Market Surge Protection

Expecting improving breadth on Wednesday . . . especially for the NASDAQ stock market, we have consistently suggested the stock market was simply awaiting Tuesday's Greenspeak, after which it would again get "in gear" on the upside, with sporadic profit-taking waves, but not able to damage our expectations that the 1500 area of Sept. S&P's would be cleared on a closing basis.

Of course there are arguments that we haven't moved sufficiently to deny the "head & shoulders" structure; probably dominant in the past couple weeks from those hearing somehow that such a pattern existed; which has been clearly evident as a broadening top formation in the superficial Senior Averages since its construction began late in 1999. Of course we've shared our view (with subscribers) that odds favored it being resolved solidly to the upside, provided that key supports under the market did not get violated in June's projected irregular consolidation; and that's just how it went. All month it was a sometimes endurance contest mode; because we thought nothing on the upside very much mattered in June; simply that the market didn't go down too much to minimize odds for this target in July being successful. That's also why the somewhat-traditional upside exhaustion near July 6th was said not to be a valid outlook this year, primarily because we thought strength would persevere beyond that time. (Timing forecast beyond here is reserved.)

In the interim, we've got the PPI to deal with on Friday, Expiration (reserved), and then the CPI in the next week. Given proximities of Elections, tendencies to suppress such price increases from general (and Social Security) considerations, we'd think everything to moderate it "ex food and of course Energy" will be done, so that these numbers won't roil the markets too much, or the Fed.

Surge Protection

As to the earnings reports…which allowed incremental selling just to restrain a market desiring to attempt a breakout, we suspected most of the warnings were out of the way, and good results for the most part would start to flow. That is also occurring, with Yahoo! (YHOO) setting the tone for all this, and Motorola (MOT) not really being a significant negative factor with its little decline this evening. MOT did make their numbers (barely), but never was expected to be a powerhouse yet, so nobody's particularly concerned. (Technical remarks on those stocks reserved for readers.)

The Last Barricade . . . was the term we used to describe that "head & shoulders" pattern many technicians had embraced of late, and we thought was there, but the underlying supports much more key to setting this up; something we persevered through the entire month of June, during which we called for that correction to not resolve this (presuming supports held, which they did) until July. Kudo's to all of you who stayed calm, didn't try to press results too much in June (we had warned that couldn't be done on a trending basis, but was lots of stress-filled fun for traders), and kept the faith in core equities, since despite all the bears and technicians talking about new drops, we'd get the breakout to the upside that was not only our preferred pattern, but part of the early annual call, including the choppy first Quarter; second Quarter collapse, and ideal final "grand dame" lows around May 23rd /24th . We don't know:-}, how we came up with those dates either (J), so far in advance, but we did, and are glad so many of you found that to be helpful.

And though all of us can only work with whatever market presents itself, we're delighted not only to have called this, but that our forecast -some thought insane- of new highs coming, is already achieved in certain ways. How so? Well, the NASDAQ has made a new recovery high, and we still think all-time highs are a potential, especially for the Nasdaq 100 (NDX)over time, while today…that's today…the Value Line Arithmetic Average made an all-time high…right now. Bah humbug say some strategists, and a few money managers; hooray, they get to pay more when they finally capitulate on the upside..that's something to look for shortly, then we can get a pause to refresh before making higher highs. Now, technicians are agreeing with our call for this run-up; over a month ago, and that was 4100-4400 for the NASDAQ, with the lower-end of that achieved as of today, while our call for the Nasdaq 100 (NDX) was to watch for break over 3800, a pause, then run it over 3900 (done), with also a goal of (reserved) for this Summer; with just occasional pullbacks to reenergize the trend by fostering skepticism. It's exactly why the theme for a couple days was "the surge protection" system, which needs some occasional "jolts" to keep worriers out there, and when the antagonists surrender, we'll worry.

We are not particularly surprised that the bears made stands earlier this week to oppose the long forecast July breakout; just about their last chance to do so. And we really could not care that the "dot.coms" and many 'net stocks weren't participating; if they were (like you saw today) it tends to be slightly at the expense of the Senior Average moves (because money which only recently shifted away from tech stumbles its way back at the expense of stocks they had just bought, as this isn't a time of year for much new seasonal inflows), and (balance reserved for subscribers).

