Weekly Outlook

Click here for The Week Ahead by Reuters

Click here for Stocks in Focus for Monday by MarketWatch

There are some economic reports of note and a few significant corporate earnings reports scheduled for release this week.

Economic reports for the week include:

Mon. – None of note

Tues. – Monthly Budget Statement, IDB/TIPP Economic Optimism, weekly retail sales report

Wed. – Weekly MBA Mortgage Applications, Import Price Index, Advance Retail Sales, Business Inventories, Fed’s Beige Book, weekly EIA energy inventory report

Thur. – Producer Price Index, Initial Jobless Claims, Mortgage Delinquencies

Fri. – Consumer Price Index, Empire Manufacturing, Current Account Balance, Net Long-term TIC Flows, Industrial Production, Capacity Utilization, Univ. of Mich. Consumer Confidence

Some of the more noteworthy companies that release quarterly earnings this week are:

Mon. – Comverse Technology(CMVT), JOS A Bank Clothiers(JOSB), Take-Two(TTWO)

Tues. – Finisar Corp.(FNSR), Lehman Brothers(LEH), Sapient Corp.(SAPE)

Wed. – Doral Financial(DRL)

Thur. – Adobe Systems(ADBE), Bear Stearns(BSC), Del Monte(DLM), Forrester Research(FORR), Freddie Mac(FRE), Goldman Sachs(GS), John Wiley(JW/A), Pier 1 Imports(PIR)

Fri. – AES Corp.(AES), Carnival Corp.(CCL), Computer Sciences(CSC), Fannie Mae(FNM), Fleetwood Enterprises(FLE), Fossil Inc.(FOSL), Intl Rectifier(IRF), Winnebago Industries(WGO)

Other events that have market-moving potential this week include:

Mon. – JPMorgan Basics & Industrials Conference, Goldman Sachs Global Healthcare Conference, Bear Stearns Tech/Communications/Internet Conference, (TXN) Mid-quarter Conference Call, Fed’s Pinalto speaking, Fed’s Moskow speaking

Tue. – JPMorgan Basics & Industrials Conference, Goldman Sachs Global Healthcare Conference, Bear Stearns Tech/Communications/Internet Conference

Wed. – Needham Biotech/Medical Tech Conference, Merrill Lynch Global Transport Conference, Thomas Weisel Alternative Energy Conference, Goldman Sachs Global Healthcare Conference

Thur. – BOJ Policy Meeting, Merrill Lynch Global Transport Conference, Bank of America Homebuilding Conference, Goldman Sachs Global Healthcare Conference, Needham Biotech/Medical Tech Conference, Thomas Weisel Alternative Energy Conference, RBC Global Mining/Materials Conference, (SYMC) Analyst Meeting, (MAT) Analyst Meeting, (GD) Analyst Meeting

Fri. – BOJ Policy Meeting

BOTTOM LINE: I expect US stocks to finish the week modestly higher on buyout speculation, lower energy prices, lower long-term rates, bargain hunting, investment manager performance anxiety, better-than-expected I-banking earnings reports and short-covering. My trading indicators are giving mostly bullish signals and the Portfolio is 100% net long heading into the week.

Market Week in Review

S&P 500 1,507.67 -1.87%

Click here for What a Week by TheStreet.com.

Weekly Scoreboard*

Indices
S&P 500 1,507.67 -1.87%
DJIA 13,424.39 -1.78%
NASDAQ 2,573.54 -1.54%
Russell 2000 835.31 -2.12%
Wilshire 5000 15,192.57 -1.95%
Russell 1000 Growth 595.83 -1.84%
Russell 1000 Value 865.41 -2.11%
Morgan Stanley Consumer 734.93 -2.38%
Morgan Stanley Cyclical 1,070.67 -1.84%
Morgan Stanley Technology 612.07 -.83%
Transports 5,120.0 -3.87%
Utilities 491.32 -5.39%
MSCI Emerging Markets 125.93 -2.16%

