Article Title: "Pause Now "
Author:
Section: Issues & Insights       
Date: 8/7/2006
The Economy: The job market is sending a very clear message to policymakers at the Federal Reserve: Stop hiking interest rates, and stop now. Will the Fed have the sense to listen?

The latest jobs figure wasn't horrible. It wasn't even bad. It was just, well, mediocre. For July, American businesses created 113,000 new jobs, about 30,000 or so below expectations and almost exactly the average - 112,000 - for the past four months. Joblessness rose from 4.6% to 4.8%.

From the job side, there's a clear reduction in the economy's pace here. We've seen four months straight of less-than-expected job growth. And this year is weaker than last, with an average 139,700 new jobs monthly through July, down from 165,000 in 2005.

By rough calculation, about 133,000 new job seekers enter the market each month; we're below that, too.

It's true, jobs aren't declining, a surefire sign of recession. But we looked at an indicator we like - year-over-year job growth - going back four business cycles. Average growth since 1979 has been 1.61%. In July, it was 1.3%.

Granted, we have smaller net additions to the work force now than 30 years ago. But 1.3% is still weak, even by recent standards. Indeed, it's a number that, when passed on the downside, has always meant a recession was brewing.

What does this mean?

That growth in the job-creating part of the economy is clearly ratcheting down. And that the economy isn't "overheating." And given tepid money supply of about 4%, fears of rampant inflation seem to be overdone.

Other recent reports back this up. GDP growth slowed to 2.5% in the second quarter. Yields on 10-year Treasuries dropped Friday to 4.90% - the lowest in four months. The Housing Market Index from the National Association of Home Builders hit a 14-year low in July, while small business optimism is at its lowest in three years. The list goes on and on.

These are not signs of strength - or of inflation. But they should be major warning signs for the Fed as it prepares to meet Tuesday to decide whether to lift rates for an 18th straight meeting, to 5.5%.

Here's our advice to the Fed, once again: Hold your fire. If ever there was a time in the economy when it appeared we'd reached a turning point, this is it.

We're not the only ones who think this, by the way. In the past two weeks, the fed funds futures market - where investors make bets on the future level of interest rates - marked down the chances of a rate hike on Tuesday from a near sure thing to about 19%.

We've argued here the economy is much stronger than the media spinmeisters say. We still feel that way. But that doesn't mean it can't be taken down by a Fed mistake.

The Fed will do no harm in taking a breather this month and seeing how things shake out in the real economy. But it could do a lot of harm by going even a quarter-point too far in its rate hikes.

Learn Investing Basics Before Taking Risks

BY JONAH KERI

INVESTOR'S BUSINESS DAILY

Posted 8/7/2006

You've no doubt heard the expression "no guts, no glory."

It tells us that in life, sometimes you have to take risks to get where you want to go.

Sound advice. But it doesn't apply to the stock market. In investing, your goal is to maximize your returns while minimizing your risk.

The best way to do that is to master the basics. Learn the building blocks of investing success, and you can achieve strong results. You should consider risky ventures only after you have the basics down.

IBD's CAN SLIM investing method sums up the broad strokes in seven easy letters.

The C stands for Current earnings. Quarterly earnings should grow by at least 25% per quarter. Accelerating growth — say 25%, 35% and 50% over the past few quarters — is especially bullish.

View larger image

The A stands for Annual earnings. They should also be up 25% or more, over the past three years.

The N stands for New. The company should be under new management, have a new product or new service. IBM's (IBM) personal computer, Apple's (AAPL) iPod digital music player and Hansen Natural's (HANS) new energy drink all drove those stocks to big gains during their heyday. A new high for a company's stock price is also a bullish sign.

The S stands for Supply and demand. Companies whose stocks trade a healthy number of shares every day tend to attract the interest of institutional investors. High demand usually leads to a rising stock price. Conversely, thinly traded stocks may lack that institutional support and may be subject to wide, volatile price swings.

The L stands for Leader or laggard. Within a given industry, you want to find the company that's leading the way, not the one that lags. A leader will show superior sales and earnings, sport a hot-selling product or service and see healthy gains in its stock price before it embarks on its big run-up.

