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[TTHQ Staff]

Gene Inger's Daily Briefing. . . . for Thursday, June 17, 2004: Good Evening; Suspended animation . . . best describes the current tone of most big-cap markets, as the majority of major and Senior Averages, including Dow Industrials, are soft. It is not particularly inspiring because this is a Triple Witching Expiration week, but also begs the question of where we are relative to resolving arguments about bull/bear considerations. Poised on the precipice of technical failure, if upside efforts reversed right here; but on the other hand many stocks, including techs, have been defensive for some time, suggesting that all they have to do is washout and have a moderate rebound, concurrent with stability in other areas, and you get something different (in terms of structure, as explained in more detail in our remarks on ingerletter.com). So in a sense this daily market resembles that strangest of creatures; the bullbear. It is incorrect to presume that everyone is worried about the Fed or higher interest rate trends (they may be, but unjustified due to what already went under the bridge, plus T-Bond behavior and persisting evidence that the bloom came off the rose as far as factors contributing to higher rates just enough to let things be ameliorated a bit). At the same time the Dollar has been quite firm, which is seasonally unusual but in our view reflects a pattern underway for many weeks, to the chagrin of bear Greenback players, trying to defeat the American currency. (more). A main concern might be that with persisting softness evident in Nasdaq 100 (NDX) and Semiconductor (SOX) stocks, as remain mostly defensive, the market actually is much weaker when one excludes Oils (XOI) and relatively stable (more) Banks (BKX) from any consideration. In a sense it's symptomatic of the times this summer; tension and reticence to do lots of anything. We understand and have expected such vagaries of decisive movement for some time (to wit; a 'summer of discontent' moniker suspected for months). For sure, if the market is able to breakout to the upside sooner rather than later, there will be a rush to both cover and enter the long side, because many skeptics out there, or lots of technically-savvy guys and gals will realize at least somewhat the implications of a market moving above near-term resistance that is also sort of weekly resistance. Daily action . . . absolutely recognizes this might fail, or might for instance push-up a bit so as to 'effect' a breakout, but then stall right after Expiration, amidst tensions. At the same time we'll be headed into a solid earnings season (despite protestations of many), with some new rollouts of chips and the like providing an explanation for the acknowledged inventory build in certain products (but not across product lines, which tends to reinforce the view that these are related to generational product shifts, not to a slowing of overall demand for tech-heavy products or consumer electronics overall) at this time. This is slightly a dicey argument because seasonality normally sees new product rollouts and transitional shifts that can actually continue for a couple months, and may well be the case here (more). Consumer/corporate awareness will minimize sales of older inventory, especially when '05 rollouts are unusually early, as they are. In any event, we do not know that the market will somehow throw care to the wind or just rocket ahead; in fact we don't particularly expect that. However, we also respect the old adage; don't sell a dull market short, and we wouldn't here. Overall concepts that the market (based on the Senior Averages) bottomed in mid-May, and gradually over time advanced, has not been denied by anything the market's done. It can be argued the market has actually given a decent accounting of itself amidst pressures that are of an exogenous nature, considering the fears of attack (or other issues) that have deterred much casual market interest. Surely we hear investors 'say' they aren't interested and will be buyers in the event there's a heavy hit to the market, such as in the wake of an attack; but would they? (Discussions about 'worry wall' psychology.) More importantly, even though nobody wants high inflation forward, overall financial structures can and do adopt to such changes if they are essentially gradual in nature. Because of fears about mortgage-backed financings and so on, there's an additional incentive for the Fed not to be too draconian in active measures they'll take, lest they create more problems than they resolve. That's part of why we've felt, for a long time, that the 'reflation' could lead to some inflation, but not a big deflation (less of evils). MarketCasts (intraday audio-emails) maintained a bias for a gradual comeback from the initial morning dip (via a long September S&P effort from 1131), which was the best one could do Wednesday (slightly profitable by a couple hundred points) in this restrained environment, but does not change the meanings of overall patterns. How the equity equivocation plays-out has a number of ramifications from here (more). It's nevertheless a continuing tough period, though again, we also don't think June 30 is a particularly pivotal day for the markets. Actually we think the current decline has more daily-basis import, as will conceivable efforts at pulling back after (reserved for readers), whether or not they are surmounted at first blush. That we are not cutting-and-running in Iraq; that taxes were not increased in a wartime along with higher oil prices (imagine that combination), or that at a modestly slow growth in price levels is ongoing, is (though many don't like it) a preferable condition to economic alternatives. Bits & Bytes… remarks on Intel (INTC), Texas Instruments (TXN), Microsoft (MSFT), Motorola (MOT), little Ionatron (IOTN) and of small-cap Corvis (CORV). In summary . . events continue reminding us of risks Allied fighting forces face, given continued attacks on free peoples, by elements including assorted terrorist groups. A world awakening to terror threats grows, as domestic observations absorb us, and as some investors fret inflation/reflation, have trading use conjuring fearful alternatives. McClellan Oscillator finds the NY 'Mac' stable, near +68 now; neutral at a modest +15 on NASDAQ. In normal (non-wartime) settings, conditions would create potential for yet-another new recovery high ahead, and higher important highs in the long run. We suspect that may occur, though there are many variables to deal with now, most explicitly growing terror threats or even infiltrations to potentially contend with; which don't deny the eventual prospect, but sure delay it, just as would be logical. The idea was that we dropped a bit, and will probably flirt with new upside on the shorter-run, but clearly can't be foreseen to be more than rebound or Expiration-related (as yet). As to flies in the bullish alternative continuing, in our view, it's not earnings or markets as such, but realization terror wars continues expanding, not contracting, with difficult challenges ahead, speculated about on occasion, and as Saudi attacks showed once more. Plus ongoing increased California earthquake risk. Last night's 5.2 shaker off of San Diego (by around 44 miles) was followed by minor aftershocks today; plus a series of small tremors duely noted in California, and even a Texas/Oklahoma one. Overall the threat matrix perspectives remain quite high, pretty much worldwide. God be with our troops in continuing struggles; as well citizens who continue at risk while traveling on pleasure or business. S&P mid-evening activity is up about 150 or so. At this point we suspect an early decline, bonce, dip; then another upside try Thursday. Have a pleasant evening, Gene Gene Inger, Publisher