NetResearch in a recent commentary is sanguine abt the STI reaching 1900
shortly. Puts IR (initial resisitance) at 1840 and unlike iOCBC is more positive.

Won't uplift report for copyright reasons.

STRAITS TIMES Index (1,844.18) – The Bull continues charging towards 2,100 by end of the year.
A more vivid improvement is seen in the current market sentiment towards a sustainable recovery, as projected between mid-June 04 – early-July 04 in our previous report on Thurs 27 May 04. This is well in line with our expectations.

Infact, the ST Index is poised for a sustainable upward momentum from here, as we are gradually moving away from the initial phase of a Bull cycle, which is normally slow and gradual. Now is still a good opportunity for aggressive accumulation on long in order to capture the full extent of the uptrend. Any delay in the projected up-move to 2,100 levels will be confined to end Q1 2005 at the latest.

Expect slight weakness in near term (over few days) with resistance at 1,875 and support at 1,815.The immediate resistance @ 1,840 levels has seen a breakthrough yesterday. Any further up-move will challenge our next resistance level @ 1,875 over the next 1-week. The Index is likely to exhibit some intra-day weaknesses in the short-term, that is, over the next few days. 1,815 level is seen as the immediate support with further strong support level @ 1,780.

Look to accumulate Blue chips now.The Index is currently in an oversold territory. We still see good opportunity for aggressive accumulation. Venture Corporation (S$18.00) is still our best pick among the blue chips at the current price level as any further downside is limited. Fundamentally, our corporate analyst has a ‘Buy’ call for Venture Corporation with a 12-month price target
of S$24.00.

STRAITS TIMES Index (1,844.18) – The Bull continues charging towards 2,100 by end of the year.
A more vivid improvement is seen in the current market sentiment towards a sustainable recovery, as projected between mid-June 04 – early-July 04 in our previous report on Thurs 27 May 04. This is well in line with our expectations.

Infact, the ST Index is poised for a sustainable upward momentum from here, as we are gradually moving away from the initial phase of a Bull cycle, which is normally slow and gradual. Now is still a good opportunity for aggressive accumulation on long in order to capture the full extent of the uptrend. Any delay in the projected up-move to 2,100 levels will be confined to end Q1 2005 at the latest.

Expect slight weakness in near term (over few days) with resistance at 1,875 and support at 1,815.The immediate resistance @ 1,840 levels has seen a breakthrough yesterday. Any further up-move will challenge our next resistance level @ 1,875 over the next 1-week. The Index is likely to exhibit some intra-day weaknesses in the short-term, that is, over the next few days. 1,815 level is seen as the immediate support with further strong support level @ 1,780.

Look to accumulate Blue chips now.The Index is currently in an oversold territory. We still see good opportunity for aggressive accumulation. Venture Corporation (S$18.00) is still our best pick among the blue chips at the current price level as any further downside is limited. Fundamentally, our corporate analyst has a ‘Buy’ call for Venture Corporation with a 12-month price target
of S$24.00.

the IR of 25 basis points is history now
wat portends for the future?

wat risk reward ratio now exist?

whilst we can expect that more rate rises will come in
the next 12 months or so...what is going to happen to the global
markets?

different views exist...and if u search the net the bulls and the bears are
about equal in number

but one thing is for sure and that is the days of cheap money is over
in the next 1 to 3 years

this will affect the highly leveraged hedge fund activity.....as they were able to borrow cheap US$ and gamble or hedge away in global mkts

as the unknown is now out of the way...ie 25 basis points and not 50 basis
points and the tone set in the FED's language, hedge activity
is on the cards again

AND in effect began towards the last 10 days of June after the sell off since
mid April 04

reporting season is also upon us and market buzz will be on the cards :rolleyes:

as long as oil prices remain at $30 to $36 pbl the slowdown, if any, ain't
gonna be disastrous......BUT if u're real long in equities, amongst yr asset
classes then profit taking and some cash build up wud be in order

juz my leaf worth of thoughts
happy trading

The Character of Slack

The character of system-wide economic slack suggests the changing nature of perceptions regarding structural leverage in the system may have a lot more to do with the current directional momentum in rates than does the real economy.

Although it may sound like a toss away comment, isn’t it fairly obvious that one of the most levered economic environments in history would hit a growth rate brick wall if interest rates were to rise meaningfully?

An economy that has become addicted to credit isn’t going to run even faster when the dosage of its primary stimulant has been reduced. Even as the Fed eventually reacts to where the market is obviously leading it at the moment, will we ultimately witness yet another of history’s aborted Fed Funds tightening cycles?
Or will it be something a bit worse?

Of course only time will tell, but history suggests that meaningful tightening in the current environment of real economic slack relative to historical experience will stop economic growth dead in its tracks.

The irony, of course, is that by betting the ranch with anomalistic monetary policy over the last three to four years, the Fed has put themselves in a box. To get out of the box, they necessarily will have to at least in part puncture the credit dependent economy they helped foster in the first place.

And certainly this should not be unexpected or some type of surprise. The build up in systemic leverage has been clearly documented in each Fed Flow of Funds quarterly report for years.

In all sincerity, we take no pleasure at all in seeing a real economy exhibiting so much slack relative to historical post recessionary experience at what appears the exact time the markets are likely to force the Fed to deal with the unintended consequences of their remarkable actions of the recent past.

We all face judgment day at some point, now don’t we?


Note: The full artcles has been uploaded at yahoo MC file section....... really worth a read.

Friday was no different from the rest of the week with the Nonfarm Payrolls coming in weaker than expected at only +112,000 and well under the consensus estimates of 275,000. This was the third monthly drop since the March high of 353,000 and the smallest gain in four months. April was revised down from 346K to 324K for a drop of -22,000 jobs. Adding this drop to the this months gain represents only a net gain of +90,000. This is still positive and the tenth consecutive month of job additions but the trend is not healthy. The net gain was only 1/4 of the March number and suggests the August payrolls could be flat or even negative if the trend continues.

Manufacturing employment fell -11,000 in June and was the first decline in five months. The companion household employment survey showed a gain of +259,000 for June but this is a very volatile survey with wide swings. It is used as a confirmation of the Nonfarm Payroll numbers. This suggests more employees are switching to contractor status or becoming self employed. Average workweek and manufacturing workweek hours both dropped suggesting a continuing weakness in the workplace. This would also suggest next months employment numbers could be weaker. The number of unemployed workers rose +45,000 for the month to 8.248 million. This was the second consecutive month of gains in the total unemployed. The economy must add +150,000 jobs per month just to stay even with the number of new workers coming into the workforce. As you can see we actually lost ground last month.

The smaller than expected job gain sent the bond market reeling with a drop in the ten-year note yields to 4.44% and a two month low. Considering this was only two days after the Fed began a rate hike cycle this is simply amazing. While I doubt this will deter the Fed from its next hike the weak economics and the drop in bond yields will undoubtedly keep the Fed on a slow and measured pace for future hikes. The Fed funds futures immediately removed a 25 point hike from the current end of year scenario and reduced the potential for a 50 point hike in August to almost zero. The equity market did not like the weak jobs numbers but the drop in rates should help smooth over their worries once trading begins again next week. The slack in the labor market is still with us and the Fed has strong history in not raising rates until jobs are on a steady path.

Another battle worth watching is the semiconductor sector. I have written about it recent path several times but the saga continues. The SOX dropped another -2% to 456 in early trading on Friday after Deutsche Bank cut Intel to a hold on concerns about global shipments. There are conflicting data points on supply and demand constraints depending on who you read. The Semiconductor Billing report on Friday showed a +37% jump in sales on a year-over-year basis in May and at their highest level since late 2000. This should be good news but the sector is under attack from analysts suggesting the peak has passed. Viewed another way sales only climbed +2.1% in May over April and this has fueled the criticism by analysts. We will get Intel earnings on the 13th and that gives us plenty of time for analysts to polarize even further. As long as the SOX continues to be weak we cannot expect the Nasdaq to recover. Leading chip stocks like INTC, AMAT and LRCX lost an average of -5% for the week. To summarize, the component shortage suggests high demand and an increase in pricing power but limits the amount of chips sold. Earnings should continue to rise but sales may not rise at the same rate.

Next week is a relatively light week for economic reports with those on the schedule not specifically market movers. We will have the ISM Services on Tuesday and the MAPI Survey on Thursday and those are the highlights. Investor focus should begin to shift to earnings as the Q2 cycle begins. It will start with a whimper on Tuesday with AA, DNA and YHOO followed by GE and ABT on Friday. The next week beginning July-12th has over 300 reporters headlined by Intel on Tuesday. After the GE guidance on Friday and the Intel guidance on Tuesday traders will make decisions about Q3 direction and the markets should react accordingly.

