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[TTHQ Staff]

Gene Inger's Daily Briefing. . . . for Wednesday, May 3, 2006: Good evening; New highs 'lite' . . . might best describe today's action, as the old Dow Industrials made a new 'bull market' high, but virtually nothing else did. The Dollar stabilized, Iran rallied, and the backlash from yesterday's so-called 'demands' by illegal aliens, dominated headlines. Quietly the world prepares for an inevitable tough summer; as the National Guard trains units for deploying Predator UAV's along the border soon. In tonight's audio we'll comment about the primary attribute perceived a causal factor for yesterday's market 'hit', which was the over-the-weekend dinner remarks to one of the best known CNBC commentators from Fed Chairman Bernanke, to the point that the market did not get his testimony right (we have our own views on interest rates). We will also address an excellent New York City presentation by PURE Bioscience (PURE), our latest small-cap pick (at lower prices), and update Ionatron (IOTN), as it seems to us that technicals alone suggest a brewing breakout to higher levels soon. We could not agree more with Chairman Bernanke's remarks, in spirit actually; as it seems to us that was the only was to maintain currency flows into the U.S. Treasury market; via maintenance of relatively firm rate structures (more); to the contrary of all wearing blinders as regards the two or more years just past, in which we persistently argued that longer rates would stay relatively suppressed (rallying in a lagging gentle way) relative to short rates, but only if the Fed continued to (ingerletter.com strategy). Concurrently argued Dollar strength culminated near-term with an 88-90 rangebound shuffle break; if it eased would initially be well-received by the Dow Jones and other multinationals (it was), but only temporarily, because it was a fallacious indicator of better earnings in old-line stocks (currency translations as ingerletter.com notes). That markets reacted solely to CNBC denoting the point is slightly disingenuous, as the T-Bond market has been saying this for days, and those recent rallies in areas of interest ranging from Gold to Oil, have been arguing (as have we) that any move that takes us above the June S&P 1320 'twin peaks' area would possibly be short-lived; as tough as it is (as the fight isn't likely over yet) to pinpoint (as outlined to members). The problem is markets suddenly see limitations of Fed control of 'aggregates', and the price (or exposure) to be paid by international or other foreign entanglements and dependencies that put us in a position of querying China (a for-instance) about their support for our Treasuries, while cajoling support regarding UN Iranian resolutions. MarketCast (intraday audio-email) comments denote how this correlates to what we have warned of regarding surrendering monetary sovereignty in recent years, as it's clearly brought to the forefront right now again. And it's not just Oil prices. Just one example of how American foreign policy (no matter how morally righteous) seriously is at the mercy of overseas influences, precisely because of the deficit situation. That didn't mean prices don't rebound here (did as forecast for Tuesday, and as forecast), but increasingly it becomes a tougher proposition, as this is the kind of difficult 'chop' or rangebound scenario we suspected would emerge at some point as this evolved. Because this was a sudden-sobriety situation perceived regarding Bernanke, it was limited in terms of immediate downside, though there's little doubt in our minds that this is telegraphing a part of the bigger picture that remains troubling (as outlined). We do contemplate geopolitical risk at various points during the year; probably late in the summer (seems like a focal point for travel and tension and currency roiling), as I regularly delve into a bit in most day's audio remarks. We actually suspect more of the same, with some effort to test if not attain higher levels, for the Senior Averages, right as media focuses on 'sell in May and go away', when it possibly ought-be-said 'don't sell too early in May, forgetting to make some more hay' for the moment. (That is especially so in special situations which trade in their own world mostly.) We'd be tempted to say early May thrashing may help the market, but with big techs defensive again, and multinationals dependent on a soft Dollar and beholden foreign policy movement, we're not being greedy or trying to milk the last percentage points. But this is generally what we opined likely; the break from the 'twin peaks' in the S&P 1320's; a decline that would suck-in the skeptics and permabear thinking, and then a transitory rally as we have seen, which at least a chance for a higher high, as a more optimum point for evaluating the market's internal condition presents itself. And yes, it may not be a top of importance at all yet, though people understand (as outlined), so we're alert for changes in structure, beyond superficially obvious ones many grasped upon; as relates to geopolitics, monetary and fiscal issues, Oil (and as we explore). Daily action . . comments recently noted (all the foregoing) themes, by emphasizing that certain aspects of bearish arguments required consideration, but that intellectual merit of those points interrelating with market timing are two different areas actually in practicality, so sometimes are entirely different animals (trading based solely on such postulates often misses badly) in terms of daily life in the markets. We're well aware of deficits, key spending issues, plus consumer challenges. Large segments of that underpinned primary forecasts here from 2002 for the Fed to 'reflate' as you know; as the only reasonable, or remotely feasible, way of bringing back the U.S. economy (as it did). Consistently it has been our view that inflation percolated along the way, within reason, but never so low as Federal 'official' (massaged) numbers suggested. Nothing's changed; it's just recognized. And it's occurring at a time when doctrinaire bearish economists are throwing in the towel on the negative side, just about the time the negative side (for the big-caps) increasingly has more chance to actually evolve. It is not that we are long-term bearish, but we are not oblivious