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[TTHQ Staff]

(Complimentary excerpt of Wed.'s Daily Briefing, posted at www.ingerletter.com late on Tues. It should be noted technical analysis chart views are primarily provided via accompanying audio. As of midmorning Wed., MarketCast intraday audio-email S&P guideline is long SPU's at 1236.) Gene Inger's Daily Briefing. . . . for Wednesday, June 14, 2006: Good evening; 'Risk management' . . . methodologies may 'mask' an exodus of leveraged holdings, as 'hedge funds' (who dominate a lot of current activities) are suffering pain similar to the majority of overly-leveraged investors; or in some cases more so, due to leverage techniques that are generally unknown by a majority of investors, actually worldwide. Starting particularly in late April, we warned against bidding-up stocks via leverage; in stocks we like(d) or are interested-in during the swansong of a then-forecast decline. For the benefit of new readers, we emphasized risk via updating our term 'crash alert' to describe such risk, while denoting that much of the risk was concentrated in Senior Average multinationals, such as the Dow Industrials and S&P represent, because at least the majority of other sectors, had never participated with the type of speculation that had last been seen in the 1999-early 2000 timeframe. That characterized a wild Fed (yes wild Fed) that cautioned avoiding exuberance while promulgating that game via an unseemly increase in the money supply. That actually served to stoke the fires of a parabolic unsustainable move by most sectors, including Semiconductor (SOX) and Nasdaq 100 (NDX) Indexes at the time. The ensuring speculative collapse, for sure was more than a 'corrective' move, and nothing of that magnitude or duration for now seems on the agenda, at least as we perceive it. That means we've targeted the decline; but called it to be a 'Summer of Discontent' adjustment within a secular bull. Now, you're basically getting 'throw the baby out with the bathwater' declines, that while unlikely to have completed the panic wave after almost two months of selling as we outlined, since warning that the April upside swing was 'distribution under cover of a strong Dow umbrella', is working towards a completion of at least this phase. We'll outline how we think this 'process' resolves both short-term or beyond, via our audio. Keep in mind we believed that DJIA and S&P rallies, back in late April and early May, in classic ways masked the selling that was going on in 'stealth-like' manner, because (noted every day then) we had a plethora of non-confirmations, negative-divergences and all sorts of mediocre leadership issues, accompanying the rise that we resolutely felt was an unsustainable move to then-new bull market territory for a limited number of overpriced multinational stocks in particular (currently with underlying distribution). Accordingly, we projected a move over the 'twin peaks' (which adjusts to Sept. S&P 1340 or so) that would not be sustained, but give an illusion of the market's infallibility just before the market began the long-road into short-term oblivion, or 'discontent', as the Summer evolved. Now we are tentatively working into a scenario that should be at least capable of supporting a rebound (hints of it technically are being constructed, as noted in audio remarks) of at least (balance strictly for ingerletter.com). However, that doesn't mean we really believe either the CPI, or the FOMC decision makes that much difference to pattern progression (for reasons we've outlined to our members). In any event, still more Fedheads weighing-in on the side of inflation being too severe so it was virtually impossible for the Dow Industrials or S&P to gain any real traction via various efforts to stabilize or rally. It's ridiculous as the risk is deflation not inflation as merely the forecast commodity collapse, highlighted by our warning as Gold lofted over 700 that it was more likely to visit 500 than press 1000, as noted for members. In any event, you know our perspective that believes this is the 'swansong' phase of an inflation they're all superficially concerned about; and this phase of market decline almost as if they wish to give the concern some credibility in trimming U.S. consumer excess, just in time for the Fed to stop this ramp-up that's been ongoing for years. It's almost ridiculous, because the Fed's 'pace' of hikes has been persistently consistent, while the 'reflation' was an essential coming-off the post-9-11 'emergency' low levels. Our view, again; rates are already more stable (to slightly lower) as T-Bonds reflect, though neither the financial press nor investor mood seems to yet comprehend. They will in time. Only the anti-Dollar fanatics (including international financiers opposed to the Greenback's