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[TTHQ Staff]

Gene Inger's Daily Briefing. . . . for Wednesday, April 12, 2006: Good evening; Hang-gliding antics . . . may replace the 'cliffhanger psychology' described recently as dominating the mood on Wall Street, for several reasons (as we'll explore tonight). MarketCasts (intraday audio-emal) comments persistently, for a couple weeks now, as ingerletter.com members know, reflected significant suspicions about June S&P resistance once it moved over the 1320 area for the second time last week. Our view on this suggested a 'false' temporary move over 1320, that unaccompanied by techs in any persisting rebound, but accompanied by rebounding oil price, would likely just result in failure and breakdown. Ahah; but how long-term and persisting will that be? Of equal or greater importance (to reserved ingerletter.com remarks) are clear noted contributions, such as ramped-up Iranian tensions had to a market already sensitized to firming Oil prices; and rising consumer costs also. However, concurrent technical work (especially on the multinational-sensitive NYSE) now is working into an oversold status which ought to be near conclusion just as pundits are starting to get concerned about the extent of downside market risks that they see 'emerging'. We thought they emerged early in advance of recent twin-peaks rally efforts into the June S&P 1320 area (including negative divergences then), and while we're indeed looking for erratic choppy action (actually fairly wild rotations) which could continue for several weeks in the structuring of the next significant move, which remains (as outlined to members). Daily action . . . thus gives us the prospect of difficult but rangebound action capable of alternating swings as will be outlined (reserved). For now, we'll look for a washout conclusion to selling pressure here, and a sharp rebound within this range; probably all commencing in the next couple days, possibly ahead of the long holiday weekend. Later we'll assess whether the range needs to be altered higher or lower (stay tuned). For now, we think the market has the nominal tax-date issue; the holiday concerns to an extent; and the higher oil prices and warlike overtones from Iran to worry about. In that backdrop we have to start envisioning a Q1 series of earnings reports, which will not be particularly disappointing in many sectors. But what might be revealing would be, in the major cyclical stocks particularly, if good reports (reserved for members). Eventually (noted) Fed action could assist new waves of prosperity; not right away. More likely, you'd get an impulsive favorable market reaction to that 'monetary shift'; a crunch, and then thereafter (following a period of basing) a protracted new advance within harmony of the (outlined structure). Basically this comes down to rangebound pattersn; false rallies, a purge, and then a new advance (timeline as outined). Far in advance of course, but gives some early outline of how this may go. It is far too early not to be wrong in some aspect, and definitely subject to modification, but we wanted to share with members a general thought or two about how we think it might evolve. In the meantime, we address markets one day at a time. For now, outside of an early war with Iran, or should we say more-open war, the market trades per usual (more). Should the geopolitics change (such as a restructuring of the American Force pattern in the Persian Gulf to a peripheral defensive and responsive strategy), the market for sure might rally (strategy comments reserved), and it could catch-shorts in a lurching kind of upside move. Just be aware that the worse markets look the riskier prospects for increasing shorts in a sense become (at least with respect to short-term swings). This has no meaning for special situation stocks with large short-positions, especially those in the military, or 'disruptive technology' areas, where they not only are in their own behavioral world, but where some of these tensions could accelerate the need for their product lines; likely especially Laser Guided Electricity or LIPC we think. (It is interesting that most articles on such weaponry refer to everything that's obsolete, laden with 'pork', or unlikely to be deployed in the long-run; rather than what's really a key to America's armamentarium for the future. That's a good thing; why tell others at all what's really key; presuming we continue correct on solid-state directions of this.) Most poignant today was the anticipated pronouncement by Iran's President (really it is appropriate to call him chief demagogue, or pipsqueak dictator with no background in government administration, save his brief stint as Mayor of Teheran). Mahmoud Ahmadinejad at a shrine in Mashad, declared Iran doesn't seek nuclear weapons and its development of uranium enrichment capabilities is solely for peaceful purposes, of course. But he warned that no one should stand in the way of Iran’s right to enrich its own uranium. Iran was 'now a member of the world’s nuclear energy club', he said to an audience of cheering extremists and army chiefs, a mere 24 hours before arrival in Tehran of chief nuclear watchdog director Mohammed ElBaradei. Ahmadinejad did say that El Baradei won't arrive to the same Iran he visited last time. No kidding; just about as close to a national leader admitting their country is a pack of Islamist lies. Ex-president Rafsanjani speaking today in Kuwait (he by