Quick Market levels

Good morning:

On February 16th we sent out our S&P levels piece in which we stated a move above 1081 would open the move to 1093. As we have seen the last few days it has moved even high testing the next resistance area of 1112. We have expected some selling, and look to first test 1104 then back to the 1090 level as supports. If the buyers are real they should begin to step up with conviction around the 1090 area.

We have attached our current Core (weeks to months time frame) recommendations as well as shorter term (days to weeks) ideas on the attached PDF. Some things to highlight:

• JDSU a new trading buy from Feb. 12 hit a new 52 week high.

• The airlines continue to trade well, with CAL, LUV & UAUA our favourite longs.

• Hopefully you took some profits last week on DE around the $58 level when we suggested.

• REXX has been taking out highs. Our target is $15, might be smart to take some off so close to that target as earnings are coming up.

If you have any questions please let us know.

Best
Peter

S&P firm thoughts

As seen in the attached research note the S&P 500 Index tested and reversed off its lowest fibonacci fan trend line on Friday. This intraday reversal level of 1,044 was very close to approaching the support level of 1,037 we had called for several days ago and the reiterated on Thursday. While the S&P 500 remains short-term oversold and could bounce we still believe the index may need to go a touch lower before it finds a better, lasting low.

A close below Friday’s low would open up prices to the next level of support. A zone near the 1,000 to 950 levels.

The silver lining in the sell off is that sentiment remains very low. With sentiment this low it is hard to expect a secular top forming. While anything is possible I have yet to see a major secular top form when sentiment readings are this bearish.

Best.

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Sentiment Review

As in the attached research note individual investor allocations to equities only recently moved back above its 21 year mean allocation of 60%. The massive under allocation to equities in late 2008 into the 2009 low was one of the major reasons we became so bullish on stocks since it suggested that selling was washed out of the market and that massive liquidity (aka – buying power) was built up ready to buy back into stocks.

That said we have seen assets rotate back to equities over the last 10 months and the market, being a liquidity driven animal, responded accordingly. Currently investors have only a slight overweight to equities at 4.00 % above the 21-year mean or stated another way investors are now 64.00 % allocated to equities versus the 21-year mean of 60.00 %. This is one reason why we continue to believe that after a bit of a correction stocks can move higher as investor liquidity is still not tapped out yet.

While not as ample as near the lows buying power still remains adequate to power/move stocks higher and keep corrections fairly well contained.

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Morning Comments 1/22/10

A big two day hit in the market and people are all asking is that it? Well the sell off on fair to good earnings as well as the Obama plan to further restrict the functions of the US Banks and Wall Street as a whole has brought us down to slight support on the S&P 500 of 1114 area. We expect this will hold today as the Friday trade will be some backing and filling. The next major level of support is 1085. If this level is broken look for a true bearish move, everything else before that is a normal profit taking correction. We do not see us breaking that level in the near future, but are more cautious as our unbiased risked model moved to a more neutral stance (see page 3).

If you followed our trading short yesterday in GS at the open, you had a good day. We still like the trading short (target $145) but expect some buying bounce in and around $158. UNH had good earnings yesterday and we would suggest buying in this $33- $34 level today. See all of our ideas on page 2.

Dow down 213 yesterday and we closed out two long with 51% up and 47% in 30 days—trading longs in APL & XTEX as they hit our targets.

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Market Note 1/21/10

The legions of worry warts still abound as every minor sell down continues to be met with the response, “Is this the top ?”

The answer is probably not, especially while pervasive concern continues to be the dominant investor theme.
Now that said can we have a correction of 5% ? Of course. However we continue to find it hard to believe that top is in play when everyone continues to call for it ! After all tops are formed when everyone becomes so comfortable with stocks they invest all their available liquidity without a hesitation or care in the world. And clearly that is not the current sentiment.

Again it is very likely we will have some semblance of a decent size pullback soon seeing the S&P 500 has run up 10% from just November 2009, 31 % since July 2009 and 64 % from the March 2009 lows.

However so we think a major top is in ? The answer again remains no.

But in regards to protecting capital from a drawdown or a correction or what is the risk to putting new money to work today and the answer changes. The answer in this scenario is the run up in equities puts investors at risk to a correction, not a top, but a correction. Our guess is that the correction would be similar in size and scope to the June/July 2009 correction that saw the S&P fall 9.00%.

This correction would likely create more pessimism and fear and then create one last leg up that would create the overconfidence associated with a top or a very long and protracted trading range.

At this point the best thing to do it to place trailing stops on current positions and or buy an inverse ETF to hedge out some temporary drawdown possibilities.

From a trend perspective the Trend remains up and must be respected. If the Dow violates its uptrend near 10,500 we would suggest getting more active with a hedging strategy or tightening up stop loss levels.

