Worries about their jobs eroded Americans' confidence in the economy in November, the Conference Board said Tuesday. The board's monthly index fell to 82.2 in November from 85.3 in October. The index read 132.6 a year ago. Economists expected a slight increase to 86.2. See Economic Calendar and Forecast.The index has fallen five months in a row. Read the full release. While consumers are increasingly pessimistic about the current economic situation, they are growing more hopeful about the economy six months ahead. The present situation index fell to 93.5 in November from 107.2 in October and 179.7 a year ago. The expectations index rose to 74.6 in November from 70.7 in October and 101.2 a year ago.

Beige Book Out Today
The Federal Reserve's Beige Book might help clarify uncertainty surrounding the economy following the Sept. 11 terrorist attacks, according to Lehman Bros. On a national basis, non-auto retail sales bounced higher and housing and stock markets appear to be holding up. There may be regional pockets of weakness, however, and manufacturing sector seems may continue to weaken. (DJ)

Closing Summary

Index	Last	Change	% Change
Dow Jones Industrial Avg.	9872.6	-110.20	-1.10%
S&P 500	1149.5	-7.92	-0.68%
Nasdaq Comp	1935.9	-5.30	-0.27%
Russell 2000 Index	460.71	-0.51	-0.11%

Home sales show unexpected gain
The lowest interest rates in 30 years helped sales of existing homes rebound in October from September levels driven down by the terrorist attacks, the National Association of Realtors said Tuesday. The 5.5 percent jump in home sales to a seasonally adjusted annual rate of 5.17 million units surprised analysts, who had been expecting sales to slip further from their 4.9 million pace in September. The rate was 2 percent ahead of that recorded in October 2000.(CBS.MW)

Bank of Canada makes 50 bps cut
There was no surprise up the Bank of Canada's sleeve Tuesday as the country's central bank's half percentage point cut in the overnight target rate was bang on with expectations. The move took the overnight target rate down to 2.25 percent and the bank rate to 2.5 percent. In total, the BoC has slashed the overnight rate by 3.5 percentage points from the 5.75 percent level at which it started off the year.(CBS.MW)

Online Shopping Reaches Record
Online shoppers spent more on Monday than any previous day this year, spending more than $220 million, according to estimates by ComScore. The results highlight how Internet shoppers aggressively boosted their spending when they returned to their offices this week following the Thanksgiving break. Because the bulk of online spending tends to occur during the work week when many users have access to high-speed Internet connections, Monday was considered by some to be the first true test of the strength of holiday sales.

- BRCD Brocade reports Q4 results after the close today.

- EMC EMC Corp. made positive comments at CSFB conf; CEO said they have reduced costs by $800 million. 

- FLEX Flextronics reaffirmed its Q3 & Q4 targets of 17 cents per share on revs of $3.4 billion (Q3) and 16 cents per share on revenue of $3.2 billion (Q4). Flextronics said business is "quite stable," and it is seeing some signs of a "slight" upturn.

- TXN Texas Instruments confirmed Q4 forecasts. The company said it had started to see signs of stabilization. Revs will be down 10 percent from the Q3, losing about 9 cents per share. The forecasts were in line with earlier guidance. Texas Instruments is the world's largest maker of chips for mobile phones.

- INTC Meanwhile, Intel is seeking to generate 1/3 of its revenues from communications products several years from now, the company announced. INTC is considered a late-comer to the market in processors for mobile phones.

- NOK Nokia cuts Q4 handset sales estimates; Mobile phone giant expects 10m fewer phone sales. The world's biggest mobile phone maker Nokia on Tuesday cut its estimates again for handset sales this year. Nokia said 380m handsets should be sold globally in this calendar year, with 105-110m to be sold in the Q4, up from 94m in the Q3 and 91m in the second.

- AAPL / MSFT Microsoft's antitrust woes ain't quite yet over. That was demonstrated Tuesday when a federal judge pondered whether a proposed settlement of dozens of private class-action suits would give the world's largest software maker an unfair advantage in the education market. Apple criticized Microsoft's plan to settle its consumer class-action lawsuits. Meanwhile, Connecticut's attorney general said the state wouldn't join the separate proposed deal between the U.S. and Microsoft.

- GS Goldman Sachs Investors May Sell 14.1 Mln Shares; A unit of Japan's Sumitomo Mitsui Banking Corp. may sell $1.27 billion of shares, according to filings. Sumitomo Mitsui has been selling in part to raise money to write off bad loans and cope with slumping business in its home market.

- KM Kmart loss widens, beats projections as CEO Conaway admits he cut too much out of advertising. Chuck Conaway, chief executive of Kmart, said he will restore part of the drastic cut he made in advertising costs as he struggles to invigorate limp sales at the nation's second-largest discounter. This year, Conaway slashed 50 percent in costs relating primarily to advertising circulars. As a result, Sunday sales dove.