The I stands for Institutional sponsorship. Make sure mutual funds and other institutions are investing in your stock. You can ride their buying to your own profits. Track daily and weekly volume movement for signs of big-money buying. Also, you want to see the better performing funds buying your stock.

The M stands for Market. Buy only when the Dow, S&P 500 and Nasdaq are in a clear uptrend. Three out of every four stocks follow the broad market's lead.

The list above shows some more investing basics in greater detail.

Market Msg from John Murphy 8/8/06



MARKET SELLS OFF ON FED PAUSE -- UTILITIES GAIN WHILE TRANSPORTS FALL -- CONSUMER STAPLES REMAIN MARKET LEADERS -- RETAILERS AND HOMEBULDERS LEAD DAY'S DECLINE
     
       

RETAILERS AND HOMEBUILDERS FALL... The Fed paused today as pretty much everyone expected. Unfortunately, the stock market fell on the news. Part of the reason may have had to do with the wording of the accompanying statement. The Fed acknowledged economic slowing, especially in the housing sector. Its claim (or hope) that inflation should start to moderate was less convincing. The problem is there's no evidence to support that view. Commodity prices remain strong and recent reports show a pickup in core inflation measures. A big jump in unit labor costs was reported just this morning, which is also potentially inflationary. If the Fed's optimistic view on inflation proves incorrect (which I suspect it will), it may have to reconsider today's action. A pause doesn't mean a stop. Rising inflation and a weakening economy lead to stagflation which we haven't seen since the 1970's. I suspect that's where we're heading. Not only did the market averages fall, but defensive sectors like consumer staples and utilities rose. At the same time, consumer discretionary stocks were the day's weakest sector. That was due largely to heavy selling in retailers and homebuilders. Chart 1 shows the S&P Retail Index falling today after a failed test of its 50-day moving average last Friday. Its relative strength line has been dropping all year. The same is true of the PHLX Housing Index in Chart 2. In fact, the two charts are remarkably similar. The fact that neither one rallied on today's Fed pause isn't an encouraging sign.


Chart 1


Chart 2

UTILITIES RISE AS TRANSPORTS FALL ... These next two charts revisit a theme I wrote about a couple of weeks ago (July 21, 2006) having to do with the fact that rising utilities and falling transports are a bad combination for the market. Unfortunately, that negative trend is continuing. Utilities were the day's strongest sector while transports were one of the worst. That means that investors are still buying defensive stocks and selling economically-sensitive ones. At the same time, the Dow Transports continue to trade below their 200-day moving average. That's a sign that investors are worried about the economy. Today's Fed inaction did nothing to change the trend of either index.


Chart 3


Chart 4

CONSUMER STAPLES GAIN MORE GROUND... Consumer staples have outperformed the S&P 500 since April. And they did so again today in the face of a falling market. Some of today's staple leaders were Campbell Soup, General Mills, CVS, Coca Cola Enterprises, and Reynolds American (tobacco). CPB traded at a six-year high while General Mills hit a new record. So did CVS. The monthly bars in Chart 6 show the big drug chain exceeding its 2001 high. Consumer staples are usually one of the market's strongest groups during an economic and a housing slowdown. So are utilities, healthcare, energy, and telecommunications. An article in Barrons this last weekend (What Road to Take When Real Estate Is Not A Sure Bet) listed those same groups as being the best historical performers during a housing slowdown. Consumer discretionary stocks are one of the weakest.


Chart 5


Chart 6

MAJOR INDEXES FALL ON RISING VOLUME ... About the only thing holding stocks up recently was hopes for a Fed pause. That's why today's market selloff on the Fed pause has to be bad news for market bulls. I wrote last week that the market rally was on shaky ground owing to a weak seasonal trend (August and September are usually weak months) and lack of upside volume to support the summer bounce. That trend has gotten even worse as shown by the next three charts. All three major market ETFs failed tests of overhead resistance barriers. And they did so on rising volume. That negative trend started with Friday's downside reversal day on rising volume. It got even worse today. The Dow Diamonds (DIA) failed a test of their early July peak at 112.41. The S&P 500 SPDRS (SPY) are back below their July peak at 128 (the equivalent of 1280 in the cash S&P 500). That has the look of a failing rally attempt. The fact that the Nasdaq market (and small caps) were the day's weakest market groups is also worrisome. Chart 9 shows the Nasdaq 100 Shares (QQQQ) unable to clear their 50-day average. Downside volume has increased there as well. One market that may gain from today's Fed decision is gold. That will be especially true if the dollar continues to weaken as I suspect that it will.