Sentiment/Internals
NYSE Cumulative A/D Line 73,811 -6.21%
Bloomberg New Highs-Lows Index -47 -106.4%
Bloomberg Crude Oil % Bulls 30.0 unch.
CFTC Oil Large Speculative Longs 180,566 +.05%
Total Put/Call 1.11 +24.7%
NYSE Arms .35 -55.7%
Volatility(VIX) 14.84 +16.11%
ISE Sentiment 92.0 -22.7%
AAII % Bulls 40.59 +21.8%
AAII % Bears 42.57 -4.9%

Futures Spot Prices
Crude Oil 64.64 -.78%
Reformulated Gasoline 213.30 -5.46%
Natural Gas 7.67 -2.65%
Heating Oil 189.85 -1.21%
Gold 652.70 -3.90%
Base Metals 253.73 -5.33%
Copper 329.55 -4.26%

Economy
10-year US Treasury Yield 5.11% +16 basis points
4-Wk MA of Jobless Claims 307,300 +.9%
Average 30-year Mortgage Rate 6.53% +11 basis points
Weekly Mortgage Applications 625.30 -1.74%
Weekly Retail Sales ++2.20%
Nationwide Gas $3.13/gallon -.05/gallon
US Cooling Demand Next 7 Days 9.0% above normal
ECRI Weekly Leading Economic Index 142.90 +.28%
US Dollar Index 82.64 +.45%
CRB Index 307.51 -2.10%

Leading Sectors
Computer Hardware +1.44%
Disk Drives +1.20%
Internet +.66%
Networking +.13%
Telecom -.85%

Lagging Sectors
Road & Rail -4.42%
Gold -5.20%
Utilities -5.39%
Oil Tankers -5.66%
Coal -6.0%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Sharply Higher into Final Hour on Falling Energy Prices, Reversal Lower in Long-term Rates

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my I-Banking longs, Medical longs, Semi longs and Retail longs. I added to my (TLT) long, added to a couple of commodity shorts, covered my (IWM/QQQQ) hedges and covered some of my (EEM) short today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is lower, every sector is rising and volume is above average. A recent long addition, Akamai Technologies (AKAM), was upgraded today by Hambrecht, and the stock is rising 7.2%. I do not believe it is too late to buy this stock around current levels. The AAII percentage of bulls rose to 40.59% this week from 33.33% the prior week. This reading is still below average levels. The AAII percentage of bears fell to 42.57% this week from 44.79% the prior week. This reading is still at a high level. These pessimistic readings come even as the DJIA is just off one of its most prolific winning streaks in history and is fresh off a new all-time high six days ago. Moreover, the 10-week moving average of the percentage of bears is currently 40.5%, also a high level. The 10-week moving average of the percentage of bears peaked at 43.0% at the major bear-market low during 2002. Moreover, the 50-week moving average of the percentage of bears is currently 37.3%, a very high level seen during only two other periods since tracking began in the 1980s. Those periods were October 1990-July 1991 and March-May 2003, both of which were near major market bottoms. The extreme readings in the 50-week moving average of the percentage of bears, during those periods, peaked at 41.6% on Jan. 31, 1991, and 38.1% on April 10, 2003. We are still very close to eclipsing the peak in bearish sentiment during the 2000-03 market meltdown, which is astonishing considering the macro backdrop now and then. I expect US stocks to trade mixed-to-higher into the close from current levels on bargain hunting, lower long-term rates, lower energy prices and short-covering.