to the odd chemistry of higher oil prices, relatively high commodity prices, and the societal impact, or war itself for that matter. The combination is going to make it difficult to traverse without a period of occasional trauma in the big-picture arena, which may actually enhance the future further out. Combine the security threats, and maybe even 'bird flu', and all the more reason to remain focused on certain specialized issues, but otherwise no hurry or compelling reason to get all excited about buying big-cap techs (our specialty, and that includes we'd like to believe knowing when to stay away from them as we'd been doing all year) as of yet. We look forward to (our strategy continuing to succeed), and suspect that opportunity is assisted by (the theorizing about the future as we outline). All along, many special situation stocks (especially defense and security related) will, as they have so far) tend to oscillate within their individual structures, related more to their own patterns than the market as a whole. Sure, if we get a financial shocker that rivals some in history, that's temporarily another story (as historically it often is), but it is also true that such events often occur near (timing remark reserved for members). Certain areas (especially Directed Energy Weapons) should ideally just be hitting on their stride about that time; so presumably lots of institutions that missed preceding (or just now developing current run-up's) grope for spots for optimum entry, will now probably be salivating at any pullback in such issues to jump in, not out, while of course bearish shills sometimes try to scare people out so big boys can get in (a strategy bulls rarely consider, but likely occurs; and uninformed investors listen with a limited realization that a stock may be climbing to all-time highs for some reason . .). Further comments almost entirely via audio as it pretty much covers everything as well as includes our views on the current status of the Averages and several stocks. If I did project anything about this week; it's that a couple situations will 'make hay' (it is just my 'suspicion') irrespective of the cloud hanging heavily over the larger market. 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) appeared to have completed consolidating before the arrival of earnings early Tuesday. Revenues were slightly shy of the best expectations, so the stock retreated, though recovered somewhat; well off the lows prior to day's end. It's also of interest that Broadwing declared positive EBITDA (earnings before interest, taxes, depreciation and amortization) on an adjusted basis (more specifics outlined). Consistent EBITDA growth is possible (long coverage from 8 will do) for now, so we consider it a reasonable hold for higher levels over time (as outlined to members). Others like Intel (INTC); Texas Instruments (TXN) and Motorola (MOT) mixed; we'll address these individually via audio remarks. Microsoft (MSFT) recently made our watch list. That doesn't mean we're in a rush to buy it; but with Vista approaching, it's likely to become more interesting (as outlined). Advanced Photonix (API) announced yesterday it entered into a multi-year strategic agreement with an for now unidentified leading central European telecommunications equipment manufacturer for purchase of 10Gbs & 40Gb high-speed optical receivers. API has been defensive recently, during a period in which we emphasized funds that could be better applied elsewhere might be addressed thusly, while maintaining 'core' long-term representation in API, for future developments. Welcoming optical progress most assuredly, but note any progress with THz will be taken as far more significant progress by the shares. We indicated late 2006 and 2007 were better times to look for accelerated gains in this stock (more reserved for members). The shares firmed modestly today in the wake of the optical deal; but again, our primary interest in API resides in the realm of THz; not optical (though that pays bills for now). Despite the reality that there's a lot of development work still necessary, the future of terahertz technology in the commercial arena may (as outlined to our membership). API has a leading position in the industry, but wasn't expected to blossom overnight (though we'd welcome surprises), as nobody's yet able to say for sure who is going to be a big winner IF this terahertz technology takes off, or for that matter whether or not a couple companies or more succeed in 'similar spaces' over the next several years. InkSure (INKS) digested preceding selling well, as suspected would be the case. It turned into a bit of a trading vehicle (folks selling as it moves into higher 3's and then buying in the lower 2's); but now has stabilized in the 3 area.. (more as discussed). Essex Corporation (KEYW) mixed after recent easing and subsequent pops (more). Ionatron (IOTN) is a developing 'disruptive player' in Directed Energy Weaponry. In our opinion the last Quarterly ' conference call' shed more light on prospects (and to us affirmed direction by management for a number of areas) as we've 'theorized and speculated' about, in a very favorable way, for the better part of two-and-a-half years. The next one will be on May 10th and we're impressed by technical price action now. A minor item. As you know, months before the company affirmed 'littoral warships' as a likely candidate for LIPC platform integration, we theorized that such 'green water' vessels would be an ideal portion of FCS (Future Combat Systems) to receive LIPC in the early days. Now we are hearing a report that the first (reserved for members). And all these areas could numerically overwhelm our conventional forces, requiring in our view an 'equalizer', so as to offset sheer numbers by sophisticated technology if it comes to that. Again, we suspect that the first (initially prototype) LIPC installations in all likelihood will be intended to be integrated into (varying platforms as speculated). As we remind everyone where this could head over time, we also were impressed by the mention in the recent General Haig interview of 'protecting nuclear and chemical' facilities, as the early fixed-positioned security systems had been thought on the back burner. Maybe they are either modified, or some technology (Mr. Dearmin in a couple presentations mentioned technological advancements not publicly reviewed ..