Chart 7


Chart 8


Chart 9

Market Msg from John Murphy 8/9/06



SILVER CONTINUES TO LEAD GOLD HIGHER -- A LOOK AT GOLD AND SILVER LEADERS
     
       

GOLD ETF NEARS WEEKLY BUY SIGNAL ... I suggested yesterday that gold could be one of the biggest beneficiaries of Fed inaction on rates. That was predicated on my view that the dollar would weaken. In today's trading, the dollar is indeed dropping and gold prices are rising. This is an opportune time to review the precious metals arena with a view to identifying market leaders in the group. But first a look at the two precious metal ETFs. With gold prices trading $8 higher today, the streetTracks Gold Trust (GLD) is within a hair of a new weekly SAR buy signal (which would occur at 65.22). Gold bullion has already done so. So has silver. Chart 2 shows the Silver iShares (SLV) having given an SAR buy signal last week and rising to a new three-month high. That's a positive sign for gold since both markets usually trend in the same direction. The simplest way to get exposure to either of those two commodities is via their respective Exchange Traded Funds. At the moment, silver is the stronger of the two.


Chart 1


Chart 2

XAU AND HUI TEST JULY HIGHS ... The next two charts show the PHLX Gold & Silver (XAU) Index and the AMEX Gold Bugs (HUI) Index both in the process of challenging their July highs. Both indexes have been outperforming the stock market since mid-June. Needless to say, a close above their July highs would turn their short- to -intermediate trends upward. Within those two precious metal indexes, however, several individual stocks have already turned up. Not surprisingly, several of them are silver stocks. In fact, the biggest percentage gainer over the last month has been Pan American Silver.


Chart 3


Chart 4

SILVER LEADERS ... There are three silver stocks included in the XAU and the HUI indexes. All of them have already exceeded their July highs and are among the group's leaders over the last month. Pan American Silver (PAAS) has gained 16% over the last month to pace the entire group. Chart 5 shows the stock trading at a three-month high. Charts 6 and 7 show Coeur D'Alene Mines (CDE) and Hecla Mining (HL) not far behind. Their rising relative strength lines are measured against the XAU which is the group benchmark. Their combined relative strength is a reflection of silver's superior strength. There are some gold leaders as well that have already turned higher.


Chart 5


Chart 6


Chart 7

GOLD LEADERS ... Charted below are three gold stocks that have been rising much faster than either of the gold indexes. IAMGold (IAG) is already challenging its May peak (Chart . So is Kinross Gold (KGC) in Chart 9. Barrick Gold (ABX), which is shown in Chart 10, is especially noteworthy. The stock is trading at a three-month high and has been outperforming the XAU Index since the start of July. Why that's significant is because ABX is the biggest stock in the XAU (21%). Some other gold leaders are Agnico Eagle Mines (AEM), Golden Star Resources (GSS), and Randgold Resources (GOLD). The fact that so many precious metal stocks are trending higher bodes well for the metals and the group.


Chart 8


Chart 9


Chart 10

PRECIOUS METAL MUTUAL FUNDS ... Mutual funds also offer entry into the precious metals group. Charted below are Fidelity Select Gold and Rydex Precious Metals funds (plotted through Tuesday). Both look very similar the XAU and HUI indexes. Not surprisingly, both funds ranked first in their respective sector rankings over the last two weeks.


Chart 11


Chart 12

     Dan Fitzpatrick
The "Insult Meter" Tell
8/10/2006 4:01 PM EDT
I am hearing from several readers of our sister-site, TheStreet.com, about my observations yesterday concerning the broken uptrend in HANS. (Yesterday's article was posted today on TheStreet.com.) I can always tell when a moomentum stock is in the wrong hands by the tenor of my emails. I received similar emails when I suggested selling Generex Biotech (GNBT) when it was at $5. Now, Hansen's is a real company that's got serious throw-weight in the soft drink industry -- especially in light of its distribution deal with Anheuser Busch. Great company, busted stock.

