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Gene Inger's Daily Briefing 12/30/04


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Posted 30 December 2004 - 03:17 PM

Gene Inger's Daily Briefing. . . . for Thursday, December 30, 2004:

Good Evening;

Markets recovered a 'healthy' consolidation . . . so were really on the upside prior to the bounce-back by the Dow Industrials, which was mostly in the late going, per our intraday comments. That stocks rested a bit more before extending is a plus, not a minus incidentally, as we continue envisioning it leading to short-term higher levels.

There is no change in our overall structural expectations, which call for the market to move up to near the March S&P 1220 area (or even higher) during the course of the week, and ideally for the Dow Industrials to assault the 11,000 area, conceivably as a soon intraweek occurrence also (continuing forecast reserved for ingerletter.com).

By the way we don't think 'bullishness' is quite so excessive as some speculate since a majority of participants now say they're bullish, but are so convinced about contrary concerns (or worried), that they have been (as we said) tepid about committing to the upside, so that implies that monies clearly remain squirreled on the sidelines (more).

Permabears, who typically never bought (or even shorted) this market periodically for much of these past two or three excellent 'swing' years are trying to convince markets of all the excess optimism, or contend 'everyone' knew this for the last two years. No, they did not, or they would have bought. And no, sentiment was not so optimistic for all this time, which is why we had to argue vehemently our perspective regarding 'not fighting the Fed', and being long in late 2002 and throughout forecast series of upside accidents projected in 2003. Many of the naysayers even thought a 'bear market rally' ended in early 2004; and while we called for a top too (ahead of time, not afterwards) we made the advance point that '04's would likely be an intermediate, not major, high in the first part of the year, with the ensuing washout clearly a point to enter, not exit.

A big difference, to say the least. Now, of course it's not bargain day like 2002; nor of course should it be. But if it's the midstream of a move, which saw intermediate (the interim adjustment we expected it to be, even if at times tenacious) correction ending in the late Summer of 2004, and accordingly tested in October of this year (more). It's interesting naysayers 'say' everyone was consistently optimistic, because of course they weren't, and even those who were remained tentative about investing all through this; and sure at some point they'll get another shakeout; and they'll call it some sort of prescient expectation of a big bad bear, but likely won't be (reserved for members).

Daily action . . . comments include audio versions of our final daily MarketCast, for further commentary on the market and issue action today. Tonight's is recorded in a new higher audio rate, so should work fine for MAC's, in addition to PC's of course. Also note additional remarks on pattern action, laser threats, and a (new tech issue).

MarketCasts (intraday audi-emails), by the way, did a single March S&P guideline long today, at the start of activity pretty much from the 1213 area, retained until very near the close (with a possibility of one exit and reentry; just about the same results).

Pattern action worked-up-and-down through the morning and early afternoon, then a desired upward path expected for the session resumed. NASDAQ firmer than Senior Averages well before the DJIA digested concerns about Oil or other aspects (more).

As for Thursday, we're generally thinking up-dip-up or something generally around that kind of action, with short-covering increasing (particularly given that traders have made no note of the SEC rule changes that govern 'naked shorting', which ameliorate permissions to do that starting early in 2005). We think this can be (reserved remark).

It is not essential that occurs, but would be preferable to a built-up of complacency as regards the upside. But for the moment there is not runaway euphoria, so that's good and also supports the idea of markets ebbing-and-flowing, as they work higher yet.

As it 'punches' into 2005, the blue-chips could run into a temporary or resisting (more reserved for members) than it was last year, when we were first warning of big techs, represented well by the Nasdaq 100 (NDX) and Semiconductor Index (SOX), and then big-caps, getting into intermediate topping formations, after what had been over a year of forecast solid advance. This go-round the structure's affirmed from secular standpoints (argument we made for the entire year of 2003 and second half of 2002; ie: no bearish case for the long-term stock market), so that can mean excess popular optimism, however that may not be the real case (for reasons explained to readers).

In any event we repeatedly forecast renewed 'bull market highs' for U.S. stock market averages, with few people yet feeling excited. Everyone says that everyone's bullish, but are they putting their money where their sentiments are? Timidly at best; so that's a good thing. (Balance is reserved for ingerletter.com members.)

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 activities, which quietly yielded higher alerts, and updated concerns, having seen nothing to ease security contingencies in this regard.

Bits & Bytes… notes actions of Texas Instruments (TXN), Motorola (MOT), and in Intel (INTC), along with speculative plays Broadwing (BWNG) and others. We'll note Ionatron (IOTN) was featured by one or more web site reviews, as they (grudgingly it sometimes seems) must acknowledge it's existence for one reason: it is the number one gaining stock in the entire stock market (by percentage we hear) for 2004. We're honored to have identified this issue around 2 last February, and continue to 'track' it.

For those who still think lasers are not both an opportunity in Directed Weaponry, as well as a developing threat (all the more reason the U.S. must be on top of the field); consider today's most recent (of recent) reports indicating a Continental pilot landing in Cleveland was 'lasered' at about 8500 feet, by an unknown 'tracking beam'. The most recent previous event was of a Delta crew landing recently in Salt Lake City.

FAA as well as FBI preliminary investigations have placed the laser at Warrensville Heights just outside of town, which is a residential community. This 'tracking' event today was the fifth or sixth time that commercial or military aircraft pilots have been nearly-blinded in apparent attacks (or probes) that have to be fairly sophisticated at that altitude to trouble pilots. (More discussion.) By the way, we suspect 'budget cuts' will primarily affect 'elephantine' DoD programs for the military; not modernization and Directed Energy; fields modern free world forces must increasingly be equipped with. The priorities may be first to properly reequip the Army, then protect it from needless (or avoidable) contact and conflict with conventional weapons that could be disarmed or deflected (or interrupted) at a stand-off distance via sophisticated implementations of technology. The 'rendering harmless' of crude devices needs to become 'a routine'.

Early this week we wrote about another 'defense' issue (subsequently 'coincidentally' higher by a solid percentage, though we'll continue reserving its name for subscribers for awhile yet). On NASDAQ; it's involved-in fields of optical processing, cognitive computing, for missile defense, as well as very classified areas we can't know about. Broad notoriety could be interesting, since they're not (yet) in typical lists of defense or Homeland Security stock listings (groups). In a sense (pun) this allowed (reserved) to fly beneath most radars looking for defense new plays, delaying visibility of any or all Government backlogs or potential symmetry of recent acquisitions, now in a sense coming to 'light'. (No assurance how any of this pans-out; as there never are, also as was stated at the onset we own nominal shares, may purchase more later, and don't plan sales at particular times, though of course, with any issue, may at a future time.)

Among others, potential addressable markets for such techniques (we suspect likely as ongoing in a couple areas so far) include intelligence and defense, environmental assessment (Tsunami or earthquake applications if we use imagination a bit), plus medical imaging, agriculture, forestry planning, transportation security, and likely homeland security. Exploring integration of techniques with other commercial system advancements is also conceivably viable in the future (initiated; will follow regularly).
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 (more).

McClellan Oscillator finds NY 'Mac' bouncing near +37; NASDAQ fairly neutral near +3. Normal resting after recovery to neutral-plus is probably concluding for now; and we simply get a yearend rally which carries into the New Year. Great to see the S&P back-off and regroup from runs over 1215, with many indicators behaving acceptably on this recent decline; to later resume desired upside into and beyond midweek lifts.
As to flies in the bullish alternative continuing; in our view, it's realization terror matrix issue continues, with challenges ahead, and as attacks and various difficulties show. Ongoing earthquake temblors continue several times daily across much of the West; not to mention the Caribbean and Central America most recently. Most are dispersed along the San Andreas fault; some randomly noted in Washington or Alaska. High 'alert' stages continue at the Mt. St. Helen's volcano and has been increased slightly.
There is no change in market outlook, or overall structure in any strategic sense, per our outlines. S&P futures projected to have an erratic (defensive start), then push to higher levels, with maybe a hesitation later, before new efforts at higher levels. For now extend a bit, shuffle some, then continue the upside efforts ideally Thursday. As of mid-evening S&P futures are ahead around a full point or so.
Our best wishes for a very Happy New Year!

Enjoy the season!

Gene

Gene Inger,
Publisher




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