Fed Minutes Halt Rally
Stocks were buoyed initially by encouraging sales reports from discount retailers and a forecast for the semiconductor industry raising hopes for an economic recovery. The release of the minutes of the FOMC's Oct. meeting was the excuse for the market's late afternoon dip from earlier highs.

  The offending portion the minutes said: "Monetary policy is a flexible instrument and, with inflation expectations likely to remain relatively benign, policy could be reversed in a timely manner later should stimulative policy measures and the inherent resiliency of the economy begin to foster an unsustainable pace of economic expansion." 

Given the short-term overbought condition of the markets (shown in Technical Analysis section below) Thursday's "churn" day was not unexpected, and short-term softness is possible. PPI data will determine whether we work sideways or dip down from here.

The Fed policy makers said they expected the U.S. economy to slip into a mild, short recession and were inclined to keep lowering interest rates, according to minutes from their early October meeting.

Battered banks slash Nikkei by 2.1%
Tokyo's Nikkei index sank 2.1 percent Friday as banks shares slid on growing fears the country's deteriorating economy would delay the progress solving the institutions' bad-loan problems.

The Nikkei Average tumbled 216.08 points, or 2.1 percent, to close at 10,215.71, its lowest close since October 10. The broader TOPIX lost 1.5 percent to 1,030.78.

Media recount story set to break
First stories on Florida ballot review will run Monday

This is a wildcard which has a some small potential to roil the markets next week; See "Further Reading" below for more details

-DIS "Disney's income statement won't be the happiest place on earth for the next few months." Operating income for its fiscal first quarter ending Dec. 31 to drop by more than 50% from a year earlier, and operating income for the following three quarters of the fiscal year will be down 10% to 15%.

That bleak forecast, a product of the economic downturn and the atrocities of Sept. 11, comes on top of the mixed results for the fourth quarter ended Sept. 30 that the company reported after Thursday's market close. For the fourth quarter, Disney reported revenue of $5.8 billion, down from $6.1 billion a year earlier and about even with analysts' diminished expectations. Disney's net fell more than 68% in its fiscal fourth quarter, and the company warned of weak operating profit for its current quarter and the rest of fiscal 2002.

-EMC sets Software Deal With Compaq EMC will allow rival Compaq to develop and sell software for use on EMC equipment, as part of an effort to build alliances in the highly competitive data-storage sector.

-AOL and Chrysler (DCX) formed a marketing campaign in which the media giant will be auto maker's partner for its "Home for the Holidays" program.

-NVDA nVidia reported third-quarter earnings of $44.7 million, or 26 cents a share, versus $28.1 million, or 17 cents a share, a year ago. First Call had expected 23 cents a share. Shares of Nvidia closed down 88 cents to $49.75 ahead of the report and then rose $2.90 to $52.65 aftermarket. There is a large outstanding short position in this stock, so squeeze induced session of volatilityis likely.

-PALM's CEO has resigned; Eric Benhamou, Palm chairman of the board, will serve until a permanent successor is named. A search has begun for a new CEO of Palm. The company also announced that it is in the final stages of its internal separation into two businesses, according to a release. Palm also confirmed that the second quarter is still on track with the revenue targets the company provided Sept. 20. Read more.

-DNA Genentech said it will buy back up to $625 million in stock during the next 12 months.

-IMGN ImmunoGen said its fiscal first-quarter loss narrowed to $1.6 million, or 4 cents per share, beating expectations by a penny

-AMRI Albany Molecular Research reported 25 cents per share as expected. CFO David P. Waldek said the company is "comfortable" with the analyst consensus estimate of earnings of 25 per share for the fourth quarter, with full-year earnings per share of 99 cents. In early October, Bristol-Myers Squibb finished its purchase of DuPont Pharmaceuticals, one of AMRI's large customers, and AMRI said it's in talks with BMS regarding its relationship. Analysts are looking for 2002 earnings per share of $1.18.