The big news has passed with Iraq, the Fed, quarter end, Russell shuffle and Jobs now history. If anything we could be facing a long hot summer of investor apathy as vacations and election conventions take center stage. Analysts are pretty much in agreement that the economy is slowing but only slowing to a more sustainable pace. The starting sprint out of the recession lows is over and the market will settle into its long distance routine. Economics will begin to be ignored as long as they maintain a positive trend and post election 2005 earnings guidance will begin to take center stage.

The prospect of no immediate catalyst provided traders with no excitement on Friday. The indexes dropped at the open on the Jobs news but they rebounded slightly once support levels were reached. The Dow fell to 10275 and light support just a couple dozen points below its recent range bottom at 10300. It tested that 10275 level multiple time during the day and appeared on the verge of cracking on weekend event risk most of the day. In the end support held and the Dow closed at 10282 for a loss of -51. Internals have declined significantly and the Dow is back to June-2nd levels having given back -200 points from the weeks highs.

The Nasdaq retreated to resistance turned light support at 2000 and hovered there most of the day. With the SOX heading south it was remarkable to see the Nasdaq hold this level for most of the day. The Nasdaq does not face a support challenge until 1965 and that is well below our current levels. The YHOO earnings on Tuesday could be pivotal in whether we test that support. Traders were not able to make any gains into the close and there was a distinct lack of short covering. The Nasdaq ended at 2006 for a loss of -9.

The flurry of earnings warnings and the weaker than expected ISM and Jobs reports have put a crimp in my expectations for a post holiday rally into earnings. I really do not think economic conditions have changed much but the perception of a worsening is growing. With the markets near 10500/2075 and the recent highs stocks were priced to perfection in anticipation of strong earnings. The warnings have tarnished investor outlook and we are seeing much less of a bullish undertone. Where I was looking for a post holiday uptick into the earnings week of the 12th I have moved back to a neutral position.

While we could easily go either way there is still strong support below us. That support could evaporate with a couple more high profile warnings and we could begin a sideways decline into October. I know this flies in the face of the summer rally crowd but when you think about it there is no reason for stocks to rise. If real earnings are going to decline and the economy continue to slow then stocks are fairly valued at the current level. What we need is for GE and Intel to brag about how strong business really is and raise guidance for Q3 and beyond. Personally I think the odds of this happening now are very slim. I think they will just affirm guidance and leave it at that. Should Intel lower guidance as two analysts have suggested we will be in serious trouble.

This makes next week a tossup and I suspect moving higher will be a challenge. We have seen the range expanded on the high side to 10487 and I think we could see the low side pushed back to 10150. This gives us a very broad range to wander over the next couple weeks without any damage being done. July is typically the strongest month of the 3Q and so far it is not shaping up as bullish. The Nasdaq has room to 1965 and is currently right in the middle of its recent 1965-2065 range. Again, plenty of movement potential without any conviction required. Our volume on Friday was definitely light with only 2.7B shares across all markets and that was weighted 2:1 in favor of declining shares.

Tuesday is going to be telling for market direction. I would use Tuesday as an indicator for the week and trade what you see not what you think. There could easily be a sentiment change in progress and we need to see which way the traffic is moving before stepping off the curb. Speaking of traffic have a safe holiday weekend and remember to buckle up. The Dept of Transportation is predicting 522-550 deaths from traffic accidents over the weekend. This weekend kills and injures more people than any other. Buckle up and live to trade another day.

Enter Very Passively, Exit Very Aggressively!

:lol:

Semiconductor Weakness

The recent round of news in semiconductor sector has hurt the market, although there may be a bright spot or two. The profit warning from AMKR coupled with a few negative comments on INTC have hammered the SOX even though memory prices have firmed in recent days and DigiTimes reported that Taiwan notebook makers are projecting a 40% to 50% rise in H2 2004 shipments. Friday, one key broker said that INTC¡¦s Grantsdale chipset and weak mobo shipments will cut INTC¡¦s growth and shave Q2 EPS by $.02. In addition to these issues, the Chinese yuan forward has weakened and it trends correlate with the SOX. The yuan was pressured Friday by a mixture of factors, but its weak tone may hint at slowing global economic growth. Two factors hurt the yuan.

¡P A Chinese think tank raised the prospects for a hard landing in China. The think tank said that curbs placed on the economy are hurting well run firms.

¡P The Chinese are allowing insurance companies to invest outside of yuan. They need to earn higher returns in order to compete in the domestic market.


If labor demand in the U.S. is truly weak, the demand for IT will like follow. We sees employment picking up as the year progresses and the June data a pause. The trouble with our thinking may rest in the seasonal factors for July. Seasonal factors are very wild in the July data and could allow almost anything to happen. Without labor demand in the US or strength in the Chinese economy, the SOX is doomed.

I¡¦m really not much of a 200 day moving average fan. However, the SOX has been flirting with the average in recent weeks and failed to break above it on two attempts. The recent failure has led to heavy selling. Given the failure at the 200 day average and the recent two highs near 490, the SOX will have to work over 490 to become bullish from a technical perspective.

STI Report

Since the start of June, we have been talking about fundamental valuations reaching attractive levels, especially in view of the low trading volumes in June and easing share prices. While day to day trading volatility remained, we reiterated our view that medium-to-longer term investors should accumulate quality stocks, especially on price weaknesses.

In an environment that is still lacking in corporate developments, and the situation is likely to persist until mid-July when corporate earnings start to kicks in, it is good to adopt a contrarian approach and sieve out value stocks to ride the next medium term upleg, buoyed by the current undemanding valuations for local stocks.

We have also mentioned on several occasions that while selective stocks have appreciated, the bulk of the listed stocks are still trapped in a narrow band or are down for the year. We also mentioned that while the STI is up for the year, a look at the other sub-indices showed that several are still down for the year. The STI is up 4.2% for the year, but the Property Index is down 4.0%, the Electronics Index is down 6.3% and the UOB Sesdaq Index is down 9.6% for the year. The gain for the STI is not broad-based and is largely confined to several defensive index stocks.

After the June FOMC meeting, the next key market moving events are the crop of 2Q corporate earnings and the National Day in Singapore in August. While the National Day rally speech is still more than a month away, this is an event that market watchers tune into to watch for any market moving indicators.

In early June, we talked about low market valuation of about 13.6x (see Morning Conference Note dated 7 Jun 2004). This view was reiterated throughout the month as valuation stayed low and is currently still trading at 13.6x.

While 2Q earnings growth will moderate compared to 1Q sterling performance, it is still expected to be a good quarter. In the US, S&P 500 companies are projected to maintain a double-digit growth rate in 2Q of 20.7% compared to 27.5% in 1Q (according to Thomson Financial). While this is a decline from 1Q, it is still a fairly good growth rate. In particular, we expect local tech companies to benefit from the double-digit US corporate earnings as most are dependent on MNCs for the bulk of their order books.

We are seeing a couple of interest factors emerging. This included easing oil prices, the US Fed reiteration of its preference for a "measured" pace of rate hikes, low market valuation and fairly good dividend yield of about 3.5% (based on STI component stocks). Putting aside the current lethargy in the market, medium to longer-term investors should continue to focus on fundamentals. The STI is currently trading at forward valuation of 13.6x, based on the STI component stocks. This is sharply lower than 18x as seen in late 2003. While historical data showed the market trading at times above 20x, we think a more reasonable range will be around 15-18x. Using 15x as an indication, which is the lower part of the band, there is still upside from the current level of only 13.6x.

OCBC

Third Quarter Market Strategy

[b]Downside limited[/b]

! Profit cycle: peaked, but major negatives unlikely
Earnings may have peaked, but risks of negative surprises appear low. First, macro
data points are surprising on the upside. Second, the direct earnings drag from key
systemic risks (Fed interest rates, China, oil and a property asset bubble) appear
relatively limited. We think the impact of option expensing is likely to be small for
the broad market.

! Valuation: approaching extremes
Our estimated 2004 forward market PE of about 13x is more than one standard
deviation below the historical mean. Meanwhile, our implied ERP is 7.5% versus
a mean of 6.1% historically. Previously, the market traded below such valuations
only during the Asian financial crisis, the events of 11 September and SARS. We
think further downside is unlikely.

! Market, themes and ideasWe think the Straits Times Index (STI) is likely to be range bound between 1730
and 1965 for the next three months due to external factors. We highlight (1) two
domestic themes we like—capital restructuring and a potential upturn in prime
commercial property; (2) the risk to yield stocks; (3) cyclical stocks that could be
vulnerable to a tactical rally; and (4) why we eschew small caps, valuations
notwithstanding.

! Top picks for Q304Domestic theme: capital restructuring—Singapore Press Holdings;
ComfortDelGro; Singapore Telecom, and Singapore Land. Domestic theme:
commercial property—Keppel Land and CapitaCommercial Trust. Cyclical
exposure: DBS Bank, Venture Corporation, and Singapore Airlines.

