Wednesday, August 13, 2008

Bull Radar

Style Outperformer:

Small-cap Growth (+.19%)

Sector Outperformers:

Oil Service (+2.30%), Energy (+1.98%) and Steel (+1.49

Stocks Rising on Unusual Volume:

ALJ, PAAS, PHI, RNST, MHGC, CREE, NVDA, SAFT, EURX, ULTR, AFAM, PLCM, APEI, ARTC, FUQI, AMAT, OMRI, SSRI, FWLT, ATPG, VNUS, AUXL, DRYS, LDG, CEG and PDO

Stocks With Unusual Call Option Activity:

1) JEF 2) DE 3) ARO 4) RYL 5) CREE

Links of Interest

Market Snapshot Commentary
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Sector Performance
WSJ Data Center
Top 20 Biz Stories
IBD Breaking News
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In Play
Exchange Volume vs. Average

NYSE Unusual Volume

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Tuesday, August 12, 2008

Wednesday Watch

Late-Night Headlines
Bloomberg:
- French President Nicolas Sarkozy said Georgia agreed to a modified plan to end fighting in the breakaway region of South Ossetia after the former Soviet republic's military was routed by Russia in a five-day war.
- CVS Caremark Corp.(CVS), the second- biggest U.S. drugstore chain, said it would buy Longs Drug Stores Corp. for $2.7 billion to expand its reach in the western U.S., closing the gap with larger Walgreen Co. Longs Drug has 521 locations in California, Hawaii, Nevada and Arizona, giving CVS about 6,800 stores, in line with Walgreen, the Deerfield, Illinois-based chain with 6,849.
- U.S. stocks pulled ahead of Brazil, Russia, India and China this week for the first time in 2008, spurred by the Federal Reserve's efforts to cut borrowing costs even as the biggest developing countries are raising theirs. the S&P 500's 12 percent loss this year leaves it ahead of Brazil's Bovepsa Index, whose drop through last week had been the smallest of the five countries. The U.S. equity benchmark claimed the lead after banks rallied 22 percent and the steepest monthly retreat in commodity prices sent the Bovespa into a bear market. ``You have the money on the move,'' said Michael Shaoul, chief executive officer of Oscar Gruss & Son Inc., a New York- based brokerage. ``So many people had cut their allocations to the United States that there was nowhere else to go. It's like a fire in an empty theater. If there's no audience, you're not going to find a stampede to the exit.'' The Bombay Stock Exchange's Sensitive Index dropped 25 percent in 2008, China's CSI 300 Index decreased 54 percent and Russia's benchmark RTS Index fell 21 percent. Brazil's Bovespa has lost 15 percent this year.
- China's stocks slumped for a fifth day, with turnover plunging to a 21-month low, on concern the bear market will deepen and as investors focused on the nation's Olympic gold medal tally in Beijing. The benchmark CSI 300 Index has tumbled 12 percent since the Games started on Aug. 8 in Beijing, to the lowest in 18 months. The value of stocks traded on the two primary exchanges yesterday fell 79 percent below the levels when the measure rose to a record on Oct. 16.
- Applied Materials Inc.(AMAT), the largest maker of chip-production machinery, forecast a rebound in new orders, signaling that a slump spurred by memory-chip companies may be nearing an end. The shares rose 4.5 percent in after-hours trading.
- Nvidia Corp.(NVDA), the second-largest maker of computer-graphics chips, posted its first quarterly loss in six years. The shares jumped 9.3% in late trading after the company said it boosted a share buyback program by $1 billion.

