Despite Hidden Bear Agendas; Market Turns per Plan

No surprise to readers here . . . when the market only nominally drove-down in the wake of Tuesday's one-day traumatic shakeout, and then turned-around not only well in advance of the Fed's decision (expected to be no-change by the market recently at the same time as we have taken that recommended posture for weeks ahead of this).

Also interesting, was the response by some media, suddenly wanting 'confirmations' to stories we have also discussed for awhile, relating to not only 'risks of new Enron's' of course, but to what we have described asinterlocking relationships among just a few major banks, and certain companies and/or funds. We speculated Tues. night on possible campaigns to destabilize our banking or financial system, regardless of a kernel of truth in the stories; but because of the timing from sources that had nothing new to add, but seemed to be embarked on coordinated efforts of their own 'agenda'.

We don't know that those efforts were intended to give 'aid and comfort to the enemy' or were actually originated by enemies (we don't even disagree with key elements, but again it's nothing new or tries to worsen an already-stressed environment for investing, to achieve ends not for investors, but for perpetrators of the often-ancient diatribes attacking the system), so we thought basically a brazen attempt to maximize the identified 'confidence crisis' at hand preceding this week. So while not all media types picked-up on an overdriven destabilization campaign from such 'rumor mills', or continue to show their naiveté by embracing stories for more than their face-value, some finally started grasping the hidden agenda characteristic (we warned of), and started to seek verification that what they reported was truly news. It helped the tone.

Again, after five years of talking about risks of excess globalism; risks of derivatives; risks of combining investment banking, brokerage, insurance and conventional bank services; and even mentioning the problems of pro-forma accounting and 'rule FD' matters on various occasions; and even outlining what kind of companies might be a target for accounting irregularities; we were certainly not disputing the problems that everyone is watching, or suggesting everything being circulated was 'disinformation'. Just pointing out that even concentrating actual information in a form that appears to be something new, can tend to evoke the most emotional responses at a worst time.

The so-called deepening 'lack of faith' has clearly been exacerbated by manipulations of the media (subtle at that, if they even realize what they are doing, or how they are being used by these anti-establishment anarchistic forces), and by reiterated attacks on major banks, that have (for those who don't know) their roots (in one case likely) in the Middle East (as noted last night), and in another the types of disinformation (or crusading) mongrels, that have done this for decades before we were born. The point is not to show excess faith in corporate reform or accounting (of which we have been critical too, in some cases before FASB and other rules were implemented, as long-time readers will recall), but to realize that the events of the times should be just an impetus to move in the direction of reform (successful or not); while damage that's unavoidable (at this point) be taken with a certain sobriety, not an embrace of panic; a behavioral quality that the agendas opposed to this Country (not just a political or a banking sector) would love to have carried out by none other than panicked investors in this Nation (who unwittingly not only aid enemies, but minimize their own survival).

There likely will be more revelations; there will likely be overall patterns suggested for February; but that doesn't mean any of us should drop the context, or naively absorb the news (or rumors) merely on face value, though mentioned last week, we wouldn't be surprised that some very large (once pricey) multinational companies, or already-depressed networking firms, might be obstacles to getting through this phase without continued volatile periods. It has been our tendency to mention a couple companies; not lambaste them; as shareholders (reserved) already are aware of where risks lie.

What we are suggesting is that full reform is not likely; efforts to separate functions (like accounting and auditing) or banking from investment banking (or brokerage) are going to be attempted, will meet with partial success, and likely at minimum bring the fear of God into corporate and accounting managements. Likely already has; and the highest-level calls for reform are out there; therefore those in the media or elsewhere, trying to milk the issues further, likely have questionable motive, or are just naïve.

That was Tuesday's focus; this is today: that's partially how ingerletter.com projected that while despite certain unknowns (and risks) would continue down the road a bit (as outlined), our work suggested it was going to washout and turn-around to a rally on Wednesday. It sure did, and we caught it both ways (the outline here; specifics on the 900.933.GENE hotline, or the direct-dial hourly number of course, as it unfolded).