the way invested in a resort in the UAE, and a large condo for his family so they have a quick alternative to flee to (in our thinking) in-event of war, cited the uranium enrichment breakthrough being on an industrial scale. Irrespective of the size of the announcement, or the centrifuges at this point being insufficient to produce much 'weapons grade' material, the 'revelation' today of the president’s announcement certainly is a serious rebuff to the UN Security Council’s efforts to persuade Iran to give up its attempts to enrich uranium. And it one more time reinforces our point that no matter how many extensions they are given, or the amount of diplomacy provided, they will talk and talk, while moving full-scale to a 'redline' point beyond which there's little doubt of nuclear-weapon making capacities. The world's reaction was sort of placid, we might say. That's because irrespective of a slew of apologists (though not as many as previously) for Iran's warlike policies, it's been recognized they were moving in this direction behind-the-scenes by everyone in basically all Western capitols. Russia and China know this too, so ought be ashamed of their role in helping Teheran finesse and refine their missile and weapons efforts. It goes without saying that some of the designs are older Soviet designs, with missiles a variation on Russian and Korean designs (which are Chinese knock-off rockets) of a type that now can carry MIRV's (multiple independent reentry vehicles), which are not defendable by the unreliable American ballistic missile system, the Israeli Arrow missile intercept system, or the basic Patriot systems (though even if intercepted in a late-stage descent, the risk of nuclear detonation would be very real indeed). We believe the Iranians know this, and also realize that an 'elevated' explosion might have the effect (that's why they test for it) of an EMP (electromagnetic pulse) weapon which could take much of Europe or the United States, and temporarily knock-out the majority of technological infrastructure (including electrical grids or communications). The UN and even President Bush are kowtowing to this theocrat, and while we totally wish diplomacy 'luck', are quite sure that's not going to work with these people. Once more we emphasize: the real objective (in our thinking) of Teheran's seeming lunacy against Israel or the U.S. is similar to that of the Japanese Imperial Navy's just before they attacked Pearl Harbor. They think they can knock-out enough of our forces such that we'll become meek and leave them alone. They want Israeli out not because it's a Jewish state (they despise that, but the politics are to garner support of the ignorant masses in the Moslem world, without which the Islamists would be viewed for what in fact they are; the only really dangerous people with state-sponsored terrorist armies); and they want the U.S. out, so they can dominate the 'Persian Gulf'; their historic old 'right' as they perceive it. Basically they wish, as have other Islamic theocrats, to turn back history via the use of violence, and have clearly stated they have no objection to having their destiny being 'ruling the world based on Sharia Islamic law' guidance. Do we think this is behind our view that these last few years have been just a modern version of the regional fights and intrigues of the 1930's that were preambles to WWII itself? Absolutely. Can WW III thus be avoided if we can neutralize Iran's capabilities, as well as their increasing cooperation some experts cite with al Queda? Yes, but the key point is if we can. If not, somehow the civilized world, including most Moslems, in our view will have to come together and screw-up the courage to mobilize adequately to (aggressively and with the knowledge of moral righteousness) destroy this threat. Put the 'nuclear issue' on top of this, and the sensitivities of what's involved, and this is likely the greatest powder-keg the world's faced since Gulf War I at minimum, and likely since the Korean War (since Vietnam never was quite the strategic threat this could in a sense become). I was tempted to cite World War II rather than the others, as it was the last time (aside the Cold War) that another Country had state-supported cells of saboteurs or other clandestine operatives in worldwide locations; something it might be noted that Vietnam never had; Saddam didn't develop adequately (he tried as in funding suicide bombers); but Iran has. To wit: Hizbollah, Islamic Jihad, and the possible cooperation of Hamas, which has resisted the cultivations by Shia Moslems to some extent heretofore (but they may come together perceiving common interests) and/or al Qaeda (which ironically does not have the extensive following Iran has in at least significant parts of the world; though we'll probably tend to group them together in terms of a worldwide response, if push comes to shove; as may be understandable in a situation where whether one is a quisling or interloper; if they fight with an enemy they are the enemy). And therein lies the tremendous risk we suspect the U.S. fears. So we are not in the 'excessive optimist' camp for the Senior Averages, though there will be rallies; occasionally sharp ones when shorts or bears get too aggressive. But at the same time we would not be surprised if the majority of the big-cap rebound has occurred for the Dow Industrials and S&P, with feasible horsing around for now, but as argued for weeks, an inability to meaningfully