- Gold demand fell 19 percent in the second quarter as near-record prices and wide fluctuations in costs discouraged purchases from jewelers, the world's biggest users, the producer-funded World Gold Council said. Purchases for jewelry fell 24 percent and sales to India, the world's largest gold consumer and jewelry buyer, plunged 45 percent, the group said. India accounted for 27 percent of total gold demand in 2007. Demand in the Middle East dropped 12 percent, the Gold Council said. Investment in exchange-traded funds rose by 4 metric tons compared with a redemption of 2.6 metric tons a year earlier, the industry group said. It was still a 94 percent decline from the first quarter, when so-called ETFs attracted 72.7 tons of investment. Gold supply rose 1 percent from 797 tons to 802 tons, the council said. Central bank sales fell 43 percent to 88 tons and gold producers bought back 131 tons to eliminate hedge positions.
- Copper fell to a six-month low on speculation that a strengthening dollar will erode the appeal of metals as an alternative investment and as slowing industrial demand boosts stockpiles. The dollar gained 3.6 percent against the euro last week while copper slid 6.9 percent. Stockpiles in warehouses monitored by the London Metal Exchange rose to the highest since Feb. 14, jumping 39 percent from a one-year low on May 7. ``Copper stocks are up slightly today, and now seem to be pulling away from the 150,000-ton mark,'' Edward Meir, an analyst at MF Global Ltd. in Darien, Connecticut, said today in a report. ``Charts still look weak, and we see further downside, as is the case with most of the other metals.''
- Platinum fell to the lowest since December and palladium plummeted on speculation that the dollar will climb higher against the euro, eroding demand for metals as an alternative investment. ``The dollar continues to be the main driver of the markets,'' Miguel Perez-Santalla, a sales vice president at Heraeus Precious Metals Management in New York, said today in a note. Some currency traders ``are still insisting that the dollar should correct to as low as $1.44 per euro, so if this will come to fruition, it would no doubt drive the entire precious-metals complex significantly lower.'' If there is ``better news for the dollar, watch out: That knife will be dropping quickly.''
- Japan's economy contracted last quarter, bringing the country to the brink of its first recession in six years, as exports fell and consumers spent less. Gross domestic product shrank an annualized 2.4 percent in the three months ended June 30 after expanding a revised 3.2 percent in the first quarter, the Cabinet Office said today in Tokyo.

- Apollo Global Management LLC, the private-equity firm run by Leon Black and Joshua Harris, had a net loss of $96.4 million in the quarter ended March 31 as it moves forward with a listing on the New York Stock Exchange.
- Russia's RTS stock index is turning into the world's worst performer this quarter as tumbling oil, a war in Georgia and the probe of a steel company remind investors owning shares in the former Communist nation can be perilous. The RTS fell 22 percent since June 30, even after President Dmitry Medvedev halted the invasion of Georgia yesterday, sending the index up 3.5 percent. The retreat this quarter is the steepest among indexes in the world's 20 biggest stock markets, according to data compiled by Bloomberg.

Wall Street Journal:
- Alarm over the price of oil has sparked controversy over the role of "speculators." But it's an unusual and damaging price spike this year in a different commodity, cotton, that has market watchers scratching their heads.

MarketWatch.com:
- Many borrowers are starting to pay less interest and being given more time to pay their mortgages.

CNBC.com:
- Home Prices Start to Show Signs of a Turnaround. "Anybody who tells you they know when the housing market will bottom is delusional, but anybody who denies there are some positives out there that could make the housing market bottom fairly soon is equally delusional," said Karl Case, the co-developer of a widely watched gauge of the housing industry and an economics professor at Wellesley College in Massachusetts. Residential construction as a percentage of real gross domestic product is below the historical bottom, Case noted. Case, whose research has focused on real estate markets and prices for over 20 years, said certain regions of the country now look similar to when they bottomed in past down cycles.
- What Financial Stocks Are Shorted the Most?

NY Times:
- Gains Seen in Curbing Short Sales.

BusinessWeek.com:
- Inflation Fears Batter Chinese Stocks. With the Shanghai stock index tumbling 60% since last October, Chinese investors are desperate to find a silver lining. The U.S. economic slump, combined with Chinese government measures aimed at popping an equities bubble and containing runaway growth, have taken their toll on many of China's most prominent blue chips.

Fox Business Network:
- The number of foreclosures in the US is growing and policy makers are taking steps to reduce the damage to the economy, Federal Reserve Bank of Boston President Eric Rosengren said. “Looking for ways to be able to address this with large numbers of people is exactly what we’re doing.”

IBD:
- Varian Medical(VAR): New Products Drive Growth For Medical Imaging.

USA Today.com:
- US power grid in better shape 5 years after blackout.