And it's still in the wrong hands.

No Reason to Believe in a Lasting Rally

By Helene Meisler
RealMoney.com Contributor
8/10/2006 9:00 AM EDT
Click here for more stories by Helene Meisler             
Technical Analysis

    * With the Fed event past, it seems everyone's realized the transports are due to fall back to 3900.
    * But the BKX shows that stocks that should benefit from the Fed's pause aren't.
    * Worse, new highs and new lows on the Nasdaq add to the case that rallies won't last.



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With the Fed announcement over, it seemed everyone was chatting about transportation stocks on Wednesday as if the group had just now fallen from its lofty perch. We've discussed the double top in the transports several times, most recently on Tuesday, when we covered the possibility of the Dow Jones Transportation Average breaking the third fan line.

Remember, the longer-term target for the transports is back near that 3900 area. There is support not far away, near 4100, but eventually the transports ought to make their way to that 3900 area.

But with everyone catching up to the transports situation, it seems in their tizzy they haven't noticed the potential double top in the Bank Index, the BKX. I say "potential" because according to the general rules of double tops, it won't be official until the BKX breaks below the valley between the two peaks. In this case, that's all the way back around 104.

I have liked this group for a long time but am bothered that I've been waiting for the ratio of the BKX to the S&P 500 to break out, yet that ratio keeps getting stopped right at its downtrend line. This is the third time it has gotten stopped there in the past month or so.

Add to that the fact that the Dow Jones Utility Average also hasn't been able to get through its old highs. I've discussed this several times and it continues to nag at me.

So it's not only the cyclicals and transportation stocks (the economically sensitive stocks) that are struggling. The stocks that should benefit from the Federal Reserve pausing or stopping its rate hikes are not exactly participating on the upside, either.

For the market as a whole, it's odd that the Nasdaq spent the entire day on the upside and yet there were only 21 stocks that made new highs. Compare that with 33 on Tuesday. In fact, we haven't seen so few stocks make new highs since July 21, when we were at the lows.

Of course, the number of stocks making new lows on the Nasdaq has almost tripled since last Friday, so I had to go looking for the last time we had so many new lows: July 18. The statistics now sport readings similar to ones we had when the Nasdaq was 40 points lower!

We've now had four down days in a row, so it wouldn't be unusual to see a short-term panic low soon. But with statistics like this and the market not yet oversold, I'm still in the camp that believes any rallies are not going to be long-lasting.
Overbought/Oversold Oscillators

When the Fed Stops Tightening

By Barry Ritholtz


http://www.thestreet.com/markets/marketfeatures/10302821.html

interesting huajian, although usually i would say Barry Ritholtz blows for value-add

Very interesting article by Martin Pring written last month.  http://www.trade2win.com/knowledge/articles/general_articles/return-of-the-bear-two/

Quoted from ORKiter

interesting huajian, although usually i would say Barry Ritholtz blows for value-add

He's an airbag.  (oooooo - did I say that?!)  

Article Title: "‘Best Time Is Now' Not Always Best Advice "
Author: PAUL WHITFIELD
Section: Investor Education       
Date: 8/11/2006
It's been said that "the best time to buy stocks is now."

The idea is that the market can't be timed, so you may as well dive in and let time work for you.

How true is this?

Sometimes the usefulness of a strategy depends on the context.

If you're the sort of investor who doesn't want to think about stocks, do the research, or learn how to read charts, then buying an index fund or a well-diversified mutual fund and forgetting about it until retirement might be your best bet.

As the accompanying chart of the S&P 500 index since 1963 shows, an investor who bought almost anywhere on the time line would've made money, given 20 to 40 years. The overall upward bias overwhelms the downturns.

So the buy anytime approach is good enough advice for investors who don't want to get too involved in their own finances.

In "24 Essential Lessons for Investment Success," William O'Neil wrote: "The real money in funds is made through compounding - letting the money build on itself - not by jumping in and out of funds trying to time market conditions."

