Monday, March 22, 2004

Monday Close

S&P 500 1,095.40 -1.30%
NASDAQ 1,909.90 -1.58%

Leading Sectors
Restaurants +.11%
Defense -.31%
Foods -.68%

Lagging Sectors
Papers -2.72%
Networking -3.20%
Airlines -3.21%

Crude Oil 37.15 +.27%
Natural Gas 5.55 +.07%
Gold 417.20 -.10%
Base Metals 112.31 -.67%
U.S. Dollar 87.81 -.36%
10-Yr. Long-Bond Yield 3.71% -1.55%
VIX 21.58 +12.69%
Put/Call .96 -5.88%
NYSE Arms 3.35 +65.02%

After-hours Movers
PLMO +11.3% after significantly beating 3Q estimates and raising 4Q guidance substantially.
PSRC +5.2% on PLMO earnings report.
SKIL +5.1% on better-than-expected 4Q earnings.

Goldman Sachs reiterated Outperform on AL, sees 31% upside from current levels. GS reiterated Outperform on CCL. Merrill Lynch raised Hong Kong to Overweight and cut Taiwan to Marketweight.

After-hours News
U.S. stocks fell again today as geopolitical concerns weighed heavily on airline and technology shares. Goldman Sachs says pension reform initiatives will have no major impact on equity and fixed income markets. Morgan Stanley and Credit Suisse First Boston Private Equity are the frontrunners to buy eight power plants in the southeastern U.S. from Duke Energy, Power Finance and Risk said. Taiwanese stocks slumped in the U.S., pointing to further declines Tuesday in Taipei, Bloomberg reported.

BOTTOM LINE: The Portfolio was down today as its 100% net long market exposure left it exposed to today's broad-based sell-off. I lowered market exposure to 25% net long in the afternoon. While I think we are getting very close to the bottom of this correction, I am not going to fight the tape. The SOX broke its 200-day moving average, but not convincingly. The NYSE Arms Index reached levels not seen since the bottom last March. However, the Put/Call ratio and VIX, which also spiked today, are still well off levels normally associated with bottoms. Finally, breadth was very bad today on average volume. Thus, I will keep the Portfolio close to market neutral, without adding new shorts, as I believe the major U.S. indices very oversold short-term.

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