- AOL Meanwhile, AOL Time Warner doesn't see evidence of a recovery in the slumping U.S. advertising market. "It's not getting worse but I don't see it getting better,'' said COO Pittman at the CSFB Tech Conf. U.S. advertising likely will fall 7 percent to 8 percent this year, the first decline in spending since 1991, according to Competitive Media Reporting.

Liquidity Driven Search for Beta
"The investment community has an even greater than normal paranoia about performance as this tumultuous year comes to a close. The desire to load up on beta has generated a significant positive bid to the semi equipment stocks. Few investors with whom we met believe there are any fundamental reasons to own semi equipment names. Most agree that valuations are still way out of line with where we are in the cycle and that the downturn is likely to either take another leg downward or last longer than the broader market currently contemplates. We continue to believe that stocks are at risk in the short-term."
--Goldman Sachs

Why the End of Recession Isn't Here
Like many people, Anderson & Strudwick's Kent Engelke had this reaction to NBER's recession call: "No duh." Unlike some folks, though, he's not ready to call a quick end to recession, for five reasons: 1) the longest peacetime expansion doesn't end in a nine-month downturn; 2) there was a financial implosion in which $5 trillion was destroyed in bursting of asset bubble; 3) "collapse" of the high-tech industry; 4) Sept. 11 and its far-reaching implications; 5) everyone is saying, "It's almost over," and rarely does a downturn end when all are in concert.

Meanwhile, perennial bear Barton Biggs (of Morgan Stanley) offered "just a glimmer" of hope. He "concedes" there is a possibility that business activity in U.S. is bottoming, as confidence has risen with successful war and the rising stock market. He even says Christmas may be good! But, his problem lies with concept that recovery in economy and, particularly in profits, will be strong. Too many imbalances, with bloated state of consumer the biggest problem. "In fact, if the U.S. does recover now, the pattern may be a 'W' rather than the 'V', with the resurrection of inflation, that markets are discounting," he says. (Dow Jones)

Market Stats

Market	NYSE	Nasdaq
Total Volume	1301.67m	2107.24m
Up Volume	533.31m	992.89m
Down Volume	738.76m	1,052.33m
Advancers	1396	1758
Decliners	1724	1914
New Highs	71	89
New Lows	22	24

- ANF ABERCROMBIE & FITCH:
Broke out over $22.60 on 11/14; Buy between 23 – 25. short term target is $28, 18 month price goal is $41. Use a modest stop of $21.50.

Early July, ANF was a $45 stock. The slowing economy especially hurt retailers in general; The usual after-the-fact-downgrades didn't help this specialty retailer.

ANF sales were slowing as the economy cooled. As every major retailer announced slowing sales – Sears, Kmart, The Gap – the entire retail sector dropped, almost in lockstep. Since peaking at $47.50 mid-Summer, the stock has gotten repeatedly whacked -- gapping down on 3 separate occasions: After monthly sales disappointments in July and August (8/8 & 9/6), and then again after the 9/11 terrorist attacks. The stock finally bottomed at $16.21.

In October, ANF cancelled their racy X-mas catalog – featuring nude models, interviews with porn stars, and tips on drinking alcohol. ANF spokeman noted the “Time's not right” for a catalog that might be "a little too fun" to suit the current mood of the nation.

But the specialty retailers have started to make a comeback, as it looks like this holiday shopping season is off to a good start. ANF is growing at better than 15% a year and has a P/E of less than 15. It is attractively priced at current levels.

One analyst wrote: "Checkout lines at Abercrombie stores were among the longest, if not the longest, at all three major Chicago-area malls we visited over this holiday weekend. We continue to view ANF's lackluster performance as environmental versus fundamental, and believe the company is well poised to profit from an economic recovery. Trading at half the historical absolute and relative P/E multiples, the stock appears cheap, in our view. We continue to target a $27 one-year stock price, with a likely return to the mid-to-low $40 range as the economy recovers."
added mid day, 11/27

BRCD
Brocade reports Q4 results after the close today. The storage network fibre-channel switch leader is facing growing competition. After the 147% rise in the stock since October 1, one would imagine that profit taking is inevitable. A potential short candidate . . .

Technimentals (Kevin Lane)
Long: G, SPLS, HTCH, INTL
Short: TUP, AEP

Things That Warrant Attention On The Charts

Volatility at the Top?
Another volatile trading session. The market started off down, had a little bit of a rally, then headed down sharply to support around NDX 1580 and held there.

It then embarked on a very strong move from around 11 o'clock till about 2. The NDX went from 1575 to 1644, nearly a 5% move in a couple of hours. The Nasdaq 100 broke out and spiked up to a new rally high. Individual stocks at that point were moving very quickly, and the S&P also made a nominal new high. Both indices peaked near my previously projected potential blow-off top levels around 1640-50 on the NDX, (it hit 1644 before backing down late in the afternoon) and 1163-65 SPX (reaching 1163).