Today's Headlines

Bloomberg:
- Bill Gross, manager of the world’s largest bond fund, said on CNBC that this week’s slump in Treasuries may push mortgage rates higher and slow housing, prompting the Fed to lower interest rates.
- China, the world’s second-biggest energy consumer, approved a plan to develop renewable energy sources to reduce pollution and cut a reliance on oil and coal. China plans to spend $196 billion over the next 13 years to increase the use of renewable energy sources to account for 16% of total supply.
- Ethanol in Chicago fell to a four-month low amid concern that supply is outpacing demand.
- White sugar had its biggest weekly decline in six months in London as speculators sold contracts amid forecasts of a global surplus this year.
- Crude oil is falling more than $2/bbl. in NY on concern that rising global interest rates may lead to lower demand.
- Copper futures in NY tumbles the most in four months on expectations that rising borrowing costs in major economies will slow growth and limit demand for metals.
- Gold is falling over $13/oz. to a two-month low in NY on speculation that higher global interest rates will reduce demand for the precious metal.
- MasterCard Inc.(MA) said it won a court decision against rival Visa USA Inc. over a fee that prevented merchants from using its network to process debit transactions.
- Fidelity National Information Services(FIS) and Fiserv Inc.(FISV) each bid more than $1.5 billion for rival EFunds Corp.(EFD), which put itself up for sale last month.
- Shares of US Steel Corp.(X) soared the most since November after Interfax said ThyssenKrupp AG is in talks to buy the company.
- Shares of Limelight Networks(LLNW) jumped as much as 62% after its IPO, as investors bet demand will grow for its business delivering video for Web sites including ABC.com and Netflix.
- The US dollar surged to a more than two-month high versus the euro and rose against the yen as benchmark Treasury yields attracted international investors, boosting the currency’s appeal.
- Microsoft(MSFT) has won over 20-year-old gamers, who spend hours a day launching rockets and firing plasma guns on the company’s Xbox 360. Now it wants their moms.
- Hewlett-Packard(HPQ) plans to follow Dell Inc.(DELL) and Sony(SNE) by introducing a laptop that uses chips instead of a hard drive to store data.

Wall Street Journal:
- NYSE Euronext(NYX) the NYSE’s parent company, may remove the “NY” from its name if it enters into more global mergers, citing Deputy Chairman Marshall Carter.

NY Times:
- Senior Democrats in the US House of Representatives may subpoena the Justice Department over documents related to the domestic terrorism surveillance program run by the National Security Agency.
- All Democrats at a debate in New Hampshire earlier this week said they would support repealing the so-called don’t ask-don’t tell policy, regarding gays in the military, first implemented under former Democratic President Bill Clinton.
- Hedge funds are 87% correlated to unhedged emerging market equities, according to a recent analysis by Bridgewater Associates.

Washington Post:
- Samuel Berger, former President Bill Clinton’s national security adviser, was disbarred from the practice of law by the DC Court of Appeals. Berger yesterday agreed to relinquish his law license rather than submit to an investigation by the DC Bar into his removal of classified documents from the National Archives. Berger pleaded guilty in April 2005 to stealing classified material without authorization. The material was related to warnings received the by Clinton administration about possible terrorist activity.

Business Week:
- Apple’s(AAPL) iPhone may generate $10 billion in annual sales within a few years of its introduction.

Financial Times:
- Three quarters of US CFOs who responded to a study by Duke University and CFO magazine say Sarbanes-Oxley corporate-governance rules should be repealed or reformed, because the costs of implementing them have exceeded the benefits.
- The growth of biofuels over the next 10 years won’t threaten oil production by OPEC, citing IEA stats.

Market News International:
- China’s inflation rate rose 3.6%, a more than two-year high last month, citing people familiar with the data, which has yet to be released.

Trade Deficit Shrinks Most in 6 Months

- The Trade Deficit for April shrank to -$58.5 billion versus estimates of -$63.5 billion and a downwardly revised -$62.4 billion in March.

BOTTOM LINE: The US trade deficit narrowed more than forecast in April as exports rose to a record and imports dropped, Bloomberg reported. The 6.2% decline in the trade gap was the most in six months. In April, exports rose .2% to a record $129.5 billion, as sales of foods, plastics and consumer goods such as jewelry rose. I continue to believe the trade deficit will only improve mildly over the intermediate-term as a decline in commodity prices more than offsets stronger relative US growth.