extend beyond the 1320 or so area, of the S&P, until there is a resolution of this issue; or some surprisingly bullish news. Technical comments almost entirely via audio as it pretty much covers everything. If we get (outlined action) intervening between now and later (depending how events go), the prospects for rapid (movement) thereafter depends on what occurs as we've noted. In any event, now the Fed has more maneuvering room to lower rates should that become necessary in the future; which is one of the primary reasons they clearly needed to push-up rates over the last three years as we've outlined. But, you realize that if we get to a point of the Fed lowering rates; something will likely already have occurred of a negative nature, such that the Fed's actions could have an effect that is a 'lag' to market action, such as occurred in 2001 and 2002. In other words, at least part of what I've speculated about relates to the backdrop triggering such shifts by the Fed, and therefore why a then-occurring initial response might be unfavorable. Later-on, it could be incredibly favorable, but let's not get that far into 2007 as of yet. The maneuvering room is the return to a 'mean' or 'equilibrium' we forecast for years. Bits & Bytes . . . provide investors ideas in a few stocks, often special-situations, but also cover an assortment of major technology issues (as are needed for assessment of general factors in tech sectors overall, or as compelling developments may call for) that are key movers in the NDX and S&P, plus ideas ingerletter.com thinks may merit occasional reflection. Broadwing (BWNG), Intel (INTC); Texas Instruments (TXN) and Motorola (MOT) (are commented upon; with more technical remarks in the accompanying audio). Microsoft (MSFT) recently made our watch list. Doesn't mean we're in a rush (more). Advanced Photonix (API) moved higher initially; then drifted, then lower again with modest action, following a 2nd traunch recent financing announcement. We indicated late 2006 and 2007 were the better times to look for potential gains in the shares. We remain fairly neutral for the very near-term, but are very interested in developments. InkSure (INKS) presented a solid earnings report and 'conference call' recently. The stock advanced ahead-of, during, and even after the report; then it eased and firmed again into the New York presentation of 'chipless RFID', where it was well-received. At the same time, those rallies invited (we think short-term) profit-taking, and shares subsequently underwent that. We suspect later it (moves) back to, and in time over, (outlined) levels; but much may depend on progress as the firm reports Q1 and Q2. The other day we addressed a subject of backward compatibility of the new systems with existing (conventional) barcode information; so that a retailer (for instance) may be able to use a single scanner to decode (read) information from both conventional and authenticated (line-of-sight or non-line-of-sight) imprints on either type of product. (Discussion of multiple code reading ability or what's offered customers is reserved.) We believe that InkSure's ability to offer multiple levels of covert, machine-readable security is yet another factor that sets them apart from the competition. Because it's a single read-only system, it can't be hacked, isn't subject to viruses, and won't reveal (a security factor others don't have as the New York Times outlined just yesterday in a story that by-inference, since few understand the sector much less this stock) one's private information at all, when incorporated in personal documents or licenses. Very frankly, if anything, the vulnerability some other systems have is a likely competitive disadvantage to InkSure, though obviously few investors even in the industry realize this as yet. As they do we're optimistic (there are no assurances) they may find that if there's resistance to conventional RFID because of security INKS results may excel. Essex Corporation (KEYW) consolidating after recent easing and subsequent pops. The stock has not been acting very impressively; nor participating in the recent rises. Ionatron (IOTN) is a developing 'disruptive player' in Directed Energy Weaponry. In our opinion the ' conference call' shed more light on prospects (and affirmed direction for a number of areas) as 'theorized and speculated' about, in a very favorable way. Today was wild, as described via audio. (Pattern action reserved for ingerletter.com). It sounds crazy (and the action at times was mentally challenging), but this stock has, as many will recall, done things like this before: basically breaking down superficially, and then turning around (within days if not hours) and cutting through the preceding range to the upside, and potentially traversing it entirely. Then news surfaces and the shares rally, experience good news selling, but rise thereafter anyway. We'd actually preferred to see this minor shakeout before an postulated effort at an upside spike. Now whether such a move higher could be promulgated into a 'leg' up, may depend slightly on the market; much upon developments, and mostly upon a continued faith in what this company has (particularly its wealth of protected patents, essentially in the equivalent of an 'Old West' safe via the Pentagon's protection). We know that trading is trading; but the 'lock-up' of sole-capabilities this company has is something that should never be forgotten by those sensitive to daily fluctuations. If