Reuters:
- UN Peacekeepers may have committed sex abuse in Congo.
- House Republican Leader John Boehner on Tuesday urged House Speaker Nancy Pelosi to call lawmakers back into session to pass a bill expanding drilling in federal waters, now that she was willing to permit a vote on such a measure.Reversing her position, Pelosi said she was willing to schedule a vote in the House of Representatives on legislation to expand offshore drilling, if the bill addressed other energy issues, such as extending tax credits for solar and wind energy and releasing oil from the Strategic Petroleum Reserve.
- Fed still worried about inflation despite oil retreat.
- Best Buy Co Inc (BBY) will be the first national retailer to sell Apple Inc's (AAPL) iPhone in the United States in a partnership that could help drive sales of a device expected to be one of the hottest gadgets this holiday season
.

Financial Times:
- OPEC last month pushed its production to the highest level in its 48-year history even as demand was slipping in the US and Europe, the International Energy Agency (IEA) said on Tuesday. Opec's output in July was about 1m b/d higher than in April and significantly higher than the 31.1m b/d in the same month of last year. The IEA cut its global oil demand growth to 790,000 barrels a day, down from July's estimate of 890,000 b/d. Some of the demand in rich countries will be lost for ever, it noted, saying: "Even if retail prices ease, it seems unlikely that motorists who have purchased smaller cars will revert to gas-guzzling vehicles."

Daily Times:
- Pakistan’s President Pervez Musharraf may announce his decision to resign tomorrow.

Late Buy/Sell Recommendations
Citigroup:

- Reiterated Buy on (GKSR), target $42.
- Rated (PHM) Buy, target $16.
- Rated (TOL) Buy, target $27.

Bank of America:
- Rated (COV) Buy, target $59.
- Rated (BEAT) Buy, target $43.
- Rated (ABMD) Buy, target $30.

Night Trading
Asian Indices are -2.0% to -.25% on average.
S&P 500 futures -.04%.
NASDAQ 100 futures +.06%.

Morning Preview
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Earnings of Note
Company/EPS Estimate
- (DE)/1.37
- (M)/.19
- (LIZ)/.00
- (DPS)/.55
- (IPI)/.33
- (NTAP)/.22

Upcoming Splits
- (TWI) 5-for-4

Economic Releases
8:30 am EST

- The Import Price Index for July is estimated to rise 1.0% versus a 2.6% increase in June.
- Advance Retail Sales for July are estimated to fall .1% versus a .1% increase in June.
- Retail Sales Less Autos for July are estimated to rise .5% versus a .8% increase in June.

10:00 am EST
- Business Inventories for June are estimated to rise .5% versus a .3% gain in May.

Other Potential Market Movers
- The weekly MBA mortgage applications report, EnerCom Oil & Gas Conference, Jeffries Industrials Summit, CSFB Electrical Equipment/Machinery Conference, JPMorgan Auto Conference and the CanaccordAdamas Growth Conference could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by commodity and insurance shares in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

Stocks Finish Lower, Weighed Down by Financial, Rail, Construction and Homebuilding Shares

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In Play

Stocks Lower into Final Hour on Financial Sector Pessimism, Global Growth Worries and Profit-Taking

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Computer longs, Biotech longs, Medical longs and Emerging Market shorts. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is negative as the advance/decline line is lower, most sectors are declining and volume is about average. Investor anxiety is above average. Today’s overall market action is mildly bearish. The VIX is rising 5.3% and is still above-average at 21.2. The ISE Sentiment Index is low at 105.0 and the total put/call is above average at 1.05. Finally, the NYSE Arms has been running around average most of the day and is currently .95. The Euro Financial Sector Credit Default Swap Index is falling -1.44% today to 78.69 basis points. This index is up from a low of 52.66 on May 5th, but down from 129.46 basis points on March 20th. The North American Investment Grade Credit Default Swap Index is rising .48% today to 129.68 basis points. The TED spread is falling another -4.12% to .95. The 10-year TIPS spread, a good gauge of inflation expectations, is falling another 2 basis points to 2.14%, which is the lowest since October 8, 2003 and down 49 basis points in less than six weeks. Gold is falling another $7/oz. today, despite slight dollar weakness, and is down $213/oz. from its $1,033.90 high on March 17. The CRB RIND Index is falling convincingly below its 200-day moving-average for the first time since its bull move began in 2000. Many CNBC pundits are now calling for a bottom in oil. I think the commodity trades very poorly given recent potential positive catalysts. I’ll be very surprised if oil doesn’t test the psychologically important $100/bbl. level and somewhat surprised if it doesn’t finish the year below that level. Given the 5.4% decline in the (XLF), the Nasdaq is holding up very well. As well, airline, biotech, disk drive, computer hardware, software, paper, oil service, energy and defense stocks are all higher on the day. Growth stocks are again substantially outperforming value stocks. I still think the XLF has seen its low, but financials will not likely display sustained market leadership for quite some time. Nikkei futures indicate a -63 open in Japan and DAX futures indicate an +10 open in Germany tomorrow. I expect US stocks to trade mixed-to-lower into the close from current levels on financial sector pessimism, global growth concerns and profit-taking.

