Taliban military forces appeared to have deserted the capital of Kabul at dawn Tuesday, after a series of stunning military victories by opposition forces over the past four days, the Associated Press reported citing witnesses.

According to the report, columns of Taliban vehicles could be seen heading south beginning at Monday night. Northern alliance forces had begun moving into the city in pickup trucks loaded with soldiers the AP reported. It wasn't immediately clear what impact the move would have on repeated U.S. requests that the Northern alliance stop short of entering the capital. (CBS.MW)

Closing Summary

Index	Last	Change	% Change
Dow Jones Industrial Avg.	9554.4	-53.60	-0.56%
S&P 500	1118.33	-1.98	-0.18%
Nasdaq Comp	1840.1	11.70	0.64%
Russell 2000 Index	440.48	2.38	0.54%

Probe focuses on GE engine
No evidence of terrorism seen in American Airlines crash; Investigators have begun to focus on the General Electric engines on the American Airlines plane that crashed in New York Monday. For an interesting theory, see http://www.birdstrike.org/risk/threat.htm

Crude Oil Falls After Crash; Russia Rebuffs OPEC Plan
Crude oil tumbled on expectations for even less air travel, and a drop in jet-fuel demand, which already had plunged since the Sept. 11 terrorist attacks.

Prices were falling before the jet crash, as Russia pledged to trim output by 30,000 barrels a day, a 10th of the amount OPEC expected. Demand for oil from the world's biggest energy users, including the U.S. and Japan, fell 2.5 percent in September, the steepest drop this year, the International Energy Agency said.

Crude oil for December delivery fell 99 cents, or 4.5 percent, to $21.23 a barrel on the New York Mercantile Exchange, the biggest one-day decline since Sept. 24. Prices are down 38 percent from a year ago and fell to a two-year low last week.

Nikkei briefly dips under 10,000
Tokyo stocks closed down for the third straight day Tuesday with investors damping airline stocks in a wake of the fatal crash of a passenger plane in New York.

Japan's Nikkei Average ended off 51 points, or half a percent, to close at 10,030.56. The index briefly fell as low as 9,955.09, slipping below the psychologically important 10,000 level for the first time since October 10. The broader TOPIX index fell half a percent to 1,016.48.

- ORCL Oracle Corp. slid 3 percent in euro trading to $14.96, according to Nasdaq-Live data, after CEO Larry Ellison suggested that the company won't meet the consensus estimate for earnings of 11 cents a share in Q2, and that results were seen in the 9-10 cents a share range.

- AA Alcoa nears deal to acquire Australian mining company WMC for as much as $6 billion in cash and stock as part of its effort to expand overseas.

- CIEN Ciena leapt more than 9 percent after the company confirmed its fourth-quarter outlook, unveiled a workforce reduction, and said it plans to record a charge of about $1.7 billion.

- JNPR Juniper Networks said it plans to acquire privately held Pacific Broadband Communications for $200 million in stock. The deal, approved by the boards of both companies, is scheduled to close by year-end, subject to regulatory and shareholder approval.

- WMT the world's largest retailer reported an 8 percent increase in Q3 profits, as sales were helped by purchases of groceries and other essential items.

Net income came in line as at $1.48 billion, or 33 cents a share. Analysts' estimates ranged from 32 cents to 34 cents a share, according to research firm Thomson Financial/First Call. Sales for the quarter rose to $52.74 billion from $45.68 billion a year ago. Sales at all company stores open at least a year, or same-store sales, rose 6.7 percent in the quarter.

- HD, GX also release 3Q earnings today.

- AMZN holds a conference call today at 4:30.

- AOL using all units to boost `Harry Potter' sales. AOL is promoting the movie on the America Online service, through its Moviefone film ticketing unit and in magazines such as Time and Entertainment Weekly. This cross promotion will be the first big test of the "synergies" of this merger.

The movie, which opens in the U.S. and Canada on Friday, is based on the first in a series of children's books whose sales exceed 110 million copies. The popularity of the book created a audience of children and adults for the movie, and might become the biggest movie for this year, analysts said. From the usually curmudgeonish Herb Greenberg: "Saw a screening of Harry Potter last night. The hype is right: Big win for AOL."

Path of Least Resistance? Short Term Predictions Fraught with Peril
Despite the strength the markets are showing, many continue to believe that the near-term the path of least resistance is down. Yet the short term remains the hardest of all time frames to predict with any confidence, as a variety of news factors continue to impact daily trading.

The Stochastic Oscillators are showing sell signals. But the markets rebounded smartly off their intraday lows -- right near their respective 10-day moving averages. Many technicians continue to look for more downside in the near-term. Volume was light Monday, as it was on Friday, so it continues to look like the markets are more in a mode of consolidating than they are making "impulse" moves. (Impulse moves have increasing volume and momentum.)

The stubborn refusal of the markets to cooperate demonstrates the difficulties of predicting both the direction and timing in the shortest of time frames. Its a cliche, but its true: When unsure, trade "In Between."