UBS

Earnings warnings send technology lower

This weekend's fireworks shows in the U.S. most easily drew
greater applause than earnings warnings from software makers
Conexant Systems (NASDAQ:CNXT) $2.40 -41.17%, Micromuse
(NASDAQ:MUSE) $4.69 -27.51 -4.69% and Veritas Software
(NASDAQ:VRTS) $17.05 -35.7%, where warnings among technology has
bulls re-thinking the 10% rise from the May lows for the NASDAQ-
100 Index (NDX.X) 1,450 -2.1%.

Market Snapshot / Internals - 01:00 PM EDT



While A/D breadth at the NYSE begins to show some sign of
internal firming, but still weak with decliners outnumber
advancers by nearly 2:1, NASDAQ continues to build more
decliners, where NH/NL breadth has been turned in favor of new
lows.

Weakness in Intel (NASDAQ:INTC) $25.88 -1.70% comes after Lehman
Brothers lowered its third-quarter and 2004 earnings estimates
for the chip giant. After recent checks, Lehman said that while
they still expect INTC to deliver solid second quarter results on
July 13, the firm is moderating expectations for Intel's third
quarter and is lowering its revenue estimates from an 8% quarter-
over-quarter gain ($8.75 billion) to a more moderate 6% increase
($8.59 billion), which has the broker cutting its quarterly EPS
estimate to $0.30 from $0.31.

U.S. Market Watch - 01:15 PM EDT


Sector action remains broadly lower with the GSTI Software Index
(GSO.X) 142.31 -4.81% leading today's list of sector losers.

Most actives in the first half of today's session are dominated
by software names with Conexant (CNXT) and Veritas (VRTS) holding
respective #1 and #2 spots. Sector bellwether Microsoft
(NASDAQ:MSFT) $28.10 -1.65% is #3 at just over 41.4 million
shares traded.

Key technicals at trend that I see currently being tested are
found in both the S&P 500 Index (SPX.X) 1,115.68 -0.86% and
NASDAQ-100 Tracker (AMEX:QQQ) $36.01 -2.19%, where both indices
now fall back to my original downward trends, which were broken
to the upside on June 7th, at higher levels than current trade.
These trends after having been broken to the upside had held has
bearish support.

A negative that I do see is that the Networking Index (NWX.X)
239.98 -3.81%, which broke out of its bearish, or downward
trending regression channel, on June 23, has fallen back into
this channel and did not find support/buyers at the 245 level,
where weakness here has me thinking that both the SPX and QQQ may
be further vulnerable to declines at this point.

From the Chartroom 07 July 2004

ST Index (1,874.57)

The ST Index exhibited a strong surge over the last 2
days, especially in its intra-day movement. However, the intra-day pullback
witnessed in the ST Index yesterday, from a high of 1,891.91 to close @
1,874.57 is a clear indication of short-term weaknesses expected over the
next few days.

Despite the overnight dive in the US market, especially vivid in the NASDAQ
Composite Index with a drop of 2.15% (-43.23 points), we still see
sustainable strength in the ST Index in a bigger picture. Moreover, the
market sentiment has gradually improves, and we are expecting even stronger
market sentiment towards the end of the month.

In short, any weakness exhibited in the current market condition is a good
opportunity for further accumulation on long, as the impact from the US
market is only short lived. We are expecting a sustainable technical
recovery for the Dow Jones Index, S&P 500 Index and NASDAQ Composite Index
over the next few days.

We maintain our immediate resistance at 1,875 as the Index failed to close
above the said level. Any clear breakthrough will challenge our next
resistance level at 1,900. We maintain our immediate support at 1,810
levels for the week.

Contra-period traders should consider Long positions selectively. Intra-day
traders may consider taking short positions aggressively and selectively
for today.

For investors with longer time-horizons, we see a good opportunity to
commence even more aggressive accumulation for an investment horizon of 3
months, in any further weaknesses in the ST Index over the next few days.

We see the current scenario as a good opportunity for further accumulation,
in anticipation of a prolonged Bull Cycle to the 2,100 levels for the STI
by the end of the year. Any further delay to our projected timeline to meet
the 2,100 levels is confined to end 1Q05.

From x-tecTrade daily technical comments

While the indicative Wall Street market ended its losing run during its latest trading session, Yahoo’s closely watched quarterly results after the close did not match market expectations, with the stock down 13% at times in post-market trading. Shortly after the close, US futures also weakened. We will have to wait and see to what extent this will trouble STI today. It must therefore be assumed that the stock market environment for STI on Thursday too will initially show not untroubled technical sentiment. From a technical intermarket perspective too, no bullish indication can be attributed, as, amongst other things, a false breakout has to be seen as the underlying factor in the broad based S&P 500. All the more noteworthy then, the relative strength of STI, which has been constantly fixed since 1690 in a short-term upward trend channel. Seen in isolation, trading chances in STI from a technical perspective are therefore predominantly to be sought at the moment on a procyclical basis on the long side. Against this background at above 1892 position traders trading in line with the trend can consider developing existing long positions. In doing so, however,
traders should not ignore the temporarily prevalent risk factors, such as the current unstable state of technical and inter-market sentiment and the significant horizontal resistance at 1913 – the latter causing position traders operating strategically and with a procyclical stance to wait for a sustained position to be held above this key resistance level. In this context, longpositioned investors continue to consider preparing themselves mentally for a restrictive profits lock-in, as with upward breakout scenarios, such as we have seen in recent days with STI, there is often a pullback to the previous down trend line.

3rd liners in play...
Think STI needs a little rest now.

There was an early rally in Tech stocks that sent the NASDAQ rallying shortly after open. This activity helped lift the DOW to early gains as well. However, there appeared to be little strength behind this rally and the major averages retraced by midday.

By market close, the markets had held onto slight gains after another rally in the afternoon was not supported. All in all, it was a volatile day that was most likely a reaction from the selling that has been experienced in the last week. But the light buying that we have seen today is just that ... light, without conviction nor support from the general markets.

Earnings pre-announcements continue to be released to the markets, and not all too favorable. Software companies experienced warnings, as did the Financial sector.

Todays activity does not lend strong potential for a continued rally tomorrow. Therefore, it would not be unexpected to see the week end to the downside with more selling pressure.



DOW gained 20.9 points to close at 10,240 (+0.21%)
NASDAQ gained 2.6 points to close at 1966 (+0.13%)
S&P500 gained 2 points to close at 1118 (+0.19%)

A nice resistance and a nice support using Andrew's Pitchfork

Bullish Call on 28th June 2004 for SESDAQ market.

NextMove4cast called for Bulls to run in penny related
stocks in the SESDAQ markets from 28th June into July
2004.

Our anticipation of an impending Bullish Move into July
scored a Bulls Eye as many penny related stocks have
registered Big Moves in Top Daily Volumes since then.

Note however SESDAQ Index has not managed to break its
100.5 Resistance level as yet. A BIG Move would occur
when such an event has happened. We are now looking for
further technical signals to confirm such a move.

- Phillip Securities 12/July/2004

SINGAPORE : China has protested against Deputy Prime Minister Lee Hsien Loong's visit to Taiwan, saying Singapore has to take all responsibilities for the consequences.

It said Mr Lee made the so-called unofficial visit "regardless of solemn representations repeatedly made by China".

Chinese state television quoted Foreign Ministry spokeswoman Zhang Qiyue as saying that China is firmly opposed to official exchanges in any form between Taiwan and countries that have diplomatic ties with China.

She said Mr Lee's visit would damage China's core interest and the political foundation for China-Singapore relations, and hurt the feelings of 1.3 billion Chinese people.

Responding, Singapore's Foreign Ministry said Mr Lee was on a private and unofficial visit to Taiwan to meet friends. He last visited them in 1992.

MFA added that Singapore has consistently maintained a "One-China" policy, and does not support independence for Taiwan.

It said Mr Lee's private visit does not in any way change this policy, nor does it represent any challenge to China's sovereignty or territorial integrity.

The Foreign Ministry said Singapore values its close and extensive ties with China, and that it would be regrettable if they were to be affected by this private visit.

Meanwhile, the Monetary Authority of Singapore said that this year's MAS Lecture, due to be held on Wednesday, has been cancelled.

The speaker, Dr Zhou Xiaochuan, Governor of the People's Bank of China, has cancelled his trip to Singapore. - CNA

----

Short china counters tomorrow ? :rolleyes:

If i am not wrong, this morning's cnbc asia reported that intel's results were disappointing. May affect tech and semiconductor stocks.


Bulls banking on Intel's guidance

The major indices hover either side of unchanged, but I'd have to
say bulls might be banking on some upbeat guidance ahead of
tonight's quarterly earnings report from Intel (NASDAQ:INTC)
$26.07 -0.67% as the stock continues to hover at lows found in
March.

There's little argument among analysts, that have a mean
quarterly EPS estimate of $0.27 for Intel's quarter that the
chip-giant will meet analysts' forecast, but there is uncertainty
around what Intel's management will say in regards to the
company's outlook for the remainder of the year.