-more-). Are we suggesting (reserved ingerletter.com remarks). We think anything that hints at a structure for inclusion in a 'plan' for managing defense of critical military/commercial installations and facilities is not only potentially a big deal, but maybe more important than contractual sums one tries to place on such relationships. We certainly welcome better earnings (reserved for members), but it's the 'vision' and strategizing as relates to the multiplicity of potential installations of LIPC that we're interested (big-picture). Recent price action has been superb. Volume continues to dry-up on dips vs. rallies; a generally positive characteristic. (Reserved.) Most trying to augment positions on pullbacks likely found executions not easy to get (more). I'm mentioning this because sometimes that's a sign of a stock about to attempt moving-up out of a range, or even market makers and/or pro's with trades triggered to enter if prices dip just smidgeons, because otherwise it was impossible to get easy fills (we read it as a bullish omen for the immediate term; but we could be wrong and there are never any assurances). While it's fair to say the stock's been solid as a rock; this action may launch the next stage higher (based on technicals; irrespective of any evolving 'series of events'). All of this continues expressing confidence in our ongoing view that Ionatron's rather directly at the core of efforts to modernize America's military armamentarium; a reason why (because it's crucial) a paucity of public-information continues to be the case; and interestingly Mr. Dearmin in that little Sunday interview said as much too; when he alluded to IOTN being at the center of a change in perception of U.S. power (to wit: variable lethality is a bottom line for troops and critical infrastructure guards). (If any of this or that ignited a short-squeeze, well it wouldn’t be a stretch to find that alone adding a few new ex-post-haste upside points on top of technically-warranted and measured action that we've outlined, as conceivable, to our members.) PURE Bioscience (PURE) was added as a speculative 'pick' recently after the firm announced an offering discussed in prior remarks. On Tuesday they presented in New York at the Taglich Bros. Small-cap Conference. We monitored of course, so our views are shared via audio in tonight's remarks. Some post-conference selling appeared was well-absorbed, with the stock closing very near the day's high actually. For now we'd opine it has a nominal (reserved), downside; with more than that (reserved) short-term upside. Candidly it's our thinking that it won't be so many days before it closes over 3, and they file for an Exchange listing, simply because (reserved ingerletter.com remarks; and we do own this stock). Bottom line: the presentation was impressive; though the questions suggest PURE is still well-below Wall Street's radar. In a strange fashion that reinforces our perception we're still on the ground-floor of this as speculative (remember that means 'vegas bet for now) investment. There are no shorts to contend with either; too soon for mutual or hedge fund participation, and too soon for the battles on the way up. We believe it may all be in PURE's future, if they can execute on their business plan as presented. It's just early, but not necessarily premature from an investment standpoint, as this is likely the pivot year for the company to transcend what's been a long-time discovery, into a money-making product, through it's aggressive (and well-thought-out) plans for introducing 'product' to distributors, marketers, drug-filing groups, and so on. Given it is almost a 'stealth-like' stock, the sooner it gets listed, and the sooner revenues start to accrue the better. If it's listed and moves over the magic number (reserved). For sure that depends on their rate of success; but the company's President indicates at least one major 'personal products' major company (maker of something like Ajax or SoftScrub) is discussing how to integrate PURE's additive into their product. Also, the excellent slide presentation now shows not 100 of CIBA's top clients introduced to the product, but their top 250 clients. And they spoke of 250 treatments that could be filed for in terms of IND's (as I recall). If you are a shareholder or interested, we'd strongly suggest you monitor the slide show and audio presentation, as it was clearly straight to the point. (Balance reserved: PUREbio.com has the slideshow lower right.) We think the 'friendlier' FDA basically is reflecting the reality that bacterial resistance to other products is a big problem, and that this type of silver ion is not yet shown to become bacterial resistant. We don't know what the future holds; but for now this will do, and we think there is going to be a lot of interest in their product mix forthcoming. Therefore, along the lines of our previous comments, the affirmation today, and what we suspect will be a fairly robust series of developments as the year evolves, we are not only reiterating our optimism about the stock, but believe the investment arena at this point still generally doesn't grasp it. When they do, or when a major household or similar name company comes into the picture, we suspect the shares will (reserved). The website presentation (plus presentation audio) covers most everything beyond our initial write-up, as the company's investor relations staff has really done a great job with that presentation of company goals; and the San Diego Union story covers most of what I was going to add about people (in terms of the saga, the pioneers and inventors; how they got from point-to-point). It is almost as if this stock is still ready to take-off, so I won't belabor the basics of original analysis, and are glad speculators had the chance to take their time buying dips following our original write-up (more). ``` 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 -27; NASDAQ at -18. Projecting a choppy start Tuesday, before a crucial rally extension effort. We suspect they'll try to hold it together, but if unsuccessful later in the week could get messy. As of mid-evening S&P futures off a couple ticks. Wed. call: down then ideally claws up. 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)