There are investors, though, who want to be the pilot for their personal finances, not the passenger. They want to be a player in the game, not a spectator.

They also want quicker results. They don't want to wait 20 to 40 years for a strategy to work out.

For the aggressive, highly motivated investor, the notion that anytime is the best time to buy stocks is inappropriate advice.

Over a shorter time frame, timing matters - even for an index fund. An investor who in March 2000 purchased a fund reflecting the S&P 500 could be showing a paper loss of as much as 18% six years later. Anyone who bought the same fund three years later, just before the start of the bull market, would find himself up by as much as 65%.

When buying and selling individual stocks, timing is even more crucial. As the legendary trader Jesse Livermore pointed out, trading the stock market all the time is unwise. Sometimes it's better to sit on the sidelines.

IBD research shows that buying fundamentally sound stocks in bull markets as the stocks break out of bases on heavy volume - and selling them when the technicals go bad - is the surest way to achieve extraordinary gains.

Subject: Fw: WW III Started in 1979

The chronology speaks for itself.

WW III Started in 1979

This is not very long, but very informative. You have to read the catalogue of events in this brief piece. Then, ask yourself how anyone can take the position that all we have to do is bring our troops home from Iraq, sit back, reset the snooze alarm, go back to sleep, and no one will ever bother us again. In case you missed it, World War III began in November 1979... That alarm has been ringing for years

US Navy Captain Ouimette is the Executive Officer at Naval Air Station, Pensacola, Florida. Here is a copy of the speech he gave last month. It is an accurate account of why we are in so much trouble today and why this action is so necessary.

AMERICA NEEDS TO WAKE UP!

That's what we think we heard on the 11th of September 2001 (When more than 3,000 Americans were killed -AD) and maybe it was, but I think it should have been "Get Out of Bed!" In fact, I think the alarm clock has been buzzing since 1979 and we have continued to hit the snooze button and roll over for a few more minutes of peaceful sleep since then.

It was a cool fall day in November 1979 in a country going through a religious and political upheaval when a group of Iranian students attacked and seized the American Embassy in Tehran. This seizure was an outright attack on American soil; it was an attack that held the world's most powerful country hostage and paralyzed a Presidency. The attack on this sovereign U. S

America was still reeling from the aftermath of the Vietnam experience and had a serious threat from the Soviet Union when then, President Carter, had to do something. He chose to conduct a clandestine raid in the desert. The ill-fated mission ended in ruin, but stood as a symbol of America's inability to deal with terrorism.

America's military had been decimated and down sized/right sized since the end of the Vietnam War. A poorly trained, poorly equipped and poorly organized military was called on to execute a complex mission that was doomed from the start.

Shortly after the Tehran experience, Americans began to be kidnapped and killed throughout the Middle East. America could do little to protect her citizens living and working abroad. The attacks against US

In April of 1983 a large vehicle packed with high explosives was driven into the US Embassy compound in Beirut When it explodes, it kills 63 people. The alarm went off again andAmerica hit the Snooze Button once more.

Then just six short months later in 1983 a large truck heavily laden down with over 2500 pounds of TNT smashed through the main gate of the US Marine Corps headquarters in Beirut and 241 US servicemen are killed. America mourns her dead and hit the Snooze Button once more.

Two months later in December 1983, another truck loaded with explosives is driven into the US Embassy in Kuwait , and America continues her slumber.

The following year, in September 1984, another van was driven into the gate of the US Embassy in Beirut and America slept.

Soon the terrorism spreads to Europe. In April 1985 a bomb explodes in a restaurant frequented by US soldiers in Madrid.

Then in August 1985 a Volkswagen loaded with explosives is driven into the main gate of the US Air Force Base at Rhein-Main, 22 are killed and the snooze alarm is buzzing louder and louder as US interests are continually attacked.

Fifty-nine days later in 1985 a cruise ship, the Achille Lauro is hijacked and we watched as an American in a wheelchair is singled out of the passenger list and executed.

The terrorists then shift their tactics to bombing civilian airliners when they bomb TWA Flight 840 in April of 1986 that killed 4 and the most tragic bombing, Pan Am Flight 103 over Lockerbie, Scotland in1988, killing 259.

