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[TTHQ Staff]

Gene Inger's Daily Briefing. . . . for Tuesday, August 29, 2006:

Good evening;

Bad news threatening Florida . . . contributed to a good news relief rally on Wall St. today, as stocks -already thin and tempted to rally ahead of long Labor Day holidays- took-off, as the bulls took advantage of the opportunity to challenge areas over 1300, basis the September S&P. This can continue as our audio remarks tonight outline.

These characteristics, while neither black nor white but more a grayish shade, for the most part if fairly typically of tepid late August seasonals, where the market handily is willing to subordinate concerns about exogenous events or seroius geopolitical risk to running-in the shorts, which sometimes can be done, irrespective of often dubious or tentative scenarios, sometimes seen in the early September post-Labor Day affairs.

MarketCast (intraday audio-email) comments projected some reigned-in enthusiasm, in advance of the preceding trading week, and allowed temporary renewed upside for the pre-Labor Day activity, which has some interesting technical aspects associated.

We'll address it more in an accompanying 'technical' audio remarks, reviewing these prospects, but basically nothing has changed with respect to relatively thin conditions that weren't outlined in my Friday night daily and weekly-basis chart commentary.

Meanwhile, though the 'market surge' is partially a response to the prospect (oddly as it may seem) to a 'storm surge' in Florida, rather than the Gulf Coast (ie: no threats to the oil fields, refineries or platforms), it is not that unusual to have this occur, in-front of Labor Day, whether sustainable or not. Absent exogenous events occurring (or for sure if they're delayed as suspected) the market can work higher; how much dubious.

As noted in ingerletter.com weekend audio; few participants (even where deals might be pending at any firm) are 'hookable together' between customers or vendors; since legal representatives, others; and so on, are pretty much disengaged until after Labor Day. It doesn't mean firms aren't working, or that progress isn't occurring, or that due diligence isn't being completed, where appropriate for a particular company or deal.

Maybe things should be different, but they are what or as they are. And that's doubly so when dealing with types of stocks supporting a National Security urgency; as the business-as-usual 'slog' at getting deals done (for too many firms as we've noticed for several years), or some lethargy because managers redirect government money intended for new projects to personnel instead of security efforts (a recent scenario at TSA brought this to light we observed), is pathetic but fairly typical. It's most pathetic where lives are at risk either overseas or in day-to-day travel, as many such agencies talk about improvements, but simply aren't functioning at breakneck wartime speeds.

Daily action . . . notes it is nevertheless likely that we find out lots more about where companies are heading in the September/October timeframe. Is this normal? Yes but we simply think an acceleration on the part of decision-makers would be appropriate as well, and that's our criticism. Shareholders know little material until it occurs, and that tends to shift a bit as we get into the Fall. Aside typical seasonals related to fund fiscal years and so on, one of the reasons stocks often 'trough', or reflect washout or re-accumulations in the late Summer and early Fall, probably relates to it becoming a sort of announcement season, and we don't mean earnings, but product evolutions.

Eight days from now everyone will be mostly back at work generally; clearly even in European business circles. That includes companies, attorneys, financial authorities, and unfortunately probably even those of the well-funded terrorist suspects traveling. So in many ways (some good, some progressive, some not so desirable) we expect a significant increase in activity; some exciting, some irresolute, but little so dormant as characterizes the way things have been for the past few days or the next few too. And there may be a little extra nervousness as the 9/11 Anniversary is approached.

Geopolitically; we do want to share Stunning revelations from this week, that reveal the 'truth' about impartiality of the UN in the Middle East, in no uncertain terms and with profoundly disturbing implications for future roles they continue playing in South Lebanon. Let's share some of the (condensed and edited) salient points (it follows).

(UNIFIL has just done what it had vowed it could never do. Once again, it has acted to shield one side in the conflict and to harm the other; the democratic side. Why this is permitted we question. For that matter, how did the U.N. obtain detailed and timely military intelligence originally, before sending it to the terrorists to see? It's the point.)
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It's now two days before U.N. Security Council's deadline for Iran to halt enrichment or face possible economic and political sanctions, and we suspect given this already is a delay beyond what the United States and the UN originally proposed, essentially amounts to a stalling tactic for 'dialogue' that isn't properly intended to work with the community of nations. That's was explored previously, and retains a restraining factor for the markets too. The debate about Iraq is essentially political 'noise' at this point, as while we definitely feel for the troops deployed there, nothing much is likely going to change imminently. The threats from Iran are quite real, though they’re not either likely to provoke us beyond a certain point; in hopes to soften coming sanctions, etc. The milque-toast response to the Iranian nuclear 'position paper' exemplifies all this.