However this remains a market fraught with caution not speculation thus we continue to believe corrections should be relatively shallow.

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Why Scott Brown Won

A good piece just sent to me

Why Scott Brown won

http://www.itulip.com/forums/showthread.php?p=144585#post144585

Here in Massachusetts, a state with three times as many registered Democrats as Republicans and half of voters are independent, the senate seat previously held by the nation’s most famous Liberal Democrat, Ted Kennedy, was tonight lost to a relatively unknown Republican, Scott Brown. He beat the supposed Democratic shoe-in Martha Coakley by a generous margin.

What did Coakley do wrong and what did Brown do right, and what does it mean for the 2010 Congressional elections in November?

What Martha Coakley did wrong
Didn’t campaign hard from day one. Voters don’t want an entitled public servant to replace one of the nation’s most famously hard working, Ted Kennedy. Unemployment may be at 10%, but the other 90% still have jobs and are paddling hard just to stay in place, and many are drifting backwards no matter how hard they try. They want their representatives to work as hard as they do and show them how they can start to move forward again.
Over-used an association between Brown to Bush. Scott Brown is not GW Bush. Anyone who listened to him for one minute knew it, and the flimsy guilt-by-association tactic insulted every voter’s intelligence and reeked of small-minded party politics.
Vilified bankers and capitalists. Americans are capitalists. They don’t hate the rich, they hate those who gain by unfair advantage. They don’t hate bankers for banking, they hate bankers of buying influence that produced great wealth at taxpayer expense, and excessive risk taking that resulted in an financial crisis that wrecked the economy. But they blame the bankers less for buying the favors than they do the politicians for selling them. As many Democrats and Republicans swam in that sewer, and red or blue, they came out smelling is just as bad. Making it a party issue was a mistake.
Over-played the role of government in solving economic problems. Americans fear excessive interference by the state in the one part of the economy that they know really can create jobs. No, not the government, the private sector. Coakley said she’d crack down on abuses by Wall Street and protect Main Street. She thought she was tapping into voter anger at the abuse of power but instead voters heard a promise cut off the lifeblood of the economy, the businesses that create jobs, with more taxes and regulation.
Over-played the traditional role of the Democratic Party as better representing the interests of the middle class than the Republican Party. If that is true, then why did Obama administration hire Goldman Sachs executives to rescue Wall Street and run the economy? The hypocrisy is not lost on voters.
In short, Coakley’s campaign treated Massachusetts voters as stupid and illiterate fools. Voters saw through the Coakley campaign’s lame and cynical attempts to exploit their anger and frustration over the mess that both the Republican and Democratic administrations created over decades.

But it took more than blunders by the Coakley campaign to lose a race that was once considered over before it even started.

What Scott Brown did right
Confronted the worries that keep voters awake at night. How are we going to get the economy growing again without expanding the enormous government debt that threatens our and our children’s future?
Addressed problems with basic, common sense solutions that cut across party lines.
Claimed independence from special interests. Obama ran on the same platform. Time will tell if Brown keeps the promise.
Brown won because of his mostly non-ideological, practical, market-based solutions to our nation’s economic and social problems. He is fiscally conservative and socially liberal. He is by any other name a Libertarian but without the baggage that the Libertarian Party has collected over the years.

Lesson for Congress

The operative word for Brown is “independent.” Voters believe that both parties have been for sale for more than 30 years. Regardless of party, independence expressed as a clear and simple practical set of solutions that directly confront the greatest anxieties of voters is the key to winning in the 2010 Congressional elections.

Members of Congress with a strong, ideological party identity, and a voting record that can be clearly traced to campaign contributors through sites such as OpenSecrets.com, who understand what this election means may now commence shitting bricks.

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Tuesday morning comments

All eyes this morning are looking to the Commonwealth of Massachusetts. The outcome may or may not have a real effect on the markets, but the election is interesting to watch none the less. The names to look at include the hospitals we have been talking about as well as some HMO & drug names(Drugs a leading move higher sector on our sheets)…fun short week start sideshow.

The futures started off this morning weaker looking to yet another loss on Citigroup. The number should be a loss at least .30c and there is almost no scenario to get a major surprise. This week the earnings really start to heat up as we see IBM after the close. We have a trading short on IBM and suggest a hedge to protect the short in case of a major surprise upside. We have a stop of $135 on the stop and still like the short here. Other earnings this week, GOOG, BAC, WFC, GE & GS (another short-look on page 2).

PENN rallied on Friday and unless we see a move lower this morning we would be stopping out that short.

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Pretty cool stuff…made in Israel… Check it out.

http://www.youtube.com/watch_popup?v=7H0K1k54t6A

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2009 final returns

Below is the snapshot of 2009 market returns

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Tiger Plates

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