Daily action . . . emphasized that selling on emotion, in an oversold short-term status especially, rarely (aside from a 'crash', which was not expected today, and isn't now it might be noted) succeeds; though it can for a couple hours, as buyers (floor traders a part of the mix) simply hang-back, letting the sellers and shorters do what they will to the market, then come in on the buy-side. Believing the very early out-of the-box rally wouldn't readily expand, we were able to capture much of Tuesday and Wednesday's early decline, and then the hotline captured virtually all of the reversal.

(Individual stock comments, and those about the risks of over-interpreting 10Q's, are reserved for subscribers. The gist being that every company has to disclose the worst case possibilities in a 10Q; so an investor unfamiliar with that aspect, may arrive at a negative conclusion at wrong times; because of their unfamiliarity with requirements. Expansion of the war(s), and the focus on accounting, while important, could change the chemistry from a focus on economic improvement (interesting, at this juncture) so we'll reserve any comments on the specifics of the inclusive nature of the President's Address for comments later-on. We are discussing the expansion of the war, and as we understand it, that besides the USN and Royal Navy, there's a joint Israeli-Turkish air operation patrolling the Eastern Med continuously, under overall US command.

In any event, we got our turnaround, the market soared; in a reversal session that did stop between the December lows and that 1055 low (March S&P low was 1081.50), and managed to work higher amidst all the delicacies of the current environment.

As a result the S&P hotline (900.933.GENE) had what can only be described as a spectacular day, with about 7 formal guidelines resulting in a theoretical complete success (each of the efforts); or something near as much as 5200 S&P points for any who did them all. Now certainly, individuals attempting to play all the moves (a rare attempt, though some do) would have done slightly worse, or better for that matter, but in any event results should have approximated triple the S&P's actual gain for the day, or thereabouts. Our hotline comments suggested in the lead-up to the turn that we were thinking something like 1110 minimum, and at least theMarch S&P 1120's on the rebound overall. As we already are at 1116, we suspect it will try to present an up-down-up pattern Thursday, and possibly close into that area; hard to tell as it's the last day of the month. Some managers will make (month end adjustments, reserved).

In summary . . we thought the market would turn, and after some reactive moves, do a further advance on ideal Fed non-moving decisions. As suspected, the President's comments tended to reassure, but also gird citizens to a long-term struggle both on the military, and on the jobs front; both a key for him now, as commented on. Today, after slightly higher 'confidence' numbers yesterday, the GDP increase was notable, and in harmony with our belief, that barring catastrophe (or stupidity) the economic nadir was Q3 of last year for many sectors. Permabears are having fits, because they can't stand the thought of a market muddling through this kind of news and surviving. We are just continuing as pragmatically as feasible, given the emotional rocking news of the times. We've served investors well, and hope it remains a sensible approach, as opposed to embracing some extreme doctrinaire view, then hope the markets will accommodate their view, which isn't analysis, but opinion, often with hidden agendas.

The McClellan Oscillator readings were about -53 on the NYSE, and near -25 for the NASDAQ stock market, as markets rebounded essentially precisely as projected, but remain very nervous. Even a few staunch conservatives are worried about market implosions; to extent of working citizens into a lather about something only Congress can really address; all the more reason to help American people (media and CEO's as well) understand what services they can render, and that what they do, must be in the highest standards of accounting and auditing, or it undermines the entire system.

Our prayers and thoughts remain with our troops fighting anywhere in the world, and as events of the week explicitly continue to remind us of various new risks the Allied fighting forces face, or may face, we try to keep in mind that the unexpected remains a risk; while all normal human beings, certainly hope for the best, and do not criticize support for brave men and women risking their lives among the Allies, to enhance the safety and freedom of all decent humans of all faiths, who respect the dignity of man. Tonight the S&P is at a 193 premium this evening; futures up about 1½ points. Our probable forecast for Thursday is as outlined, and should be impacted by month-end.