would let advertisers bid for ad spots on video-on-demand channels.

Economic Releases

Posted by Gary .....at 10:28 AM

- None of note