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[TTHQ Staff]

Good Evening; Quaking in their boots . . . . might be the pedestrian expectation in the wake of CPI data that finally revealed activity we contended percolated just beneath the economic structure for at least the past year. If one suspected the Fed was about to go on a rate-hiking spree, maybe fear of a repeat of '94 comes to mind; but the Fed's unlikely to enter a binge mode (more). To the extent commodity prices are driven higher by virtue of Chinese demand, increasing U.S. rates in the U.S. do nothing to deter risks. To the extent American companies have slight 'pricing power', that's really a plus not a worrisome point for earnings; coming on top of rising productivity for several years now. The combination can imply the U.S. is merely continuing to 'cook' in stellar ways that are not developing into 'stagflation' (more), and in that case, investors who are automatically nervous about T-Bonds becoming competitive vehicles to equities may be missing a real important historical point. That’s the reality that slightly higher rates in the midst of an upward or growing economic cycle get short-term reactions, but do not bust the primary uptrend. In many cases the same pundits and economists quaking about the higher CPI (built up pressures over time that finally reveal themselves, but in our view were growing a bit for over a year, as we've frequently discussed with respect to goods and services, as well as housing and other costs that defy the small-ticket focus on goods that are commonly imported, like most lower-end consumer electronics and at least a majority of the garment industry). When (said) nonsense, we don't mean to imply unimportant, we just mean to say those are not heavier cost items for middle or higher American income families; though where it matters to the lower-end, yes, the cost pressures are comparatively low. To homeowners, or anyone concerned with at least the rising costs of drugs and medical care, or indirectly the growing taxes (that of course have increased particularly as property values have, affecting citizens in a way they cannot control, and have typically had to accept in most states of the Union) almost across the board, well, there has been a pretty steady perceptible price rise. In our view this nascent inflation is (and has been forecast to be) preferable to what a few economists (sometimes the same ones now worried about inflation) foresaw; real 'deflation'. Our view was that the disinflationary trend of the preceding few years was at an end last year, and that the spread between high-yields and Treasuries warned of the rising risk for those chasing yield on an investment basis. We expected that the Fed and National policy was to 'reflate' this economy, come what may. It happened of course as we now know, so was decidedly the lesser-of-evils for the Nation's psyche. And it is ongoing. We repeat; modest rate increases are not an impediment to borrow for normal business (or even housing) purposes, and shouldn't break the economy in an overall sense. Slightly higher rates contribute to a stable and rising Dollar, which of course presses the multinational stocks slightly, but that's understandable. It's also why domestic centric companies, including many techs in the Semiconductor (SOX) and Nasdaq 100 (NDX) sectors, who have real growth, even if largely international in nature, are doing better than the Senior Averages per se (some are in those as well). There is no doubt that this is a 'testy' spot in the stock market; we noted that prior to today. There is also little doubt but that the longer-term technical work (intermediate or beyond) has no need to work to oversold, as the hourly and daily already has (for sure that's because in a primary uptrend, especially where we already experienced a full intermediate correction from January to March as assessed, nothing more than a test or partial retracement of the forecast late-March/early-April run-up was needed in a sense, with respect to normal pause-to-refresh behavior most recently). Hence it's arguable either way (and is not a 'lock'), but in our view the rebound in the S&P right now is coming from about where it needs to, and there is little if anything to suggest an aborting of the primary trend. No, the largest fears aren't inflation or economic matters in a direct sense. Yes, there are concerns, but they continue to relate to the war and terror matter primarily, and if we must bring up another issue, let's include (in the catastrophic category), a larger-than-commonly experienced earthquake somewhere on the West Coast of the U.S or in Mexico. Are we projecting that? Of course not; though any of us with long years of California living are wary of temblors, accepting them as part of going about life for the most part; but also aware than the 25-30 year 'framework' for expecting a major quake has basically maxed-out from the time it was outlined by seismologists (more). It is notable that there is a certain level of alarm being contemplated in Palm Springs this week, according to local press there, and that most of the work and testing tends to concentrate in area around the San Andreas fault