Clinton treated these terrorist acts as crimes; in fact we are still trying to bring these people to trial. These are acts of war.

The wake up alarm is getting louder and louder.

The terrorists decide to bring the fight to America . InJanuary 1993, two CIA agents are shot and killed as they enter CIA headquarters in Langley, Virginia.

The following month, February 1993 , a group of terrorists are arrested after a rented van packed with explosives is driven into the underground parking garage of the World Trade Center in New York City. Six people are killed and over 1000 are injured. Still this is a crime and not an act of war? The Snooze alarm is depressed again.

Then in November 1995 a car bomb explodes at a US military complex in Riyadh, Saudi Arabia killing seven service men and women.

A few months later in June of 1996, another truck bomb explodes only 35 yards from the US military compound in Dhahran, Saudi Arabia. It destroys the Khobar Towers, a US Air Force barracks, killing 19 and injuring over 500. The terrorists are getting braver and smarter as they see that America does not respond decisively.

They move to coordinate their attacks in a simultaneous attack on two US embassies in Kenya and Tanzania.. These attacks were planned with precision. They kill 224. America responds with cruise missile attacks and goes back to sleep.

The USS Cole was docked in the port of Aden, Yemen for refueling on 12 October 2000 , when a small craft pulled along side the ship and exploded killing 17 US Navy Sailors. Attacking a US War Ship is an act of war, but we sent the FBI to investigate the crime and went back to sleep.

And of course you know the events of 11 September 2001. Most Americans think this was the first attack against US soil or in America . How wrong they are. America has been under a constant attack since 1979 and we chose to hit the snooze alarm and roll over and go back to sleep.

In the news lately we have seen lots of finger pointing from every high officials in government over what they knew and what they didn't know. But if you've read the papers and paid a little attention I think you can see exactly what they knew. You don't have to be in the FBI or CIA or on the National Security Council to see the pattern that has been developing since 1979.

I think we have been in a war for the past 25 years and it will continue until we as a people decide enough is enough.America needs to "Get out of Bed" and act decisively now.America has been changed forever.. We have to be ready to pay the price and make the sacrifice to ensure our way of life continues. We cannot afford to keep hitting the snooze button again and again and roll over and go back to sleep.

After the attack on Pearl Harbor, Admiral Yamamoto said "... it seems all we have done is awakened a sleeping giant." This is the message we need to disseminate to terrorists around the world.

This is not a political thing to be hashed over in an election year this is an AMERICAN thing. This is about our Freedom and the Freedom of our children in years to come.

If you believe in this please forward it to as many people as you can especially to the young people and all those who dozed off in history class and who seem so quick to protest such a necessary military action. If you don't believe it, just delete it  --  and go back to sleep

----WAKE UP

The engine continues to work!

http://finance.yahoo.com/columnist/article/futureinvest/8103

THINK MR. KEON IS A CANSLIM INVESTOR? ONLY 10% IN CASH?

PERHAPS THERE WAS A FOLLOW-THROUGH DAY WE ALL MISSED?


Prudential's Ed Keon Raises Stock Allocation to 80% From 75%
Aug. 14 (Bloomberg) -- Ed Keon, chief investment strategist at Prudential Equity Group LLC, raised his recommended allocation for stocks to 80 percent from 75 percent and cut cash on optimism the U.S. economy will not slip into a recession.

Keon, 53, is now the most bullish strategist among 14 tracked by Bloomberg News. He had been tied with Goldman Sachs Group Inc.'s Abby Joseph Cohen and ISI Group Inc.'s Jason Trennert.

On average, Wall Street strategists as of last week recommended a 63 percent weighting for stocks.

``The record says that it's been very tough to push this robust economy into recession,'' New York-based Keon wrote in a note to clients.

Keon cut his recommended cash allocation to 10 percent from 15 percent.

Last July, Keon advised investors put 100 percent of their assets into equities, the most since Bloomberg began surveying Wall Street strategists in 1996. Keon slashed that to 55 percent on Feb. 6 on concern earnings may not live up to expectations, and has brought the weighting back up since then as profits held up against higher interest rates.