We would ask whether the 'nonsense' from Hezballah suggesting that they were now inclined toward rapprochement is some sort of ruse to buy time to get a tired world or UN past the upcoming deadline for their mentors (to say the least) back in Teheran.

Our perspective was for the September S&P to have troubles slightly over 1300, and in that regard we're not surprised by either the revived rallying or late softening taking place. It seems lots of issues aren't resolved, so with seasonal disinterest combining with European holiday time, as sporadic terror or real military events occur, it reminds us of the challenges of economic stability, much less revitalized prosperity desires we all would like to see, during what's really a wartime environment treated otherwise.

Absent the geopolitical and military challenges of our time, we'd be quite bullish with respect to the future. Basically we are anyway, but it's going to take some adroit and smart leadership to navigate these tough seas, and therein lies the short-term rub. It may be that we merely shuffle for a few more weeks and then advance, or it might be necessary to have a seminal sort of washout event, though few expect that instantly.

What we do not expect is a rip-roaring upside market, even as some profess that as a likelihood. We don't disagree economically; we disagree in terms of funding, spunk, and geopolitics. This too will fade and improve, but not immediately for bigger caps. It is something that for smaller caps or special situations, requires case-by-case review.

Bottom-line: again if not for noted issues, we'd be lots more optimistic economically, and maybe we should be just that. We're not selling small depressed (or revitalizing) stocks, but we're generally not yet pushing the envelope on accumulating big techs of which we were sellers late last year or in the opening moments of this year. We just suspect that there's no urgency to re-accumulate except for stocks where something unusual is occurring or shorts may increasingly become trapped; real considerations (and sometimes news events) that are often irrespective of the market pattern per se.

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.

Broadwing (BWNG); Intel (INTC); Texas Instruments (TXN) Motorola (MOT); plus
Microsoft (MSFT); InkSure (INKS); Essex Corporation (KEYW); Ionatron (IOTN); PURE Bioscience (PURE); and QPC Lasers (QPCI) are commented upon in audio.

This morning PURE Bioscience following-up a presentation the other day, noted that 'StaphAttack' is now 'immediately available'. That's important as it's the antimicrobial intended for hospital and institutional use. Whether this implies (reserved for subscribers).

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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 our assessment of advanced tech stocks; notably for key reasons: we view Directed Energy Weapons and all related or sector products, of any 'pure play' or high-power solid-state laser-related companies, as new potentially important 'disruptive technologies' to benefit the U.S. defense; they're important as anything else able to shift the world into 21st Century technology.

Comments are interpretative speculative postulations, provided 'as is with all faults', and all risks, with no assurance about future performance of anything (markets or for stocks) in any way whatsoever. Personal necessity, irrespective of opinion on stocks, may periodically require buys or sells deemed appropriate or required, without notice.

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 focus on the Middle East crisis and World War III avoidance.

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, irrespective of oil-induced inflationary pressures. This is a continuing saga. Often we get a speculative phase later in a bull market, but increasingly towards the end of an overall rising phase. In our view, there has not been that degree of speculation, but that is a potential feature developing let us suggest somewhere in the years ahead, maybe late 2007-2009, barring disaster.

McClellan Oscillator finds NY 'Mac' stabilizing at +72; NASDAQ at +18.

Issues continue including oil, terror; Iraq; Iran; Hamasistan, Korea, and 'Ernesto'. As to the situation in Iraq; things remain fluid. 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, sparing harm to the majorities of people (innocents) are necessary for civilization and for the military's armamentarium. We are focused on this area now and in the future. That's partially as 'advanced defense' isn't so sensitive to consumer economics or domestic recession fears as a forecast 'Summer of Discontent' evolves.

As to Ernesto: it's still a Tropical Storm, but can strengthen as it enters Florida Straits later tonight. It may become what we call an 'I-95' storm, as it comes in around or just South of Miami (say, Homestead), and tracks-up I-95, exiting into the Atlantic again in the area of Jupiter Island or Vero Beach. While it can grow over land (daytime say on Wednesday), that is rare, and it will probably be a messy storm which expands only a bit, until after drenching Florida, after which it becomes a hurricane near N. Carolina, and then dissipates some as it potentially moves towards Maryland or Pennsylvania.

Tuesday ideally could be dip-up-dip-up, with a second rally of slightly better durability, since a typically disinterested attitude among players at the moment might be caught off guard, at least temporarily, a bit more. Thereafter it may continue yet again slightly more dicey, for the S&P, as projected to occur as the past week evolved, but having it move higher this time, if even temporarily, as was our forecast idea for this week.

Enjoy the evening,

Gene

Gene Inger,
Publisher

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~Gene Inger’s MarketCast™ (Intraday audio updates emphasizing S&P futures and market action)

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