Daily action . . . on our hotline (900.933.GENE) this time was flat-out long…all through the day. I would note that although we've done it for quite a few recent days (because we've emphasized a bullish bias, and didn't want to miss this long-projected July surge), the Tuesday comments were a little different before the bell, because we had good theoretical gains that day (even a fast short to our delight, though that's certainly not the primary focus….) and were pretty convinced that if YHOO met their numbers (we thought they would), that the market would gap-up Wednesday; so that much more reason than usual to stay long overnight from that SPU 1489 most recent entry.

Still with it too, as 5 minute stochastics (comments are of an intraday and forward nature; thus of course reserved for readers of our Daily Briefing only). Anyway, our September S&P and general market calls have remained quite robustly optimistic, and we have now achieved the minimum goals in the futures that has just got to worry the bears back into hibernation. All I have to say on the subject tonight is remember the other part of July's forecast; which we'll now address.

Technically; Bits& Bytes and Economic News: (all reserved ingerletter.com subscriber areas)

In any event, we've suggested that just combine a reasonable rebound in the cyclicals with good action from the big-tech leaders, and you've got essentially what we're looking at, our forecast of long-standing, which some now call a summer rally, and we call potentially an early phase of the second leg-up, coming off the indicated April / May washout rotational low points; per gameplan.

Perspective. . . the markets have been working their way out of a "rangebound" condition for at least a few days; one reason we pointed out last week the improved internals of the market, with a basing formation affirmed in the A/D's, and with the Cash S&P already working above the old right shoulder or the half-year plus developed "head & shoulders" topping pattern, something we thought ideally might be relegated to history, by virtue of a July rally above that shoulder, looked for in many of our remarks over these past couple of months to be dragged-out beyond June into July, which was the first realistic chance we suspected, for a kind of upside extension to be seen. We don't understand why certain technicians failed to notice the advance climb of the cash S&P.

Bits & Bytes . . comments on market-bellwether Intel (INTC), LightPath Technologies (LPTH), which we had the honor to first discover late last year as our "first ever" small-cap annual favorite (the big-cap at the time wasAnalog Devices (ADI), which recently made another all-time high). It might be noted that LPTH lost the "A" by moving to NASDAQ's National Market Tier after Tues. In itself such moves often presage modest consolidation, but allow more discussion & coverage. We are delighted to have encouraged a buy in the 'teens, partial sale pushing 60, and then entry for new readers this Spring (or repurchase, as the case might have been) again in the 'teens. We have measured goals discussed for this and other shares, which represented our opinion, and it should be noted all these stocks have already achieved minimum upside target goals; not max.

Comments in this evening's remarks also include the 9 point rally today inLiberty Digital (LDIG) and a remark regarding how that may relate toAT&T (T) (efforts), notes on Conextant (CNXT) & Rambus (RMBS) as well as long-held Time Warner (TWX). (As for all stocks, decisions are fully the responsibility of investors; we are a resource of ideas. A mention here does not constitute a recommendation to buy, sell, hold or short any noted stock. Do your own due diligence or consult your broker or personal advisor. We're retired money managers, humbly sharing strategy ideas & delighted our analytical concepts -short & long-term- continue navigating complex markets well.)

In summary . . . the McClellan Oscillator reading of +103, is ahead 10 from yesterday's revised +93 posting; suggesting some short-term exhaustion at nearly overbought levels. We recently as you know suggested that the market might become short-term overbought around Thursday or so, but it's not necessarily going to pullback much after that, before (balance must be reserved).

For now, after a solid consistent multi-day long and a new one late Tuesday at September S&P 1489 in our hotline (900.933.GENE) guidelines, we're still holding long. S&P premium is a bit lite at 1388 this evening, which we think is bullish, because traders are nervous, so maybe they let them think things look soft a bit and then run-'em-in once more. However, the easy upside for the forecast thrust is behind now, and so are the weeks of hard determined bullishness when we did argue that the breakout wouldn't happen until July, but that the key wasn't rallies, but how well it acted during the declines. Throughout the consolidation the market never broke our key levels, as noted, as that's precisely why it made the achievement of what you see today less difficult for anyone who understood how far down we went in June mattered far more than how far up it got.

We weren't inclined to side with softness in prior days, and aren't now, as this continues to reflect the type of worrying that in a perfect scenario would accompanying this up-move in July, which it might be again noted, already has broken-out in the cash S&P, with the rest of the market trying to have the faith to believe it's actually happening. We expected it, and look for move over time in a rotational advance that shouldn't lift everything, but continues moving many key major players.