Today's Headlines

Bloomberg:
- Russia promised to pull back troops from Georgia under a European Union-mediated peace plan after President Dmitry Medvedev ordered a halt to a five-day offensive in the former Soviet neighbor.
-
New York Times Co.(NYT) faces increased financial pressure to cut its dividend as credit quality deteriorates amid record advertising declines. Credit-default swaps used to speculate on New York Times' creditworthiness or to hedge against losses are trading as if the company already was rated junk, according to data from Moody's credit strategy group. The contracts, costing $397,000 a year to protect $10 million in debt for five years, trade as if the company had a Ba3 rating from Moody's, three levels below its actual Baa3 rating, the data show.
- Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-risk, high-yield credit ratings decreased 5 basis points to 547, according to JPMorgan Chase & Co. prices at 7:50 a.m. in London. Credit-default swaps on the Markit CDX North America Investment Grade index, a benchmark gauge of credit risk linked to the bonds of 125 companies in the U.S. and Canada, fell 1 basis point to 130.5 basis points at the close in New York, according to Lehman Brothers Holdings Inc.
- According to Morgan Stanley(MS), there are clear signs of a slowdown in India over the last few months. A number of indicators show that investments growth has decelerated over the last six months. Capital goods output growth has slowed to 6.8% during the three months ending June 2008, from the peak of 24.2% for the three months ending October 2007. Similarly, the trend for aggregate corporate fund raising has also suffered over the last six months. We believe the combined impact of slowing domestic consumption, higher domestic cost of capital and reduced capital access from international capital markets will result in further major slowdown in investment cycle over the next 12 months. Morgan Stanley does not see a recovery until 2010.
- The UK pound slid to its lowest level in almost 21 months against the dollar after an industry report showed U.K. house prices fell in July, adding to evidence the economy is slowing.
- Dennis Garman, economist and editor of the Gartman Letter, calls the US dollar a ‘safe have’ and says to avoid gold. (video)
- The US dollar headed for a sixth day of gains against the euro, the longest rally since October 2006, on speculation tumbling commodity prices will give a boost to the world's largest economy. The greenback also rose against the Australian and New Zealand currencies as crude oil traded near a 14-week low, copper fell to the weakest in six months and gold dropped to the cheapest since December.
- Posco, Asia's biggest maker of stainless steel, and rival Jindal Stainless Ltd. cut prices of the rust-resistant metal after the cost of nickel declined. Posco cut prices by as much as 10 percent from Aug. 18, the first reduction this year, Ko Min Jin, a spokeswoman for the Pohang, South Korea-based company, said today. Jindal, India's largest producer, dropped prices by more than 5 percent. Nickel has slumped 32 percent this year as rising supplies outpace demand from steelmakers. World stainless-steel demand probably won't recover until early 2009 as soaring energy prices and a property slump in major economies curb consumption, MEPS (International) Ltd. said July 31.