While there is focus on Intel's earnings after the bell, there
are some bullish undertones from the broader market.

While the Broker/Dealer Index (XBD.X) 118.28 -1.24% trades lower
on disappointing earnings from Merrill Lynch (NYSE:MER) $49.69
-3.45%, I wouldn't say that the XBD.X has exuded bullishness
after triggering a triple bottom sell signal on its point and
figure chart, but somehow, the brokers as a group continue to
hold relatively steady. For the S&P 500 Index (SPX.X) 1,113.49
-0.07%, where financials comprise roughly 25% of its value, the
S&P Banks Index (BIX.X) 349.45 +0.34% remains one of the stronger
financial sectors.

U.S stocks little changed after PPI, Nokia


The Dow Jones industrial average (INDEX:INDU) was down 12.98 points, or 0.13 percent, at 10,196. The Standard & Poor's 500 Index (INDEX:SPX.X) was down 1.35 points, or 0.12 percent, at 1,110. The technology-laced Nasdaq Composite Index (INDEX:COMPX) was down 2.01 points, or 0.1 percent, at 1,913.

The Labor Department report said the PPI declined 0.3 percent in June versus a 0.8 percent rise in May. The closely watched measure of core producer prices, which strips out food and energy costs, gained by 0.2 percent.

In another report, the number of Americans filing initial claims for unemployment pay grew by more than expected last week, government data showed on Thursday, but was due in large part to seasonal factors.

U.S. crude oil prices were above $40 a barrel and approaching June's peaks, which again were raising concerns that higher fuel prices may threaten the U.S. economic recovery and slow profit growth.

3M Co. gave a boost to the Dow after the U.S. Food and Drug Administration approved its Aldara drug as a treatment for a form of skin cancer. The stock rose 71 cents, or 1 percent, to $88.85 on the New York Stock Exchange.

Global mobile handset leader Nokia reported a drop in sales in handset and core earnings due to fierce competition and a weak product range. It warned profitability would suffer for the rest of 2004. Nokia fell $2.10, or 14.8 percent, to $12.15 on the New York Stock Exchange.

Apple Computer pulled up the Nasdaq, jumping $4, or 13.6 percent, to $33.50. Apple posted quarterly net income on Wednesday that more than tripled.

IBM profits rise 17% on hardware sales :

Strong growth in computer hardware sales helped boost second-quarter profits nearly 17 per cent at IBM Corp, beating Wall Street's forecast for the technology bellwether on Thursday.

From April through June, IBM earned US$1.99 billion (S$3.40 billion), or US$1.16 per share, on revenue of US$23.15 billion. In the same period last year, IBM made a net profit of US$1.71 billion, or 97 US cents per share, on revenue of US$21.63 billion.

This time around, analysts surveyed by Thomson First Call were expecting IBM to show earnings of US$1.12 per share and revenue of US$23.35 billion. IBM's chief financial officer, Mark Loughridge, said growth in the information-technology market is the best it has been in the past four or five years and noted that 'customer spending continues to improve.' He said analysts' current forecasts for IBM's full-year performance 'remain reasonable.'

US Markets This Week

A barrage of earnings reports and two days of congressional testimony from Federal Reserve Chairman Alan Greenspan will keep investors busy in the coming weeks. But if corporate earnings and guidance come in mixed, much as they did the past week, the major indices could be in for another week of drifting.


Nevertheless, it will be another tech-heavy reporting week with big names such as 3M on Monday, and Motorola, Sun Microsystems, EMC and Texas Instruments on Tuesday. On Wednesday, Kulicke & Soffa, Nextel and Sprint will report. DoubleClick and SAP will report Thursday.

Greenspan will deliver his semiannual testimony before the Senate Banking Committee on the state economy on Tuesday at 2:30 p.m. EDT. The testimony continues before the House Financial Services Committee on Wednesday at 10 a.m.EDT.

SESDAQ INDEX

High oil prices prevailed amidst onslaught of bearish news. These RATTLED the markets further, adding selling and downside pressures to 97 Key Level. Recent initial bullish attempts by SESDAQ sectors in early July have dampened and tapered off, succumbing to persistent “negative” news in the prevailing bearish environment.

Short Term View
i. Occasional Brief Rebounds expected as prices fall into Oversold Zone.
ii. Weakness to persist if closes convincingly below SESDAQ 97 Support.
iii. Short Term Traders to “AVOID” or be verycautious of taking long positions as Rebounds would be brief and not sustainable in “negative” environment.
iv. May be prudent to lock some profits in COSCO as it has rallied too much recently ahead of results.
v. Mid week would point to better signs as the short term tussle between Bulls and Bears wrestle blowsover.

Mid Term View
Maintain Hold for those with existing mid term portfolio.
i. Be cautious and stay on “Sidelines” till marketselling recedes from “bearish” moods.
ii. May do strategic “switch” from weak counters into quality growth stocks for better weeks ahead while market succumbs into consolidation mode amidst “bearish” environment.

- Phillip Securities 19/July/2004

STI INDEX

Short Term View

STI INDEX 1860 would provide short term support and it needs to hold well amidst current “bearish” environment to maintain its recent upside biases. Immediate Resistance 1900 level would cap any further upside in the short term; new positive fresh leads add fuel for STI to cross this key resistance.

Mid Term View

As long above 1760, STI Index is still in an Up trend over mid-term. Any Upside is limited at its previous high of 1913 level in the short term. However, we expect this level to give way in the later half of this year when “bearish” events subside.

- Phillip Securities 19/July/2004

NASDAQ INDEX

Has fallen for quite sometime amidst barrages of bad news. Expect occasional brief rebounds on its bear journey, with immediate minor support at 1865. Any rebounds from NASDAQ will help mitigate tech falls that have succumbed to analysts’ downgrades over recent weeks.

The SESDAQ INDEX and local tech stocks are likely to react with technical rebounds should a NASDAQ technical rebound occur.

- Phillip Securities 19/July/2004

DOW JONES INDEX

Any fall near 10,000 is likely to be met with an impending rebound as this is a key psychological support level. As such, we can expect rebounds to occur this week as falls have been overdone recently; although these rebounds are more of a bear rally (traps) that are not sustainable.

- Phillip Securities 19/July/2004

STRAITS TIMES Index (1,871.47) – The Bull is still firmly intact to the 2,100 levels by the end of year.

All the Bullish signals [Point 1 and Point 3] pointing to the 2,100 levels are still firmly intact, despite recent concerns over US market fundamentals. The ST Index is taking a short breather before the next up move towards a sustainable
momentum [Point 1]. Despite the temporarily muted market sentiments, we see a good opportunity for aggressive accumulation on long in order to capitalize the sustainable up-trend fully as the market is still littered with selective
bargains. Any delay in the projected up-move to 2,100 levels is confined to end Q1 2005 at the latest. Short-term consolidation [Point 2] with resistance at 1,900 and immediate support at 1,850 levels. The Index is likely to exhibit some intra-day weaknesses in the short-term over the next few days. The 1,850 level is
seen as the immediate support with further strong support at 1,810. However, we see a remote chance of the Index diving to the 1,810 levels. Any further up move will challenge our immediate resistance level of 1,900 for the week, with strong
resistance expected at the 1,950 levels. Selective accumulation of blue chips.
The Index is gradually accumulating strength in the current consolidation phase [Point 2] for the next up move.

NEW YORK, July 21 - U.S. stocks opened higher on Wednesday, buoyed by news that Microsoft Corp. (NASDAQ:MSFT) would return more than $75 billion in cash to shareholders over the next four years.

The Dow Jones industrial average (INDEX:INDU) was up 15.78 points, or 0.16 percent, at 10,164.85. The broader Standard & Poor's 500 Index (INDEX:SPX.X) was up 3.48 points, or 0.31 percent, at 1,112.15. The technology-laced Nasdaq Composite Index (INDEX:COMPX) was up 15.51 points, or 0.81 percent, at 1,932.58.

ST Index stuck in narrowest trading range in 20 years since 1985

It has become increasingly predictable that the ST Index would not drop much below its year’s highs around 1900 and neither would it break out to a new high. But it is ironic that such “certainty” has become the enemy of players and investors who have always found it much more difficult to cope with uncertain market environments.

Perhaps the ideal situation is when the market sustains its rallies, ie bull runs, which we had seen from March-April 2003 to January this year or better still superbull runs the last one being in 1999 and January 2000 when the index hit an all time high of 2583.

But the current “certain” market is definitely better than the 3 year bear market from early 2000 to early 2003 when share prices plunged almost continuously taking the STI from 2583 to a low of around 1200.

Still the exceptionally narrow trading band so far this year, all of 223 points from 1690 to 1913, is a cause for concern since it is the narrowest since 1985 when the STI was reconstituted from the old ST Industrials Index. That year the movement was between 690 and 479, a span of 211 points but in percentage terms it is much more volatile than the present 223 point range.