-HZ H.J. Heinz warned that earnings for the second quarter and for the full fiscal year will be lower than expected. Somewhat unexpected, HZ blamed the post 9/11 restaurant/dining out slowdown for their shortfall.

Market Stats

Market	NYSE	Nasdaq
Total Volume	1501.47m	2272.96m
Up Volume	760.29m	1,002.87m
Down Volume	698.66m	1,252.12m
Advancers	1681	1824
Decliners	1421	1789
New Highs	97	63
New Lows	20	41

Interesting tidbit: The rally that took place from early April to the peak in May lasted 33 sessions before turning lower.  Yesterday was the 33rd session since the September 21st lows. The equity markets already had a fairly large move off the post attack lows in the anticipation of rate reductions, fiscal stimulus packages and lower long-term interest rates:

The major equity indices are now overbought in the context of a down trending market and should not be ignored. A "prolonged pause" is possible -- rather than pullback or decline -- as the lower move in long-term interest rates to levels not seen in a generation has created an environment where there are not any alternative investments to meet investors long-term needs.  

That indicates that we will be in a rotational market vs. a broadly moving market until the markets work off the overbought condition.  
(--Tony Dwyer)

Market Gains Since Sept 21st Lows

Dow Jones Industrial Average	+16%
S&P 500	+16%
NASDAQ Composite	+29%
PHLX Semiconductor Index	+46%

THINGS THAT WARRANT ATTENTION ON THE CHARTS

--The Dow was unable to close above 9598, which was the intraday high on October 26 (the local top of that up move). While the Dow has been showing strength, this failure leaves the door wide open to a failure of the new high that was hit intraday on Thursday.

--On November 6, the COMP broke up through an important downtrend line. It is now threatening to break back down below that line. There is a decent chance it will torture that line for a while before making its next definitive move.

See the Nasdaq chart for a graphic depiction.
(Source: http://www.BullMarket.com)

- SUNW was recommended at $9.70 late October, with a price objective of $14. We hit that target yesterday (Intraday high of $14.10) and recommended taking profits. Excellent trade for those of you who participated: 40% gain in two weeks.

-Oracle (ORCL) is still on the buy list; It broke thru resistance at $15; We said buy half now; pick up the rest on any pullback to the lo $15s. (added Mid-day Nov 7th)

--Countrywide Credit (CCR) was recommended as a short yesterday, and it traded over 46. It is featured today as a short on TheStreet.com. You can add to the position on an uptick between 45 - 47; STOP LOSS: cover on a breakout over 47.50

Interpublic Group (IPG): From a low of $18.25 on Oct 2, 2001 prices rallied, reaching a high of $23.05 on Oct 11, 2001. A decline saw prices pull back, reaching a low of $20.37 on Oct 19, 2001. Another rally saw prices penetrate resistance line, closing 11/8/01 at $24.07.

A buy alert was given on Nov 7, 2001 when the Histogram crossed the "0" line to the upside. Support remains at $22.00; Resistance is at $27.58. Point & Figure reversed to the upside on Oct 22, 2001; A P&F downside reversal takes place at $22.50.

Technical indicators have turned bullish. BUY IPG @ $24.38; Use a protective stop of $22.38. Price Objective is $32.00. Risk/Reward: $2.00 VS. $7.63. Risk Reward Ratio: 4:1 (SOURCE: http://www.wstraders.com)

Flextronics (FLEX) - Short Term Bearish
FLEX designs and manufactures products for makers of networking and telecommunications gear, computers, consumer electronics, and medical instruments.  The company reported earnings on October 25 that came in below analysts' estimates by one penny per share.  Following this poor announcement, FLEX fell 27 percent over the next three sessions.  Subsequently, the shares have reversed course and are approaching pre-earnings announcement levels.  The equity's Relative Strength Index readings are showing an overbought state as FLEX approaches its downtrending 10-month moving average.  The current option reading on the stock stands in the second percentile - a sign of over optimism from option players.