from Palmdale to the Salton Sea and generally the southern-end of the fault line. UCLA, UCI (Irvine) and Univ. Oregon professors are all talking about increasing strain and stresses, so the generally heard idea is that something's up (or about to be in the months ahead). We'll hear more on this tomorrow, when one forecaster is said to likely come close to a specific forecast. Unfortunately we've got to concur that makes sense, just based on everything heard these past 30 years. From market views, an old adage 'hurricanes and earthquakes' are good for markets may hold true, though the Country (and California in particular) doesn't need the challenges or costs right now; though there's no flexibility about this issue. It is the case that (more discussion, while advocating preparation, not panic). If anything, the point of this is to again denote that absent serious catastrophes or an attack, the U.S. economic backdrop isn't bad (in fact it's pretty darn good considering the challenges we all face, regardless of political persuasions), and that extraneous or unexpected events continue to remain a primary concern ahead; not light inflation. At this point short-term work (technical analysis reserved for ingerletter.com readers). MarketCasts (intraday audio-emails), after a choppy day (slight rebound gains and a moderate short-side theoretical guideline gain as well) in this market, was actually on the long-side of the ledger at the start of the final hour from the 1122 June S&P area, by intent (as affirmed on the final hour comment), because we were contemplating a test (slight penetration, but no volume or participation expansion) of the prior hour's low, so it worked out really well, and was retained virtually until the session's close. It was certainly a 'taxing' session, but the bears may find themselves assessed if the market rallies first in the morning, and then settles-back moderately before rallying anew. Ideally that's how Thursday would go (oversimplification, but the general idea). (More).. not a sharp oversold weekly or daily-basis condition, nor does it need to be. But there can be a negative argument that the deflections from the recent highs were failures to assault into new territory. We suspected barring expansion of war or new attacks, a period of deflections from the old highs would prevail last week (and into about now, with realization that the news simply stymied tries at rebounds), and now we get to a point that we likely washout hourly and turn-up (in a manner discussed). But it's not a lock, and remains very sensitive to news. One can argue it's sensitive to earnings as well, but that's not really what this market is about. Seasonally sequential tech results are usually no more impressive than what already is generally reported. Bits & Bytes… mentions Intel (INTC) and Texas Instruments (TXN) and updates a speculative U.S. Home & Garden (USHG) the share-vehicle for Ionatron until name as well as symbol changed (scheduled for vote April 29th). It's been on the defensive since an excessive spike last week took it to more than a triple the first mention here; almost just double points thought logical to retrieve any speculative (original money wagered) bets on shares any players made; of course too soon a time to take partial profits as it turned-out (if one did that), and just a bit more anxiety if one stayed with it (firming relatively to the quick profit-taking after post-Barron's) foreshadowing (more). An ingerletter.com member called our attention to an over-year-old BBC story (in Jan 2003) about the USAF working on a 'lightning weapon', wondering if that might have at the time been an early glimmer about work with Ionatron though nothing was said. (We wonder too. Formal 'research' agreements weren't announced until a year later. While speculative, we'll follow this up as it approach name and symbol change and a better glimmer at financials as will be reported upon in the normal course of events.) In summary . . events continue reminding us of risks Allied fighting forces face, given continued attacks on free peoples, by elements including assorted terrorist or groups. An awakening of Europe to terror threats is upon us we had speculated, and news from 'the front' continues to be enrapturing and difficult to contend with. Increasingly we're interested to hear what this Administration will do to further secure our borders. McClellan Oscillator finds the NY 'Mac' reading at -250 now; at -14 on NASDAQ. No structural variance from last month's belief the subsequent declines (after rallies into early April) would take the edge of advances; consolidating gains before new upside. If there's a fly in all this, it's not earnings or markets, but realization that the terror war continues expanding, not contracting, with more tough challenges ahead, speculated about on occasion; plus apparent increased earthquake risk. Overall the threat matrix remains quite high, pretty much worldwide. God be with our troops in these battles. Mid-evening S&P's are up about 80. Got the ideal down-bounce-dip-up Wednesday, and would like to see up-down-up-dip-up on Thursday, if overall conditions permit. Have a pleasant evening, Gene Gene Inger, Publisher