It is highly unlikely that neither the high nor low would not be broken in the 5 months or so before year-end. In fact with the persistence shown in sticking close to the 1900 level, it is more likely that a new high will be seen rather than a new low, although many are resigned to see the market stuck around 1800-1900 for rest of year.

But what is certain too is that we will not see a repeat of the wide 500-800 points annual trading ranges of the past 4 years from 2000 to 2003. One of the reasons why the STI is stuck around 1850-1900 is because it is at the half way mark between the 2583 peak and the Sept 11 low of 1198, which is 1890.

Moreover if measured from the Asian crisis low of 800 to the record high, the 1900 mark is also the 38.2% retracement. This means by both yardsticks, 1900 is indeed a really tough nut to crack and this has been proven since the beginning of the year.

It looks like it will continue to be an arduous task to break 1900 and perhaps only a superbull run to new highs will break this jinx. That possibility has already been explored earlier when it was observed that there have been 6 year gaps between super bull runs in the last generation – 1981, 1987, 1993, 1999 which means the next superbull is due in 2005.

This could also explain why the STI has stubbornly clung to 1850-1900 to make it easier to repeat the 500-800 yearly trading bands next year. A 500 point range from 1850-1900 will mean an STI of 2350-2400, exceeding the 61.8% fibonacci mark of 2054, while an 800 point range will mean a new record of 2650-2700.

- Fraser Securities 22/July/2004

STI dwgraded
Lifted by overnight gains on Wall Street, stocks managed a mid-week rebound
following Tuesday’s sell-down. Technology and China related stocks were the main beneficiaries. Despite the STI rising 7.9pts, it failed to break near term resistance of 1882. Breadth was positive with gainers outnumbering losers by 221:111.

In the US, major indices gave up early gains to finish sharply lower amid continued
concerns about a slowdown in H2 corporate earnings. Both the Dow & Nasdaq have
given back all of the gains achieved on Tuesday with change to spare. After the bell, eBay reported quarterly earnings that beat expectations but lowered the FY earnings forecast. Shares of internet bellwethers eBay, Yahoo & Amazon are falling in late trade.

Look for a lower start to the session, in line with the overnight disappointing
performance on Wall Street. Buyers could also shy away as the weekend approaches.The STI has been propped by just a handful of blue chip stocks in recent weeks while the broader market slumped amid concerns about earnings slowdown in H2. Market breadth has been falling while the benchmark index appears strong and unshakable. This is analogous to a barrel of apples that is ‘nice on the outside, rotting on the inside’.

The recent strength in index-linked stocks could be due to either optimism that FY GDP numbers would be revised upwards or the smooth and successful Prime Minister transition. But with concerns about H2 corporate earnings hurting global indices, we now take the view that there maybe little impetus to propel the STI up to the psychological 1900 mark and above the year’s high of 1913.

Instead, we now see the benchmark STI oscillating within a broad trading range around 1793/1800 to 1900 over the medium term.

KELIVE

Sunday, July 25, 2004

--------------------------------------------------------------------------------


Ready, Set, Wait
by Jim Brown

After a terrible week for the major indexes we closed at critical support levels and very close to lows for the year. The markets are poised to wait out the Democratic convention in hopes it will pass uneventfully. If it does we are poised for a rebound until the next event on August 13th when the Olympics begin. The waiting game for the convention will begin on Monday.

There were no economic reports on Friday and I doubt the markets would have paid attention anyway. The focus on Friday was earnings and convention and both were negative.

After Thursday's earnings 242 S&P companies have reported earnings and 169 beat estimates, 47 reported inline and 26 missed estimates. Last year at this time the numbers were 206, 7 and 29. Clearly there is a shift away from the high end after expectations became too optimistic. Earnings warnings on future guidance by numerous big name companies have soured investor appetites for stocks. It is not that earnings are bad, they are far from it at +24.4% in year over year Q2 gains. These are very strong gains but the challenge is not what companies are reporting but what they are saying. It appears these earnings are not sustainable and the decline back to single digits could come faster than expected.

The gloom and doom from the earnings slow down pushed the Dow to its lowest close since May-24th at 9962 and a new intraday low for July at 9932. The Dow is only one sell program away from making a new closing low for the year at 9906. The Nasdaq has already performed this feat with the 1849 close on Friday. Not only was it a new closing low for the year but also a new low. Also jumping on the bandwagon was the SOX with a new dual low for the year at 405.

Dow Chart - Daily



Nasdaq Chart - Daily



We all know this market depression is not based entirely on earnings but also on the terror threat to the Democratic convention next week. Headlining the news today was a FBI announcement that there was a plot to disrupt media coverage of the convention by blowing up and setting fire to media vans. While this was discouraging it was far from the critical event anticipated from groups like al Qaeda. Reportedly the media attack was coming from a domestic group and not overseas terrorists. The market sold off all week purportedly on earnings but always with an eye on coming events.

Not only do we have the Democratic convention next week we have the Olympics beginning on August 13th, just two weeks after the Democratic convention is over. In the U.S. the convention is an important symbol but globally the Olympics is a far bigger target and one far harder to protect. With hundreds of thousands of attendees heading to Athens the potential for multiple deadly attacks is very strong. Right in the middle of these events we have another Fed rate hike on the table on August 10th. This is creating a virtual mine field for the markets to traverse over the next four weeks.

Reports out on Friday suggested funds are sitting on abnormally high amounts of cash both for protection against an event drop and to be able to take advantage of any opportunity an event creates. Several funds currently sitting on piles of cash include Long Leaf Partners at 29%, Clipper 26%, Weitz Value at 28% and FBA at 30%. These funds have billions under management and they are holding billions in cash. Multiply this even in moderate terms over the 11,000 funds and you have a virtual mountain of cash on the sidelines. This cash is ready for a market event but what if no event occurs?

It seems clear to me that a lot of this cash will be put back to work in the market once the convention is over with even more going into equities after the Olympics. This is setting up a potential rebound from these lows as soon as next week. With the convention over on the 29th we have about a two week window where we could see a summer rebound before the calendar heats up again.

This does not mean we are going to the moon or even back to the midrange of our recent travels. I am just suggesting we could see some money put back to work and I want to capitalize on that potential.

We still have some serious technical market problems that have to be addressed. The S&P has been trading under the 100dma for three weeks and Friday's close at 1086 was a new two month low and -20 points under the 200dma. These bearish technicals could continue to keep pressure on fund entries. Don't forget Sept and Oct are two of worst months of the year on a historical basis. Unfortunately August has been the worst month for the last 15 years on the Dow and SPX and second worst on the Nasdaq. While September and October are remembered for major bottoms August is just remembered for being down. Over the last seven years the markets have averaged a -4% lost in the last five days of the month. Add in the August event risk and the odds are good any post Democratic convention rebound will not be earth shaking. We have piles of cash on the sidelines but the majority of that cash is likely frozen until September.

What this means for next week is the potential for a range bound market on very low volume as everybody watches the news channel rather than the stock channel. As the week progresses we could begin to see some bargain hunting which could accelerate if we get a further dip to the May lows on the Dow. I hesitate to mention the potential for a rebound because there are so many factors at work but the potential is still there. The qualification remains the terror risk. We all know that the convention site is very well protected with major streets blocked off on all sides for blocks in every direction. However, terrorists do not have to hit the convention itself to be successful. Putting an airplane in the side of the John Hancock tower would bring everything to a crashing halt. A few car bombs at critical intersections would also make their point. It does not have to be an attack on the fortress of the convention itself so investors can't afford to be aggressive in reentering the market until it is over.

This is a week for waiting and watching and praying and not necessarily a week to rush into the markets. Keep your eyes open for good stocks punished with the rest of the crowd and be ready for an end of week uptick.

27/7

QQQ and Nasdaq broke below their previous year-to-date lows this morning, the first of the major indices to do so. The OEX, Dow, and SPX all came close to doing so but managed to hold above the previous lows. Much of the losses were corrected in the final hour of trading.

Volatility rose, with the QQV up 7.61% to 23.62 and the VXO adding 2.22% to 17. While these levels represent significant increases from the recent lows, they continue to reflect relative complacency on a longer-term basis.

Several investment houses were out with opinions on where the stock indices are likely to go next. Prudential's Ed Yardeni lowered his year-end 2004 target for the SPX from 1300 to 1190 and his 2005 target from 1450 to 1300 citing investor disappointment regarding high oil prices and uncertainty surrounding the presidential election. Prudential also cut its technology weighting to underweight, with strategist Edward Keon advising clients that he sees at best single-digit growth for 2005, compared with the previously expected rates of 11% overall and 18% for the tech sector.