newfound forecast stability here) will couch this in political terms that seem to presage something more than a typical slowdown or mild recession brewing. That crowd will almost never overtly address the real liquidity erosion we'd mentioned previously, or how it started not so much in Asia or Europe, but in the Middle East of all places, where markets crashed awhile back (most Americans never heard of that). The anti-U.S. stability crowd may also acknowledge how commodities and Gold are continuing lower (as we forecast before the breakdown), but won't recognize that the United States has almost nothing to do with this, and how the lack of confidence in all the currencies of the Moslem Middle East, as well as separate concerns in China, as regards their financial system, were contributing to Gold's strength, now migrate (we think) to the Dollar, because relative to their problems, higher interest rates or not, it's clear the United States (and to a lesser extent Great Britain) are relatively appealing. If the Fed's going to be draconian (absolutely a wrong approach here), then the very bearish technical and economic analysts just issuing downgrades (two months after a warning here about a late April and early May topping process for the non-confirmed, and heavily diverged from the broader market, Dow Jones or S&P) may be right with those calls, even though they are late to the game to figure out the April distribution (not meaning to be critical of anyone, but if we spotted it in April and early May; what are they anticipating now, when every investor in the Land is aware of current action). The current morrass is the confirmation of weakness resulting from the false rallies of a rediculosis move (just what we called it) in April and early May, and nothing new. Of course this is important, because it's normally a phase down that sets-ups a rally in the not-too-distant future, rather than yet-another decline, after a washout or two just to make emotional folks think we've gone over the undefendable edge into the abyss. By my work we could get another (reserved) points down in the S&P; just depends on the daily news or the emotional makeup out there. That's time to begin to prepare for stabilization and a move back up around (the timeline) as contrasted to beginning to batten-down the hatches, even though that rally likely will be an intermission (more). Put it in perspective: ('x') points down risk after we already had 94 points of decline from the forecast September S&P high in late April. Why are people acting if this is a new decline? It's an old decline. It's a decline which is getting into folk's principal, or core values of portfolios (and that includes the widely held big stocks, even Oils that have been so overpriced and certainly commodity-related plays or multinationals that others thought impervious to decline, which they obviously weren't), and they're very concerned. We understand that. But that's also part of the mechanism of working-out short-term troughs. Might be hit more, but unlikely by much at this phase of evolution. MarketCast (intraday audio-email) comments realize well-watched (if less-relevant) PPI and CPI numbers are wrapping up, and increasingly have less potential to rally or 'tank' markets anew; but suspect either way will be inline with what I just described above, or even if it drags-out into the time just ahead of the ensuing FOMC meeting. Do note that we warned for several years that as the Fed completed hiking rates; in a climate during which 'actual' rates would be affordable and hence not really any sort of a business impediment; we also intimated that as the Fed curtailed the hikes (more for members), or foreign rates firmed to attract funds (portions of which were drained-off by Iran, fearful of asset freezes by the West, not just Asian sources), the domestic rates would probably firm just enough to get everyone's attention at the end (more). There is no change in this assessment, or its implications. In the long-run that's likely the plan the Fed intended, and the only (best) chance (besides dramatic Oil declines) to salvage the asset-risk of those who leveraged real estate speculations into manias making what's going on in stocks pale by comparison. So is all the Fed noise a ruse? We do need to touch upon the foreign markets, as one of the major institutions today just upgraded international investing; encouraging investors to move overseas as a result of a weakening Dollar. What weakening Dollar? That's the old move, not the new one. Or what emerging market? Maybe I'm missing it; I thought that submerging markets had taken over the moniker, as forecast for two months. (Balance reserved.) Our opinion (and like everything else, and we're not right on everything; thankfully at least lots of stuff) is that submerging markets are