Technimentals (Kevin Lane)
Two to watch: Inter tel (INTL) and Hutchenson Technology (HTCH)

"Adopt the pace of nature: Her secret is patience."
-- Ralph Waldo Emerson

Nasdaq 100 to reduce tech weighting

The Nasdaq 100, widely used by investors as a benchmark for the world's biggest technology stocks, will undergo a major shift away from technology during its annual re-jiggering in late December, the chairman of the Nasdaq Stock Market said Thursday.

The shift is scheduled to be announced on Dec. 17 and to take place on Dec. 24. It will trim the weighting of technology stocks in the Nasdaq 100 to about 65 percent from 78 percent currently, Nasdaq Chairman Hardwick Simmons said in a speech to the annual meeting of the Securities Industry Association.

Nasdaq annually shifts the companies that make up the Nasdaq 100 to reflect the largest publicly traded, non-financial companies on the Nasdaq, removing on average 12 to 15 companies each year and bringing in new ones. This year, technology companies have lost so much of their market values that many of them are being thrown out of the index and replaced with companies in more traditional, brick-and-mortar industries.

While no final decision has yet been made, a recent study by Lehman Brothers estimates that as many as 16 stocks will leave the Nasdaq this year, almost all of which are technology companies. Among those currently at the bottom of the Nasdaq 100 according to market capitalization include such former tech growth leaders as RealNetworks (RNWK), Inktomi Corp. (INKT), 3Com (COMS), Novell (NOVL) and Ariba (ARBA).

The new companies entering the index are expected to include several from industries such as drugs and manufacturing, according to the Lehman study.

Source: CBS

America in 2001, a Space Odyssey:
Who would have thought it'd come to this
By David Callaway, CBS.MarketWatch.com

EXCERPT:
SAN FRANCISCO (CBS.MW) -- It was just another night at Sam's Anchor Café on San Francisco Bay, when a spacecraft suddenly appeared overhead and deposited a rumpled-looking figure in a Yankee hat on the outside deck.

"Where am I," said the man, clutching a Wall Street Journal dated Tuesday, Nov. 7, 2000, as the jaws of the regulars at the bar dropped into their beers. "Last thing I remember, I was on my way to the polling place on East 14th Street to vote for Ralph Nader. Then a blinding flash of light, and now I'm here."

"You better sit down and have a drink," I told him. "You're not in New York. You're in the Bay Area, and you've missed an entire year. It's the day after Election Day -- 2001."

"You're kidding. How can that be? My day-trading account will have expired. Oh well, should be OK, I was long Cisco, Lucent and Enron. Anyway, how'd Nader do . . . ?"

CHICAGO (CBS.MW) -- Temporarily lost in the aftermath of Sept. 11, what could be one of the biggest news stories of the year is about to break.

Beginning in February, the National Opinion Research Center, working at the behest of a consortium of media companies, labored for months to tally uncounted votes in the disputed election that eventually led to George W. Bush's victory in Florida and, ultimately, to his presidency.

NORC's tabulation of 180,000 ballots that did not register votes during initial machine counts was complete before Labor Day and was slated for media release in mid-September. The data were held back at the behest of sponsors who felt they did not have the resources to analyze it properly with so many reporters busy covering the attacks.

However, NORC quietly turned over its findings early this week. The Associated Press said Thursday that its first coverage will go out on the wire Sunday for newspaper use the following day. Follow-ups begin Monday for use Tuesday.

A spokeswoman for the New York Times Co. (NYT) told CBS.MarketWatch.com late Thursday that the company's flagship paper will run with its own story Monday.

Apart from the AP and the Times, companies contributing to the estimated $500,000 cost of the project were Dow Jones (DJ), Washington Post Co. (WPO), Tribune Co. (TRB), AOL Time Warner (AOL) and a couple of independent Florida newspapers. Under the terms of the unusual agreement, the results would be given to all consortium members at the same time, with an agreed period in which to independently analyze them before going public.

Other news outlets have done their own recounts in Florida, with results showing everything from a larger margin for Bush to a slight edge for Democrat Al Gore, depending on how the ballots are interpreted.

--Barry Ritholtz
November 9, 2001

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