Merrill's Richard McCabe was out early in the morning, stating that his short term momentum indicators were "extremely oversold" and that a "new rally phase" could develop in the short-term. He went on to note, however, that sentiment was not sufficiently negative to lead him to expect a resumption of the post-2002 rally. CSFB's Garthwaite disagreed, advising clients that valuations remain above their long-term averages, and that a correction to those averages would require another 3% decline. However, he added that a throwunder of just one standard deviation could result in an additional 18% decline for equities. He went to say that "Implied volatility remains low, the CSFB chartists' view continues to be negative, and the ratio of gainers to losers remains well above levels that have been associated with previous turning points in the markets."


Last week's candle broke the rising weekly support line on a closing basis for the first time since the 2003 bottom, with Friday finishing at the week's low. The move resolved both the price and oscillator ambiguity to the downside, printing a fresh sell signal on the 10-week stochastic and reversing the bullish kiss on the Macd. While the potential bull wedge remains intact, with the parallel pattern of lower highs and lower lows above 9800, the action was decidedly bearish, particularly with respect to the shorter timeframes, which failed to bounce on schedule and which trended lower as the price decline continued.

Daily Dow Chart



The Dow daily chart left off with a doji star for the day, with moves to both the high and low rejected and price settling unchanged, lower by 0.3 at 9961.92. The 10-day stochastic buy signal that had me expecting a bounce last week above 10K aborted its fledgling upphase and is now trending, still showing a very slight bullish divergence but bumping along the bottom of its range as it did in March and in May. The Macd has not confirmed with any buy signals, showing only a slight histogram divergence as highlighted in the chart. The spike low in May to 9840 is support below the levels tested today at the previous May lows of 9900. While the oscillator setup continues to suggest bullish pressure building, the bottom of the current descending channel is well below 9720. We recall 9800-10200 from years past, however, and despite the downside whipsaw, the daily cycle oscillators remain at levels that have more risk for bulls than for bears. A break back above 10020 would have the daily cycle back on buy signals. However, as we've seen since last week, picking bottoms in this market is very risky business.


The Nasdaq had been weaker through the bulk of the decline, and last week did not disappoint. An initial retest of the rising weekly trendline (which had broken the previous week) was repelled with authority, leaving a long doji shadow atop what proved to be a bearish reverse hammer or gravestone doji. As with the Dow, the bull flag is still intact. However, the oscillators have also resolved their uncertainty to the downside, with sell signals printed from lower price and oscillator highs. Resistance is in the 1930 area, while flag support and price confluence now line up at the 1760 Fibonacci level.

Daily Nasdaq Chart



The Nasdaq's 10 point decline was sufficient to maintain the steep downtrend on the daily chart, with the close at 1839 leaving the upturning 10-day stochastic rolling over for a trending move within oversold territory. Bollinger and regression channel support are down to 1820 here, and while the risk to bears is obviously increasingly with each decline, previous support between 1880 and 1900 is now resistance. As even Merrill's McCabe noted, the increases in volatility, while respectable, are not at absolute levels from which a bounce appears readily obvious. While the weekly cycle pointed south and the daily unable to turn from previous support at the y-t-d lows, the onus is on bulls to regain former support before imputing too much significance to an oversold daily chart.


Bonds declined today from the open, falling further with the release of the record existing home sales data (see below), with the ten year note yield (TNX) closing higher by 4.3 bps at 4.475%. Resistance above is at 4.48%, followed by 4.5%, 4.64, 4.75% and 4.8%. This daily cycle upphase is opposed to the weekly cycle downphase on the chart above, projecting to a retest of support at the 4.02% level and possibly to what appears as daily bullish descending wedge support as low as 4.32%. A break above 4.5% would have a bullish implied target of 4.8%, with stronger resistance at 4.5%.

At 10AM, Existing Home Sales for June were released by the National Association of Realtors, with the number of existing homes sold rising 2.1% from a revised 6.81M level to a record 6.95M units. This represents a 17.4% increase over last year. The NAR also announced that the median sales price reached a record $191,800 in June, a 9.6% increase.

K announced earnings of 57 cents per share, up from 50 cents in the same fiscal quarter of 2003 but missing estimates of 54 cents. The company reaffirmed its 2004 outlook of $2.07-$2.11 per share, below the consensus estimates of $2.14 per share. K finished higher by 1.29% at 40.75. WMT announced that July sales were headed for a 2-4% increasing, matching prior forecasts buoyed by warm weather summer buying and back-to-school products, but closed for the day lower by .96% at 52.65.

TSN beat expectations of 36 cents, coming in at 45 cents per share but announced that 2004 results will miss previous estimates of $1.41 per share, guiding to between $1.20 and $1.30 per share. The stock got smoked for a 7.37% loss, closing at 18.48.

Google, which has requested to trade under the symbol "GOOG", seeks to price its IPO at $108-$135 per share for 24.64M shares. The company expects to raise $3.3B to $3.8B, above the 2.7B that marked the highest estimates in its previous filings. ASKJ was higher on the morning announcement of the extension of its advertising pact with Google through 2007.

AXP reported Q2 earnings 68 cents a share, beating expectations by a penny and up 9 cents from Q2 2003's results. Revenues roses 14% to $7.26B, exceeding expectations for $6.91 billion, and the stock closed higher by 1.64% at 48.90.

After the bell, GNSS reported earnings excluding charges of 5 cents per share, beating estimates by a penny. The stock was lower by 1.13% for the day at 9.60, sliding lower to 9.45 after the announcement. Homebuilder CTX announced a 21% y-o-y- increase in net earnings to $1.35 per share, with sales increasing 33% since last year. The company upped its fiscal '05 earnings target to $6.75-$7.25 share, compared with expectations for $6.78 per share.

The future is anything but clear from here. On the one hand, the daily charts tell us to expect a bounce, but the weekly charts are reasserting their ongoing downtrend and suggest a possible move to the lower bull flag supports or below. The rally off the 2003 lows generated a slew of extreme readings, including breadth and the TRINQ, the volatility indices, and, among others, on the oscillators. It is easily imaginable that the intraday and daily oscillators will continue to trend as the longer cycles continue to dominate to the downside. While the daily candles printed lower doji shadows, the intraday action was not the stuff of classic doji bottoms- the crowd was not gleefully selling through support and the reversal was not sudden, swift or on much higher volume. I'm not trying to talk down the bullish case, but am rather trying to provide a counterpoint to it. I personally expect to see the daily cycle generate buy signals at or close to current levels. However, that gut feeling is tempered by the foregoing arguments. The indices do not have to continue today's 3PM bounce, and patient bulls should continue to so be, at least until at least one or two levels of prior support have been regained. Until it reverses, the daily trend remains down.

I think this commentary is quite sensible.

Over the last few months, investors have been looking for reasons for the markets to rally or decline, and today it came in the form of Consumer Confidence figures.

Stocks are depressed at the moment, in other words, at low prices. For the last week we have seen the markets gap up on open but investors have not been able to hold onto these small gains and find buyer strength. Today was different as the Consumer Confidence figures for July came in better then expected, but not at an over inflated level.

The Conference Board``s measure of July increased to 106, up from 102 in June. Expectations were for 102. Analysts perceive anything higher then 90 represents good consumer confidence and so todays release shows that there is still strong potential for consumer spending to help continue driving the economy.

By afternoon, the markets were still dominated by buying activity with most sectors in the green. Instead of the usual retracement that we have seen over the last month, investors remained upbeat and held onto the gains. This is most likely in light of stock prices at such low levels and investors perceiving a "bargain".

So will the rally continue?

It is a little early to judge whether this is simply a quick rally during the overall downtrend, or whether there is greater potential for the markets to hold and rally. If today was such a big reaction to positive news, how will investors react if we find negative news in the coming days - maybe in the form of earnings reports, or even weaker economic statistics?

For this reason, we remain cautious of todays rally. We might find follow up buying tomorrow, but we would not be surprised to see another day or two of negativity before the end of the week.

We can see from the above daily charts that todays rally is at the perfect reversal point. The technical traders out there may also realize this and help fuel the buying activity to lift the major averages. But what is also apparant is that the high points are lower. Traders who speculate that the markets will rally from this point, taking Bullish positions, should trade carefully and be aware that the markets could reverse at any time to form a lower high.

I did expect a rally last nite..but was surprised it was so strong. But one swallow does not make a summer...so do be careful. ;)

Nasdaq Futures



Perspective: Bias is mixed this week. The major stock indexes are at critical support levels and cannot move too much lower without creating technical damage. Our general bias is that the economy is strengthening and that rates are still low enough to prompt economic growth. However, the market¡¦s perpetual focus on rising interest rates and the election as both being negative developments could create continued pressure. A short dip below support at the 1366.00 level is not out of the question, and would serve to take out stops (all prices and charts are based on continuation futures).

Analysis

Positive Factors:

1) Yesterday¡¦s trade tested and held at support from the bottom of the bullish hammer reversal pattern made on May 17th at 1372.50 on a closing basis.

2) Yesterday¡¦s trade also tested and held at support from the bottom of the bullish hammer reversal pattern made on Mar 24th at 1366.00 on a closing basis.