by no means ripe for investing and in fact domestic centric stocks (portions reserved for ingerletter.com), which were hit simply because when the raid comes all get temporarily taken to the cleaners, are the areas for earlier interest in. Furthermore, a trend to repatriate offshore outsourcing to the U.S. may negatively impact several so-called hotter overseas sectors. (Reserved) Keep in mind, if a market 'crashes' from oversold (that's how it occurs, or already did for many techs and assorted stocks), it usually completes a pattern, rather than starts one. But depending on the damage (and here we mostly refer to the big-cap gigantic companies), it can take weeks at best, and months at worst, to repair. Years? Given the backdrop in this environment, barring major terrorist attack or world war, we tend to think not. That's because we didn't have the degree of speculation preceding this, as in 1999-2000; and because it's been a big-cap multinational rally absent techs for the most part. We have believed that would likely be unsustainable without a broader participation. Simply put: we have been unimpressed with breadth all year long, and the market is behaving as expected, even if nobody's particularly thrilled about it all. Otherwise, it's a situation that has to workout over time as we postulated, and that's the 'Summer of Discontent' theorizing suggested likely in recent months. Declines get interrupted by rallies, but the rallies don't hold, and then declines that give-way to the next rebound; but those don't hold very well either. This will resolve in time. In time; it may resolve short-term any hour now (parts of this reiterated; but it hasn't changed). In the case of the Senior Averages, the conventional negative divergences were very present, and new rebounds are and will be dubious for now. There is no reason for a sustainable low point as of yet; but we're getting there for an intervening bounce type of move. Will it then take new catharsis to end the pain? (Technical strategizing ideas are reserved for members.) It was almost a classic 'distribution under the cover of a strong Dow Jones umbrella', we said in late April / early May, thus we don't see why this isn't a continuation pattern; a rebound, liquidation phase where players say 'oh it didn't hold', and then robust rally. In the scope of this, we should be working (more). Bits & Bytes . . . provide investors ideas in a few stocks, often special-situations, but also covers an assortment of major technology issues (as needed for assessment of general factors in techs overall, or as compelling developments may call for) that are key movers in the NDX, SOX or S&P, plus ideas ingerletter.com thinks merit further reflection. Individual stock comments are primarily via audio remarks for members. Broadwing (BWNG); Intel (INTC); Texas Instruments (TXN) and Motorola (MOT); Microsoft (MSFT); Advanced Photonix (API); InkSure (INKS); Essex Corporation (KEYW); Ionatron (IOTN) and PURE Bioscience (PURE) are commented upon. ~~ We can't answer detailed questions for you (how could we; companies release what they will when they do; ditto for the Departments of Defense or Homeland Security); but these are topics previously explored as part of assessments of Directed Energy stocks; notably for key reasons: we view LGE, and all related or sector products, of high-power solid-state laser-related companies, as evolving new potentially important 'disruptive technologies' to benefit the U.S. defense sector; as they're important as anything else in facilitating the ability to shift the world into 21st Century technology. 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 a new hurricane season and other emerging issues. McClellan Oscillator finds NY 'Mac' fluctuating; NY near -197; NASDAQ at -59. It's all still (debatable) but potentially headed for a nervous turnaround given the financial news still in the wings (nearby). Probably this is a work in progress as audio outlines. Issues continue including oil, terror; Iraq; Iran; Hamasistan, and Bird Flu. As to the situation in Iraq; things remain fluid, but just improved with the elimination of terrorist insurgent leadership. But needs for advanced weaponry to protect secured civilized areas will remain as important, or certainly in future combat engagements elsewhere. Further, advanced weaponry to eviscerate vermin without mushroom clouds; to spare harm to vast majorities of people (innocents); are a necessary plus for civilization and for the military's armamentarium. We are focused on this area now and in the future; and that is partially as certain advanced defense is not so sensitive to economics, or may become interesting anew, as recession fear dominate a 'Summer of Discontent'. As of mid-evening, the S&P is up 60. 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.