The last hour or so the market came down sharply, dropping about 44 NDX points before bouncing off psychological support at 1600 and closing around 1610, down around 10 on the day. But that didn't tell the picture. We had three distinct swings, first down, then sharply up, then back down sharply again. So we'll have to see whether this is a topping process or just another pullback and retest, but it sure was a steeper sell-off both this morning and this afternoon than we have seen recently.

We're starting to get extreme volatility and what looks like anxious selling, but at the same time there are still willing buyers every time the market sells off sharply. Until the market gets down to at least below 1580 NDX and 1140 on the S&P, we're still considered to be trending upward and we're still above the rising moving averages. On the other hand, based on many of my indicators being overbought and also some of the negative divergences I'm seeing, we should be approaching a topping process if we're not in one already.

"Human beings never think for themselves, they find it too uncomfortable. For the most part, members of our species simply repeat what they are told--and become upset if they are exposed to any different view. The characteristic human trait is not awareness but conformity...Other animals fight for territory or food; but, uniquely in the animal kingdom, human beings fight for their 'beliefs'...The reason is that beliefs guide behavior, which has evolutionary importance among human beings. But at a time when our behavior may well lead us to extinction, I see no reason to assume we have any awareness at all. We are stubborn, self-destructive conformists. Any other view of our species is just a self-congratulatory delusion."

-- Michael Crichton, The Lost World

WHY Does Charting Work ?

Any chart of an individual stock shows the battle of supply and demand. In fact, that is the purpose of charting. This battle is one that has been fought many times. Each time, there were certain troop movements, deployments, dispersals, which indicated which side was winning or, in some cases, which side was going to win. We use this history to judge the significance of current formations. Keep this military analogy in mind when thinking about chart formations.

Once we understand that if enough people want a stock, the price is bound to go up, and if hardly anyone wants a stock, the price must go down. It must be evident then that price movements are not random. Stocks move because of the value people place on them at various times. This increasing investor confidence, or disinterest, is usually graphically portrayed in a familiar pattern on a chart.

The study of charts is based on the evaluation of past events to determine future probability. We seek a stock forming a particular pattern or shape (or configuration if you will). We note that this pattern resembles that which typically precedes a stock's upward move. In this way, we are able to use our knowledge of the way stocks have acted in the past to estimate this particular stock's most probable future move. Also, we study the past movements of the stock in question to determine how it has acted after forming such patterns. In addition, there will be a rational, logical explanation for a particular chart formation usually preceding a given stock move.

It is good to remember, however, that even the most obvious pattern only provides you with an indication of a strong probability. Stocks will continue to make mystifying moves, and no chart pattern nor strong fundamental position for that matter can force a stock to rise. Stock prices do not rise because you wish they would.

(Source: Dorsey Wright)

Warren Buffett on the Stock Market

EXCERPT:
What's in the future for investors--another roaring bull market or more upset stomach? Amazingly, the answer may come down to three simple factors. Here, the world's most celebrated investor talks about what really makes the market tick--and whether that ticking should make you nervous.

The last time I tackled this subject, in 1999, I broke down the previous 34 years into two 17-year periods, which in the sense of lean years and fat were astonishingly symmetrical. Here's the first period. As you can see, over 17 years the Dow gained exactly one-tenth of one percent.

• Dow Jones Industrial Average
Dec. 31, 1964: 874.12
Dec. 31, 1981: 875.00

And here's the second, marked by an incredible bull market that, as I laid out my thoughts, was about to end (though I didn't know that).

• Dow Industrials
Dec. 31, 1981: 875.00
Dec. 31, 1998: 9181.43

Now, you couldn't explain this remarkable divergence in markets by, say, differences in the growth of gross national product. In the first period--that dismal time for the market--GNP actually grew more than twice as fast as it did in the second period.

• Gain in Gross National Product
1964-1981: 373%
1981-1998: 177%

So what was the explanation? I concluded that the market's contrasting moves were caused by extraordinary changes in two critical economic variables--and by a related psychological force that eventually came into play.

Here I need to remind you about the definition of "investing," which though simple is often forgotten. Investing is laying out money today to receive more money tomorrow.

That gets to the first of the economic variables that affected stock prices in the two periods--interest rates. In economics, interest rates act as gravity behaves in the physical world. At all times, in all markets, in all parts of the world, the tiniest change in rates changes the value of every financial asset. You see that clearly with the fluctuating prices of bonds. But the rule applies as well to farmland, oil reserves, stocks, and every other financial asset. And the effects can be huge on values. If interest rates are, say, 13%, the present value of a dollar that you're going to receive in the future from an investment is not nearly as high as the present value of a dollar if rates are 4%.

--Barry Ritholtz
November 28, 2001

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