3) Trade on Jul 26th marginally created a bullish hammer reversal pattern. The bottom of the pattern created an 8-month low at 1360.00. It was tested and held in yesterday¡¦s trade when the market moved within 1.50 points of that level at the day¡¦s low.

4) The Jul 26th reversal created a bullish divergence when compared to the low made on Jul 19th on both the stochastics and the RSI oscillators.

5) Trade in early-Oct broke out and sustained a move above the 62% retracement of the 12/01-10/02 downtrend at 1378.50. That indicates that the market will move up to the 12/01 high at 1738.00.

Negative Factors:

1) Yesterday¡¦s trade was very vulnerable to gains in crude oil. Since that market broke out above the early-Jun high at $42.45 and moved to new all-time highs at $43.05, it looks like additional gains are possible and that will offer pressure to the stock market.

2) Trade on Jul 16th broke down below support from the rising trendline drawn off the 9/30/04 & 3/24/04 lows. The trendline offers resistance today at 1411.30 and gains 0.50 points/day.

3) Trade on Jul 6th caused the short-term three week bullish triangle pattern to fail. The pattern was drawn off the Jun 3rd & Jun 22nd lows and the Jun 9th & Jun 18th highs and projected a rally to the 1533.81 level. The market moved within 5.30 points of the upside objective in late-Jun before falling lower.

4) Trade on Jul 6th broke below the upper boundary of the longer-term bullish triangle continuation pattern drawn off the Sep ¡¦03 & Mar ¡¦04 lows and the Jan ¡¦04 & Jun ¡¦04 highs causing a false breakout. The pattern made a false breakout before when the pattern was drawn off the Jan and Apr highs. Of course it can be redrawn again but seems silly at this point.

5) Trade in late-Jun tested and generally held at resistance from the Apr 5th high at 1511.00. There was only one closing breach above that level and the market reacted sharply lower following that breach.

6) Trade on Jun 30th created a small bearish spike pattern and a 5-month high at 1528.50. That high tested and generally held at the top of the Feb 19th bearish outside day reversal pattern at 1525.50.

7) Trade on Jan 20th created a bearish doji reversal pattern. The top of the pattern created a 22-month high and will offer resistance at 1562.50.

Dow Industrials Futures 29/7



Perspective: Bias is mixed this week. The major stock indexes are at critical support levels and cannot move too much lower without creating technical damage. Our general bias is that the economy is strengthening and that rates are still low enough to prompt economic growth. However, the market¡¦s perpetual focus on rising interest rates and the election as both being negative developments could create continued pressure. A short dip down below the 9,840 level is not out of the question and would serve to take out stops (all prices and charts are based on continuation futures).

Analysis

Positive Factors:

1) Yesterday¡¦s trade moved down to 9,990 at the day¡¦s low. That was just 15 points above support from the Jul 26th high at 9,990, which was the lowest high made during the late-Jul short-term bottom.

2) Trade on Jul 26th created a bullish hammer reversal pattern. The bottom of the pattern will offer support at 9,900.

3) Trade on May 12th created a bullish hammer reversal pattern. The bottom of the pattern will offer support at the 9,840 level. The pattern was tested and held as support three days later when trade on May 17th created a bullish spinning top reversal pattern after holding 15 ticks above the hammer reversal.

4) The May 12th reversal pattern tested and held at support from the Nov 7th ¡¦03 high at 9915 on a closing basis. That was the top of the bearish engulfing day reversal pattern as well as a short-term peak.

5) The May 12th reversal pattern was made 43 points above key support from the 50% retracement of the Jul 1st ¡¦03-Feb 19th ¡¦04 uptrend at 9,797. A continued hold at that level would project a rally back up to the Feb 19th high at the 10,750 level.

6) Trade on Jun 4th ¡¦03 broke out above the neckline of the bullish head & shoulders bottom pattern. The neckline is drawn off the 8/22/02-12/2/02 highs. The pattern projects an upside move to the 10,849 level. The neckline was tested and held as support in late-Jun/early-Jul and again in early-Aug.

Negative Factors:

1) Trade on Jul 21st created a bearish outside day reversal pattern. The top of the pattern will offer resistance at 10,225.

2) Trade on Jul 6th broke down below key support from the top of the bullish triangle continuation pattern drawn off the Feb 19th & Apr 13th highs and the Nov 21st & May 12th lows. The top of the pattern was taken out and its upside objective at 11,405 was confirmed on Jun 7th. The top of the pattern can be redrawn using the Jun 23rd high, but it seems silly to continue to believe in a pattern that repeatedly fails (as it has in the Nasdaq and S&P).

3) Trade on Jul 2nd broke down below strong support from the bottom of the bullish hammer reversal pattern made on Jun 22nd at 10,292. That low formed the bottom of a month-long sideways continuation pattern.

4) Trade on Jun 24th created a bearish harami reversal pattern. The top of the pattern created a two-month high and will offer resistance at 10,479.

5) Trade on Feb 19th created a bearish shooting star reversal pattern. The top of the pattern created a 2 1/2 year high and will offer key resistance at 10,750.

Stocks Up on Strong Earnings, Oil Prices

29 July 2004, 10:19am ET

NEW YORK -- Stocks extended their rally Thursday as investors focused on strong earnings and oil prices stepped back from their record highs.
In early trading, the Dow Jones industrial average was up 11.43, or 0.1 percent, at 10,128.50.

The broader gauges were also higher. The Nasdaq composite index added 15.53, or 0.8 percent, to 1,873.79. The Standard & Poor's 500 index gained 3.61, or 0.3 percent, to 1,099.03.

Investors have grown increasingly nervous about slowing growth in the second half of the year, and worries about terror ahead of the presidential election and the Olympics have added an element of fear to the market. A surge in crude prices, largely propelled by a dispute between Russian oil giant Yukos and Moscow, has added to that uneasiness.

September crude oil futures, which reached a 21-year high in regular trading Wednesday, were down 57 cents at $42.33 on the New York Mercantile Exchange.
The Labor Department reported a moderate 0.9 percent rise in wages and benefits for U.S. workers in the April-June quarter, down slightly from the previous quarter's increase. In a second report, the department said new claims for unemployment benefits edged up slightly last week, though they remain at a level that suggests continued labor market improvement.

MetLife Inc. added 40 cents to $34.70 after reporting a 45 percent gain in second quarter profits, soaring past Wall Street's forecasts, as higher premiums and profitable investments helped boost revenues across all business segments. The company also disclosed that the Internal Revenue Service is auditing its returns for the years 1997-1999.

Exxon Mobil Corp. was up 8 cents at $45.89, after matching Wall Street's earnings estimates, reporting a 39 percent jump in profits on higher prices for oil and natural gas.

General Motors Corp. was down $1.27 at $42.85 after analysts with Goldman Sachs and Lehman Brothers downgraded their rating on the stock, amid worries about inventory buildup and a pending accounting rule change that could dent earnings.

Krispy Kreme Doughnuts, Inc. was down 10 percent, or $1.84, at $16.82, after disclosing it is the subject of an "informal, nonpublic inquiry" by the Securities and Exchange Commission. The probe is focused on the company's franchise reacquisitions and its guidance on a reduction in earnings, Krispy Kreme said.
Advancers outnumbered declining issues by about 2 to 1 on the New York Stock Exchange. Volume came to 167.19 million shares, compared to 155.82 million shares traded at the same point Wednesday.

The Russell 2000 index, which tracks smaller company stocks, was up 4.11, or 0.8 percent, at 545.31.

Overseas, Japan's Nikkei stock average finished 0.8 percent lower Thursday. In afternoon trading in Europe, France's CAC-40 added 1.6 percent, Britain's FTSE 100 gained 1.2 percent and Germany's DAX index was up 1.7 percent.

That Was Exciting
by Jim Brown

The market celebrated the end of convention event risk with a yawn and the concern immediately shifted to the lower than expected GDP. The critical convention event risk expired with no more excitement than a week old newspaper.

Dow Chart - Daily



Nasdaq Chart - Daily





The big news for the morning was not the end of the convention risk but the unexpected drop in the Q2 GDP to +3.0% from +4.5% in Q1 was well below estimates of +3.8% growth. This was the lowest level for GDP since the +1.9% in Q1 of 2003. The biggest component drop was in personal consumption which fell from +4.1% in Q1 to only +1.0% in Q2. This was a major drop and confirms the retail weakness we have been hearing about for a couple months. Overall the GDP is still up +4.8% over the last four quarters but that is mostly due to the +7.4% jump in Q3-2003 as a result of the 2003 tax rebate. The minor rise in consumer spending was the smallest gain in over three years.