it's too much for them to grasp the importance (as often mentioned all the way up during corrective phases); it may be they're too focused on daily action, or speculative investment isn't for them. For others (we're reserve that for members). At the same time, when IOTN moves, it can do so quickly, and the long-term sole-source aspect of matters means a lot more than the endless debates over every tick. That's out thinking, which is why we tend to be long-term participants ever since 2; and buy rather than sell shakeouts. Ionatron's President Dearmin has scheduled a personal appearance at the upcoming SunTrust Robinson-Humphrey securities conference coming at the Ritz Carlton in Atlanta (Buckhead) at 3:20 pm EDT on Wednesday. The particular presentation won't be 'webcast' because of National Security aspects that (more reserved). We believe that for those institutions that weren't represented at the Roth or other conferences, this may be enlightening. We however look forward to sharing the 'gist' of pertinent (more). Details may flow, but these aren't essential to those with an understanding of the importance of what Ionatron's doing has to the United States military, and now it's (we believe) not just potential, but already likely evolving. Mostly these meetings are important as they draw interest on the part of other fund (mutual or hedge) investors, and if other clients of the particular securities firm are additionally enlightened by this. There is no change in our view, as to relationships, or where this company is headed. PURE Bioscience (PURE) was added as a speculative 'pick' last week after the firm announced an offering discussed in prior remarks. We won't reiterate commentary as it's available as the March 28th Daily Briefing text in the archives). If new MarketCast members wish that coverage initiation write-up, send me a note and I'll send it along. (We will not provide the text to non-members, so please don't ask if your not with us.) As usual there's no assurance any stock will not be more volatile either way than we'll speculate, but that's the nature of stock markets; especially in the OTC 'bb' area. ``` We can't answer detailed questions for you (how could we; Ionatron releases what they will when they do; ditto for the Departments of Defense or Homeland Security… that latter further down-the-line potentially); but these are topics previously explored as part of our assessment of Ionatron; notably for a key reason: we view JIN & LIPC as important (note we don't think just potentially) 'disruptive technologies' for the benefit of the U.S.A.; as important as anything able to shift the world into 21st Century technology (o.k.; in theory, but we think we're basically past it being just 'theory'); as we think it was essentially announced by none other than the President of the U.S.A. He may not have meant too; while actually triggering increased focus on just this firm, and it's products, which we continue to believe have important potential to save lives. Members please note: we have no association with IOTN or any other publicly traded firm (never have had; never will), other than as shareholders. Yours truly remains an Ionatron shareholder through 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 forces in various countries. A world addressing terror threats continues, as domestic issues absorb us less as we adjust to the hurricane recoveries and other emerging issues. McClellan Oscillator finds NY 'Mac' fluctuating; NY near -200; NASDAQ at -40; all of which is in an downward purge following a forecast rebound slightly over S&P 1320. Issues continue including oil, terror; Iraq; Iran; Hamasistan, Bird Flu (interesting it is reported the U.S. has 'spy satellites' monitoring infected 'bird' travels (tough trip) or temblors. As to the 'civil war' fears in Iraq; things remain fluid. But if they expand, the need for advanced weaponry to protect and defend the secured and civilized areas will be at least as important over time. Further advanced weaponry to eviscerate vermin without mushroom clouds, so as to spare harm to vast majorities of people (innocents) are a plus for civilization and for the military's armamentarium, as we now gather is about to become proposed formal security policy applying to civilians too. This week could be a choppy down-up-down (late bounce?) week; but action is very tentative. Our near-term goals for the Senior Averages already were achieved; last week. S&P futures are little changed in mid-evening activity. Wednesday could be sort of a crucial session; ideally down-up-dip-up (rebound time towards the end of any tax pressures, plus oversold conditions); but that remains to be seen. S&P up 70. Enjoy the evening, Gene Gene Inger, Publisher ~Gene Inger’s Daily Briefing™ (The Inger Letter daily analysis on www.ingerletter.com) ~Gene Inger’s MarketCast™ (Intraday audio updates emphasizing S&P futures and market action) Updates about 10 minutes after: the opening bell, 10 a.m. ET, noon, 3 p.m., with a nightly final issued at approximately 8 p.m. In times of volatility, an additional interim report update is frequently provided. Range of Inger & Co. service details (current as of January, 2006): Gene Inger's Daily Briefing™. .posted nightly by 9 pm on www.ingerletter.com. Analysis and a forecast of short-term market conditions. Posted 9 p.m. ET each evening. Focuses on events of significance, plus potential monetary or psychological impacts and a focus on likely next day action.