- Corn declined as the U.S. crop's condition improved last week after rains fell in parts of the Midwest, improving production prospects. Soybeans and wheat also dropped.
- Crude oil fell $.81/bbl., despite tensions between Russia and Georgia, as the US dollar traded near a six-month high. China, the second-largest oil consumer, said yesterday crude oil imports fell 7% in July.
- Copper fell 20 percent below last month's all-time high in London trading, entering a bear market, on speculation a worsening global growth outlook will exacerbate falling demand. Zinc dropped to a two-year low. ``It's a bear market if you think the copper cycle is really over,'' said Michael Widmer, an analyst at Lehman Brothers Holdings Ltd. in London, who forecasts copper to drop to $7,000 in August. ``The wind is probably out of the base metals.''
- Sales of New Zealand houses fell 33 percent from a year earlier in July as record-high interest rates curtailed demand for property.

Wall Street Journal:
- Signs are emerging that Americans are cutting down on their appetite for oil, driving fewer miles, buying more fuel efficient vehicles and modifying their power consumption habits. US motorists drove 966 million fewer miles in May than they did a year earlier, a 3.7% decline, citing the US Transportation Dept. US consumers are buying fewer sport-utility vehicles and more energy-saving washing machines as they reduce consumption. Mass-transit usage rose 3.4% in the first quarter, citing the American Public Transportation Assoc. Procter & Gamble(PG) is filling smaller bottles with more-powerful laundry detergent.

- Wal-Mart’s(WMT) Three-Year Turnaround Plan May Be Working.

NY Times:
- Is Goldman Sachs(GS) Losing its Halo? Two analysts lowered their ratings Tuesday on Goldman Sachs. In Tuesday’s report, Mr. Mayo said new evidence of economic slowdowns in China and Europe may be bad news for Goldman, which gets much of its revenue from overseas.
- NYC may photo the license plates of vehicles entering Manhattan and scan them for radioactivity to strengthen security against a possible terrorist attack, citing a Police Dept. proposal.

NY Post:
- The SEC is working furiously to unveil a proposal next month that would permanently tighten existing rules for short selling.

Washington Post:
- European Unity Under Pressure as Economies Slow.
- Antiwar activist Cindy Sheehan has qualified to run as an independent against House Speaker Nancy Pelosi in November’s general election. She says Pelosi has failed the country by refusing to cut off funding for the war after Democrats reclaimed the majority in the 2006 election.

TmoNews:
- Presale of Google’s(GOOG) Android phone will begin on September 17.

Reuters:
- Intel’s(INTC) CFO said he is comfortable with Q3 revenue forecast of $10 billion-$10.6 billion versus consensus of $10.3 billion. He said the Atom processor is off to a very strong start and that it is far exceeding estimates.

Market News International:
- The German economy may have contracted 1% in the second quarter, Finance Minister Peer Steinbrueck said.

Il Messaggero:
- European Central Bank executive board member Lorenzo Bini Smaghi said the economy may show “extended weakness” in the next few quarters, citing an interview.

Le Phare:
- The Democratic Republic of Congo western basin contains about 4 billion barrels of crude oil reserves and millions of cubic meters of natural gas, citing Perenco SA. Oil-industry experts are meeting in the capital to discuss ways of increasing the central African nation’s oil production.

Stuttgarter Zeitung:
- European Central Bank council member Axel Weber said the bank stressed after its last policy meeting that fighting inflation remains its “highest priority.” Weber said the inflation outlook is poor and the ECB must prevent the higher cost of living from becoming a yardstick in wage negotiations. Weber, who heads the German Bundesbank, said he doesn’t expect the euro-area inflation rate to fall below the bank’s 2% limit “this year or next.”

Caijing:
- China’s top food production quality director committed suicide by jumping off a building a day after he met with Beijing prosecutors on alleged financial corruption

Haaretz:
- Palestinian President Mahmoud Abbas on Tuesday rejected an Israeli peace proposal, which included withdrawal from 93 percent of the West Bank, because it does not provide for a contiguous Palestinian state with Jerusalem as its capital. Nabil Abu Rdainah, Abbas's spokesman, told the official Palestinian news agency WAFA that Prime Minister Ehud Olmert's plan showed a "lack of seriousness." Under the proposal, Israel would return to the Palestinians 93 percent of the West Bank, plus all of the Gaza Strip, when the Palestinian Authority regains control over the Gaza Strip, which the militant group Hamas seized from forces loyal to Abbas in June 2006.