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[TTHQ Staff]

Gene Inger's Daily Briefing. . . . for Thursday, December 23, 2004: Good Evening; Oil-price-drops induced extensions . . . to the upside on Wednesday, very much in harmony with our call for the week to start erratically, and then see extended upside, as was even more impressive given the 'news vacuum' rally as developed Tuesday. In Wednesday action, the Dow Industrials made another bull-market closing high, just as expected and desired. Overbought daily-basis stochastic readings mean little of course, as a momentum-driven market (especially when seasonally strong) has an innate ability to simply bump-along overbought as it generally advances higher yet. It might be worth noting that the DJIA has solidly cleared the preceding January high of early this year, a noteworthy accomplishment in its own right. Few believe the DJIA is headed for levels over 11000; whereas we suspect it may be sooner rather than later. As a matter of interpretation, we look at the monthly work to envision considerably higher levels than that over moderate periods of time next year (something we'll evaluate in the future, but could eventually broach -higher- levels; as discussed with our members at ingerletter.com). Daily action . . . recognizes that volume could tail-off at any time now, but seasonally we're in the 'sweet spot' of this forecast December second-half advance, so we don't see, other than hourly tempering or intraday squaring, why we wouldn't head higher. It remains our view that most late year selling is behind, as previously observed, so of course other than exogenous news developments there's little to impede later upside. Pre-holiday action has developed almost precisely as outlined likely per analysis here of this week's prospects (both via Daily Briefings and intraday audio); per suspicions that an initially superficially 'anemic' market was concluding a slight digestion period at the beginning of the new week, leading to a fairly sharp upside run. MarketCasts (intraday audio-emails) adhered to this as well, with March S&P's on the defensive rarely during the session, and bolstered when the Oil inventory data suggested that supply is considerably higher than most consensus estimates saw. That supports our suspicion that the recent Oil rally was a rebound after almost doing a drop under 40, and that while bearishness on energy is no longer quite justified as it was when we forewarned of a decline from the mid-50's, the embrace of long-side positions probably (other than the aforementioned rebound) is premature, with odds of a penetration (reserved comment), irrespective of OPEC policies. Development of that will instill more (nonsense) about it being a market negative by infusing too much optimism among consumers (the idea that bad news is bad news and good news is also bad news is typically bearish fodder for non-existent market scenarios); whereas in reality that's a key component to how the market reaches higher levels as we see it. And we see this market, barring shocks, progressing normally (as we've outlined). There were hints of potential (just potential) problems down the road. Late yesterday we got a 'surprise' resignation of the CEO/CFO of Fannie Mae; and that could be the nexus for a 'bubble bursting', in theory, if it later turns-out that the largest underwriter of home mortgages (directly or indirectly) really is 'undercapitalized'. Everyone thinks of their own personal mortgages and of course debt, but the reality is the structure is all intertwined, and a Fannie Mae 'crisis' would effect everything.. conceivably fairly swiftly. But even if there is an 'issue', it's not something that will likely shake markets in any immediate way (more), for a number of reasons, as we've noted last evening. The Fannie Mae woes have been around for awhile, and while it's more visible now, one can also view this week's news as part of the procedural house-cleaning. Oil plummeted down (actually an easing continuation); while the Dollar was just a tad softer, as were T-Bonds. Generally the backdrop was more of constructive than destructive throughout today, in harmony with our projections for the markets to rally. At this point it would have to be said the Senior Averages absorbed challenges very well and that the market looked higher after the preceding suspected period of a mild consolidation. Again, that had ended, or was completing via some oscillations in the early or first hour's going (approximately) on Tuesday, and then we had looked for an upside 'pop', and got it; first to 1203-1205 in the March S&P, and then even higher. Now we're pulling back a hair from an intraday test of the forecast new 'bull market highs' for the U.S. stock market averages this week again, and few people felt or feel excited, with the market contracting in the wake of that accomplished as suspected likely. Everyone says everyone's bullish, but are they putting their money where their voiced sentiments are? Timidly at best, and that's a good thing. It implies that much of the upside action is (sorry; reserved for ingerletter.com members), continuing into 2005. For now see 1195-1200 as tentative support (not that we'll drop that low), with 1215-20 tentative daily resistance (not that we'd stop the overall advances that low). Now it's sort of a momentum drive, as -reserved higher levels- loom later). Concurrently, while closely watching interesting events, risks and assorted domestic issues, we must not shirk from monitoring the world situation as well. Yes, saboteurs, infiltrators, and 5th columnists are still operating in the U.S. and we remain concerned about the implications of al Qaeda messages, which quietly yielded higher alerts, and updated concerns, having seen nothing to ease security concerns in this regard. Bits & Bytes… notes actions in Texas Instruments (TXN); Motorola (MOT), Intel (INTC), with focus on speculative plays Broadwing (BWNG) and Ionatron (IOTN). 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 concerns retreat from absorbing us. Though few generally concur (interestingly the Fed does), our view has been slow but persistent American growth isn't negative, as it allows protracted gradual growth without ancillary significant high interest rate pressures (slightly higher over time; but not high). There's not a truly-restrictive monetary policy; nor is there likely to be one employed over time, irrespective of energy-induced inflationary pressures that can't be addressed simply; but (as suspected) are being tempered by simply lower prices. McClellan Oscillator finds a NY 'Mac' firmer at +21; NASDAQ fairly neutral near -4. Perfectly normal rest after recovery to neutral-plus. It was great to see S&P's back-off and regroup from runs over 1210, with many indicators behaving acceptably during a projected rest; so as we looked for higher later today; everything's behaving well too. There is no change in market outlook, which pointed to higher price levels as we've progressed; with outlined pauses to refresh, but no change in overall structure in any strategic sense. S&P futures were projected to have an erratic (defensive start), then push forward again towards midweek, with a slight hesitation, before new efforts at higher levels. (Balanced reserved for members.) Our best wishes for the holidays for sure, and to those leaving early for Christmas, do know we'll provide a slightly-abbreviated weekend review with tomorrow's remarks. Enjoy the season! Gene Gene Inger, Publisher