While the GDP was a disaster the PMI was a blowout. The Business Barometer headline number was 64.7 compared to 56.4 in June. This did not completely reverse the drop in June from 68.0 in May but it does bring the report back in line with the prior two months. The Production component soared to 69.5 from 53.9 and New Orders rose to 68.7 from 56.8. Backlogs rose +6.5 to 60.2. The only component with a strong decline was employment which fell to 45.6 from 53.6. That was the worst labor reading since June-2003. Most notable was the drop in inflation with Prices Paid falling to 77.6 from 84.5. This was the first drop in PP since February.

Also adding to the positive economic picture was the NAPM-NY which rose to 302.5 in July and well over the 290.9 in June. This is a multi month high and shows business conditions are still improving. Non manufacturing activity jumped +31% to 71 from 58.0. Current conditions jumped to 72.3 from 57.6 but the six-month outlook exploded to 78.5 from 60.

Strong economics like the PMI and NY-NAPM along with the Philly Fed and Empire State survey suggests the ISM on Monday could see a strong upside surprise. The challenge is whether the rebound actually occurred in July or just the beginning of the rebound. The consensus estimates are for a headline number of 62.0 and right in line with the last four month average of 62.2. The recent high was 63.6 in January and we have seen numbers near 61 twice in Feb and June. A number over 63.0 would be seen as a very strong confirmation the economic soft patch is behind us. The markets should act positively to any strong number.

The GDP sinking to +3.0% growth for the quarter and the uptick in the regional indexes for June/July suggests May was the weak link that dragged down the GDP. The best news was the falling inflation levels. With a soft GDP and inflation levels coming off their highs despite high energy prices the Fed should be ecstatic. The Fed meeting on August 10th is still showing the possibility of a rate hike but there is no possibility of a 50 point hike as there was in the past. The current Fed Funds Futures are pricing in a 25 point hike in August, November and December and would raise the target rate to 2.0% by year end. I believe the Fed will raise rates in August because to not raise them would raise questions about what does the Fed know that we don't. Since the hike is already priced in the Fed will get a free pass on this one.

The final reading on the July Consumer Sentiment came in at 96.7, +2.0 over June's 95.6 and slightly over estimates. The dip in gas prices added to the slight rise in sentiment but with prices rising again we could see sentiment sink once that $2.00 per gallon rate is back to haunt us.

Oil rose to an all time high at $43.85 and spiked well over previous levels. The reasoning analysts are giving is the potential for terrorist attacks causing a real slow down in deliveries. OPEC is reportedly pumping every barrel they can and well over the stated production quotas. Meanwhile the demand for oil is growing at a 24 year high. This means any production stoppage could send prices soaring even farther. The rumored target is Saudi Arabia where the regime is under attack and they are a major producer of high quality oil. Terror attacks have grown in intensity and frequency and the oil infrastructure is reportedly too wide spread to protect completely. Traders are fighting rumors that the production/transportation facilities could be attacked just before our elections in an effort to drive prices significantly higher and provide a voter backlash from high gas prices. Granted this is all just speculation but as you can see by the price there is worry. Oil supplies are actually rising in the U.S. and some traders feel the price spike will end badly.

What was really surprising on Friday was the disconnect of the stock market from the oil price. Recently we have seen a strong divergence in prices when oil rose, stocks fell. This disconnect could be the symptom of an impending move higher in stocks. We saw support levels remain rock solid at 10100 on the Dow and 1098 on the SPX. The S&P futures closed at the high of the day at 1103.75.

Unfortunately the market action on Friday was far from predictable. The price action on my charts was more like child's crayon scratching than a recognizable pattern. We tested highs and lows of the various support/resistance ranges almost at will with no directional trend. The strongest move of the day came just before the close when the Dow and SPX rebounded off their lows and returned to their highs in just the last 25 min of trading. Techs, which had been stronger turned weaker in the afternoon in stark divergence to the action in the Dow and SPX.

The Dow traded in a 64-point range from 10086 to 10150. The 10100 support was rock solid and 10150 was equally solid resistance. We made the round trip to both levels multiple times over the last two days and the battle seems far from over.

The Nasdaq traded in a narrow 20 point range just under 1900 and was supported by the SOX (+1.27%) and the Russell which traded over its 550 resistance high several times. The only trend was sideways and that was barely discernable.

The easiest method of illustrating the abrupt swings in the market is to show an intraday chart of the Advance/Decline line. This chart shows alternating buy sell programs almost constantly throughout the entire day with major swings late in the afternoon. Those swings in the afternoon were +/- 700 issues on an alternating basis. Very difficult to trade when alternating buy/sell programs are running rampant. This is good news because volatility means change is in the wind.

I have been expecting a post convention rebound and I have to admit Friday was very frustrating. I kept expecting every rebound to break that overhead resistance and begin to move higher in anticipation of next week. Unfortunately that strong move up did not appear until the close when the futures moved to the high of the day.

There were multiple reasons for the lack of momentum with the primary ones being the very low GDP and the nearly $44 oil. There also appeared to be a sell the news crowd that came to the market this morning also looking for a rally to sell into. The good news was the strong underlying bid at 10100 on the Dow and 1098 on the SPX. Buyers took a lot of shots but managed to hold the line. I may have been expecting too much for a summer Friday with barely over three billion shares traded but I have not changed my tune.

Despite the choppy week and some new lows all around the indexes did manage to finish positive and at the highs for the week. It was the first positive week for the Dow and SPX since June-18th. The Dow gained +177 and the Nasdaq +38. Not great numbers but still a reversal of the trend. I view the strong underlying bid on Friday as proof that sellers are beginning to lose their grip on the market. With the S&P futures closing at a two week high and well over 1100 at 1103.75 it suggests we could see a very different market on Monday.

I still believe that SPX 1100 resistance will break to the upside despite multiple failures at the 1102 level on Friday. Part of my reasoning is the trend for the last 11 election year cycles for the markets to rebound the first week of August. Secondarily we are still very oversold given the positive earnings we are seeing. I believe any rally will eventually fail but that is another story for another day. Treat any continued rebound as a trading rally only and keep your stops in place.

With the convention over one of our fear factors has been put to rest. Kerry is still in a dead heat with Bush but his pep rally is over. I am sure he hoped to add some points in the polls but the latest survey showed Bush adding +2 points on Friday. The Kerry platform has been publicized and the critics are coming out the woodwork. Drug companies are under attack and price controls and green power are the hot topics.

On the Republican side the Budget Office released the expected budget deficit today at -$445 billion. While that is a record deficit it is still not complete. The budget was offset by a +$155 billion social security surplus. Considering the state of the SS system that money should remain in the trust fund for future use instead if used to pay bills. The war in Iraq was not included and will be brought up as a supplemental item in the spring and is expected to be $50 billion. Add those together and we have a real budget deficit in the $650 billion range. This is why foreign investors are fleeing our markets with net withdrawals for the last three months. They believe the soaring deficit will require desperate measures that could handicap our economy and our markets.

To be fair that deficit is the result of the post Y2K recession that began in early 2000, the 9/11 attack, massive expenditures for homeland defense and the huge tax rebates that helped to spark the economy in 2003. There are pros and cons on both sides but the main point I want to make is the market is watching the polls. The drop over the last three weeks could have been partly due to the convention event risk but not risks from terrorists. Had the convention produce a ground swell of support for some new program of price controls, budget cuts and cancellation of last years tax cuts then the market would have reacted negatively to any Kerry gain in the polls. With the convention over and no new agenda the danger, in both contexts, seems to have passed. The market is free to discount the race with the Republican pep rally still ahead.

In stock news of note Intel announced a delay in the release of the new 4ghz Pentium 4 processor until the first quarter. Giving confusing reasons in English that would make Greenspan proud the company deftly avoided saying that by pushing the chip one quarter farther out they could dump their high inventory of older chips during the Q4 holiday sales cycle. Intel management is not stupid and they realized that by delaying the long awaited chip all the computers built in the 4Q would have to be built with the older chips. Does not take a rocket scientist to see the reasoning here.

I ended last Sunday's article with instructions to look for good stocks over the next couple days that were beaten down with the market and then expect an end of week rebound. Monday was the low for the week and you got a second chance on Wednesday. The Dow finished +224 points off its lows for the week and the Nasdaq +54. If you followed my instructions you probably did well.

For Monday the Thursday night instructions have not changed. Remain long over SPX 1100 and short/flat below that level. Hopefully we will get a stronger than expected ISM and we will be off to the races. As always, just like the GDP on Friday, there is the potential for a negative surprise so wait for the announcement volatility to pass before entering new positions.

Laoya..a message for you in tools.

Anyways, I sure appreciate your posts here.

I hope you will still make plenty $$$$ even though you have a time lapse of a few days more.


:lol:

Yo Laoya, nice avatar leh.....but mine more chio...hehehehe... :lol:

Plotting the trendline from May 12 and Jul 26....yar think support ard 1356...hope if it gets there.....it will be supported with strong volume..... :ph43r:

hi Laoya

exacerbated by oil prices i think
expect a NQ rebound soon

Tested another rd with low of 1332.5 :ph43r: Trendline support think is ard 1325 :blink: