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[TTHQ Staff]

Gene Inger's Daily Briefing. . . . for Thursday, July 21, 2005: Good Evening; An 'outside-up' day . . . was forecast from Wed.'s start on our MarketCast service; complimenting our belief stated for the last couple days that 'buy the rumor/sell news' attitudes would take tech stocks down on the reports, and then revive them thereafter with a vengeance in a couple cases (not to mention speculative entry opportunities). We thought that would be just enough to create an 'outside-up' day (lower low, higher high, and higher close relative to the preceding session) in the September S&P's, so our entry at 1227 in the futures was directly related to that specific expectation call. It sure did; not to mention new 'bull market' high closes for the S&P and NASDAQ too! Let's stay calm about this, because 'accidents are to the upside in the year's 2nd half', as you know; based on our repeatedly expounded belief that amazingly cheap techs in the early Spring (in a bull market correction; there never was argument for a rally in a secular bear, as we contended for 3 years didn't exist because of the damage done by the climax in 2001 and 2002, which purged the last of speculators who didn't heed warnings here about the 'unsustainable rallies' of the 1999 and 2000 timeframe). And let's not focus too heavily on our view that with the year's earlier forecast adjustments behind, there isn't as much reason to be wary about seasonal patterns beyond (more for ingerletter.com members). We rather specifically thought Spring purges let this all shift the seasonal patterns off-axis for commonality this year. That meant the second half could do considerably better than most had thought (most of them now embrace the upside belatedly, which of course helps prices head higher, so we welcome them, though their risk at higher prices for sure is greater than ours, or anyone who bought in 2002's purge or again this spring during the indicated March/April tech washouts). Gee, does that make this a 'Goldilocks' market scenario? Well, that's been our view at ingerletter.com since March/April, in harmony with ending of adjustments projected to commence at the year's very January start (our stocks running into a 'brick wall of resistance' forecast). Sure, it got messy in March and early April, and we were alone (that we know of) in saying there was 'no conundrum' regarding the reasons for rates being low on the intermediate and long portions of the Yield Curve; an issue about which even the Fed Chairman increasingly has come to realize isn't a conundrum. It's unprecedented we grant (and well, we're honored to have beat the coming esteemed new retiree, and virtually all the so-called mega-manager bond mavens, on this call). For three years we have argued that (short) rates would be firmed by the Fed as the economy grew, but that it would not be an impediment to business activity or curtail progressive slow U.S. growth, which we projected to be far better for markets than a faster growth rate (though for unknown reasons many pundits criticized slow growth as being negative; must be some lust for quick nasty rises later inviting the opposite). In our view the relatively stable Dollar (something else we forecast from the depths of decline to firm, again almost alone; not crowing, but surprised we lacked company) was projected to have been (and continue to be) an overall assist to the Nasdaq 100 (NDX) and Semiconductor Index (SOX), and other primarily domestic-centric areas. Combine our forecast for Crude Oil topping around 60 for now, and you grasped it. We also believed the 'speculative' small-cap phase would be superior (albeit always speculative and more volatile) sector of the market for most of the past couple years, in the wake of the big-cap leadership, and there's no reason to change that suspicion about the future, to the extent we have recently been outlining. At the same time, we have regularly reminded members that speculation means risk (so do bigger name stocks some appear comfortable with), so especially with 'Vegas bets' in a handful of sometimes thin/volatile issues, there's reason (an allocation comment for members). In recent times, we have increased discussions of advanced technology that typically hasn't yet made the radar screens of most analysts or even funds. Formative times of course are risky, and extremely speculative. We don't regularly interject such stocks into discussions, but only rarely, when we come upon something that seems unique, innovative, or has a particular potential. We're looking at yet-another now, and in the next couple weeks could decide to add it too (a little frequent for us, but the nature of the market's tech growth allows that). Just that I want to make the point such issues are speculative, and as is known by experienced investors, institutions typically won't really get interested (if ever) unless or until more 'substance' is known of companies, or it is more expensive (often these characteristics are coincident). So do understand that, and try not to treat 'all' tech stocks as being similar in potential, risk, or the ability to recover if things don't pan-out, and you'll probably be better-able to (reserved). We'll focus (as we did with innovation, even with competitive risk) on 'leading edges' in a few areas, but with a certain predilection for technologies that enhance security in a crazily changed world. Certainly not every mediocre stock claiming 'homeland security' applications', but ones we think really can assist that, or increase efforts that counter the false documentation, counterfeiting, bombings, and other serious threats. Yes it began with Ionatron (which we have not changed our views about, nor should we, by the way, in our opinion), but it doesn't stop there, as you'll learn in the future (we added an anti-counterfeit/authentication stock, with its name reserved for now, aside from ingerletter.com members of course; so we're pleased it's up almost 50%). Daily action . . . just wanted to touch on this, because I'm a little physically drained from the last couple days, and intended an audio comment tonight, but my voice will not permit. I'm pleased we were able to properly guide through the turnaround action today (Wednesday), and to intraday members indicated from the start we'd be buying the gap-down moves right away, with a suspicion that we'd fill the 'closing gaps' from Monday under the market in the September S&P, and then surprisingly to some, fill the closing (not spatial) gap from the Tuesday close. That's an outside-up day (the impressive kind of daily-basis intraday reversal) and we talked about it as an ideal outcome from the start of this wild Wednesday session; not after-the-fact like most. To us earnings basically non-issues for the moment; because no recession is on the horizon, and we've had an internationally-influenced interest rate near-inversion that's fully been explained (ie: the Chinese and other foreign monies seeking safety and at least mild quid-pro-quo Treasury commitments to offset horrendous trade imbalances we've addressed before). T-Bonds should continue to reflect (reserved remark), and the Dollar should remain relatively firm, if not quite as firm (but not at all troubling). We continue to suspect (yes, as we've said for months, after a forecast big correction early this year), that techs and small-cap broadly defined, wouldn't have as much risk in a sloppy time of the year (timing reserved) as some of the big-caps. No reason to change our view on that, with of course reasonable expectation for some oscillations in the next few weeks, both in response to thin markets during vacations, important news in some new key defense areas, and the real risk of a series of terrorist attacks. And yes, there are sometimes currency movements, which can roil matters a bit, and that could include the prospect of China revaluing the Yuan anytime as we outlined. For an important point, what we did not expect was any top; just interim adjustments that are healthy (temporary discounts), with post-Q&A Greenspan run-ups following. MarketCasts (intraday audio-emails) correctly projected an upside Tuesday, and we suspected that Wednesday would be something like down-up-down-up (and rallying after the testimony, whenever it was). We had a long guideline from 1227 Sept. S&P and couldn't be happier with homerun gains. We caution you could spike this soon a bit, but so far so good (editor's note: obviously the latest London attacks disrupted, but did not change, the anticipated outcomes for the American markets; continuing). Bits & Bytes . . . last week noted it was time to refocus on Directed Energy as well as other weapons to defend our society and dispersed forces, not just for an attack. It was mentioned that 'Sunburst' or other supersonic 'cruise missiles', can't assuredly be defended against by a wonderful but aging 'bullet defense system' called Phalanx (computer controlled but conventional wall-of-steel projectiles). What we were trying to say is that with the 'closing speed' or ranging almost impossible in a confrontation with these newest anti-ship missiles, the mentality of defense must (it is not a choice) shift to radical new ways of protecting our fleets to intercept these. (further comment) Notes include a potential washout, reversal, and likely 'sequence of positive news developments', which can be interesting (in theory) for any company experiencing such similar scenarios. We suspect Ionatron (IOTN), subjected to forecast roiling in the wake of the rollout of JIN at the Stennis Space Center, is such a company. Our original entry cost basis dates from 2, as members know, about a year and a half or so ago. We have tried to call rallies and dips and revived thrusts, as outlined daily. During Senate testimony last month Gen. George Casey, commander of U.S. ground forces in Iraq, said that what American forces need "is a way to set off a blasting cap from a distance." Need we say more? Humbly, probably not at the moment. At ingerletter.com we haven't cheerleaded at tops (the opposite actually, short-term); denoted possible low points recently, particularly for new members, and not because those in from back at the start have reason to do anything (reserved). Historically we try to combine corporate information with technical action and pattern recognition, as well as psychology at some times (how these combine for this now were explored). Ionatron (IOTN), Intel, Texas Instruments, Motorola and (reserved; a speculative innovative stock) were all really excellent as was the turnaround back up by Essex. Members please note: we have no association with IOTN or for that matter any other publicly traded firm (never have had), other than as shareholders of course. Yours truly remains an Ionatron shareholder throughout coverage timeframes, as regularly noted. Comments are interpretative speculative postulations, provided 'as is with all faults', and all risks, with no assurance about future performance of anything in any way whatsoever. In summary . . events continue reminding us of risks Allied fighting forces face, given continued attacks on free peoples, by elements including organized terrorist armies in Iraq. A world awakening to terror and nuclear threats grows, as domestic concerns retreat from absorbing us. Yesterday the 7th Century al Quaeda monsters threatened Europeans (all of them), unless they evacuate entirely from Iraq & Afghanistan within a month. Obviously that won't occur (yes, even the French and the Germans have at least some more backbone than lots of folks think especially given the situation now). So, we have to be increasingly prepared for further terrorist attacks, and heightened alert profiles (almost worldwide) as we move through the latter portions of Summer. We do not want to be particularly alarming, but there is nothing mere mortals can do regarding a retired FBI agent's warning about attempts at nuclear attack by Islamists on the U.S. in the next 90 days (other than common sense; such as going the other way in event of the worst; at right angles to wind patterns and so on, or protecting in-place as best able). So we continue trading, with realization that for big-caps (more so than tech or the better Homeland Security beneficiaries) and at least some deep cyclical multinationals, this move to higher highs may (temporarily) cool-off later. Though few generally concurred for three years, our consistent view has been slow but persistent American growth isn't negative, allowing the protracted gradual growth without ancillary significantly high interest rate pressures. There's no truly-restrictive monetary policy; nor is there likely to be one employed, irrespective of oil-induced inflationary pressures; though it's likely this is again tempered by further eventual oil price drops. This is a continuing saga, which finds a few too many curious converts to the bullish side of the ledger just most recently. However, that in itself doesn't mean it tops-out beyond the short-term (as outlined thoroughly to ingerletter.com members). McClellan Oscillator finds NY 'Mac' firming slightly (in harmony with our overall outlook); currently +62 today; as NASDAQ advances adequately; presently +15. Issues continue to include oil, of course Iraq; increased terrorism risk (remember it's a tactic of the threat: Islamism) and Europe moving closer vis-à-vis the United States. 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 continuing in lighter bunches across much of the West, while a concern about 'freight trains' of weekly 'canes (reserved effect on oil remark). Last night we showed a Tropical Storm named Eugene (how could we not), which we firmly believed was gentle, and wouldn't disturb anyone, while circulating a breath of freshly cleansed air in the Pacific basin:-}. Accordingly it turned into the open Pacific. Note that (it is normal) some stocks sell off after good reports; buy the rumor sell the news, then of course up later if warranted (and we suspected warranted). (Editor: S&P will be weak after latest London vermin attacks, but later recover some ideally.) Enjoy the evening! 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