Market Stats

Market	NYSE	Nasdaq
Total Volume	994m	1573.57m
Up Volume	438.93m	1,070.20m
Down Volume	531.20m	472.76m
Advancers	1496	1777
Decliners	1561	1770
New Highs	70	39
New Lows	29	49

- PMCS broke out Monday on the move over $20; A gradual uptrend since 9/11, the stock moved thru the 50 day moving average last week. Relative strength continues to improve. There is still no confirming volume surge, which would raise the degree of confidence in this chart. Short term target is filling the 9/11 gap to $25; Buy half here, and the rest on either a pullback to $20, or a confirming volume day. (added Mid-day Nov 12th)

-Oracle (ORCL) lowered guidance by a penny or two this a.m. ORCL bears watching this morn, as the futures are up strongly and ORCL is off only slightly despite the preannounce -- this could be a "higher on bad news" situation. Its still on the buy list. (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

- Sungard Data Systems (SDS) From a low of $20.01 on Oct 2, 2001 prices rallied, reaching a high of $26.75 on Oct 26, 2001. A decline saw prices pull back, reaching a low of $24.11 on Nov 2, 2001. Another rally saw prices penetrate resistance, closing 11/12/01 at $27.01. Support is at $24.50; Resistance is at $28.00. A Point & Figure downside reversal takes place at $25.50. Technical indicators have turned bullish. Buy SDS @ $27.13, Use a protective stop of $25.13. Price Objective is $39.50. Risk/Reward: $2.00 vs. $12.38, a risk reward ratio of 6:1. (Source: wstraders.com )

Technimentals (Kevin Lane)
Short: Tupperware TUP

MARKET TALK: Plenty of Good, Plenty of Bad For Stocks
For every piece of good news, Arnhold's John Roque can also cite some bad. The good: Fed still cutting rates and providing liquidity. The bad: still very few large-cap base patterns around. The good: end of 30-year forces down long rates. The bad: most stocks are still burdened by downward sloping 200-day moving averages suggesting there's still a lot of work to do. The good: pullbacks have been light. The bad: many stocks are into big resistance areas where they had trouble earlier in the year. (Dow Jones)

Things That Warrant Attention On The Charts
The CBOE Volatility Index (VIX) gained back some ground Thursday with a small bullish (bearish for equities) tail following a near-test of the 50-day EMA Wednesday. As mentioned, the index will likely look to spike higher before a sustainable rally in stocks can emerge along with a continuation of the bigger picture erosion in the level of volatility we expect in the coming weeks. This fear spike, likely up to the 37.50-40-level will be what the market needs to move higher. We continue to see the index setting up for a counter trend move to the upside likely to come from the 30-32.50-area. This area was tested with a low of 32.46 on Wednesday, but we expect a deeper test could be possible before retracing volatility. For the day the index traded as high as 34.57, while printing a low at 547.22. The index finished the session up 1.30 points, or 3.93% to close at 34.40. (Price Headley)

"Who knows when some slight shock, disturbing the delicate balance between the social order and thirsty aspiration, shall send the skyscrapers in our cities toppling?"

- Richard Wright, from his first novel, "Native Son" (1940)

The Second Derivative

Someone on CNBC recently mentioned that, "The market watches the second derivative." On Friday, Kevin Lane's Technimental market overview also discussed the second derivative. Both of these mentions raise the question: What is second derivative?

The second derivative is the rate of change of the rate of change. Here's what that means:

Suppose a company is growing earnings consistently at 10% per year. The rate of change is 10%. If that rate remains constant the 2nd derivative is zero. That is, the rate of change does not change, or the rate of change of the rate of change is zero.

Now suppose there is a company that grew earnings by 5% in 1998, 10% in 1999, 20% in 2000, and 40% in 2001. (Wouldn't that be a nice company to invest in?) The rate of change of the rate of change would be increasing from 5% to 10% to 20%. The 2nd derivative has been accelerating to the upside, or doubling each year.

Because markets tend to predict that "what's happening now will continue to happen over time" it becomes possible (and in some people's minds REASONABLE) to predict huge growth curves when 2nd derivatives are accelerating. The acceleration of the growth curve gets extended very far in people's imaginations, when in reality there will likely be a "knee" in the curve sooner than a market wants to think. That's what happened during the great bull run of 1995-2000. Likewise over the past 18 months as earnings have declined at accelerating rates, the market has been pricing in long-term continuations of deceleration.

The recent rally off the September 21 lows that has been pretty coincident with 3Q earnings reports and would appear to be largely in response to a "deceleration of the deceleration to the downside." That is, the rate of change of the rate of change to the downside has slowed.
(Source: DWA).

Enron, we hardly knew ye
By Andrew Leonard, Salon

EXCERPT:
Ironically, only one thing could have saved the now-imploding corporate poster child for deregulation: Tougher regulations requiring more financial "transparency."

Nov. 9, 2001 | It's never a good sign when a pack of Wall Street Journal reporters start nipping at your heels, rending your financial filings into tiny shreds and howling at every daily downgrade in your stock price and bond credit rating. But such has been the fate of Enron Corp. over the past two weeks: The company that Wall Street and the financial press lauded above nearly all others at the turn of the century is suddenly teetering on the brink, desperate for infusions of capital, seeking a "white knight" buyer and suffering from the unwanted attentions of a formal SEC investigation.

As the world economy sinks ever further into recession, stories of high fliers brought down to earth are hardly unusual. But Enron's abrupt transformation into dot-com blow-out wannabe deserves special attention -- and for those of who live in California, impels the kind of schadenfreude that you can't shake, no matter how hard you try.

--Barry Ritholtz
November 13, 2001

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