Fed Fund Futures: 100% chance of Quarter Point Cut
Fed Futures all but guarantee a 1/4 point cut today; What to watch? The comments released at the same time will suggest whether a January cut has a snowballs chance . . .

Closing Summary

Index	Last	Change	% Change
Dow Jones Industrial Avg.	9921.4	-128.10	-1.27%
S&P 500	1139.93	-18.38	-1.59%
Nasdaq Comp	1992.1	-29.10	-1.44%
Russell 2000 Index	474.18	-7.03	-1.46%

CSFB Will Settle IPO Investigation
CSFB agreed to pay $100 million to resolve a federal inquiry into alleged abuses in its IPO distribution, marking the biggest crackdown on the excesses of the Internet stock boom of the 1990s. (WSJ)

Irrational Exuberence: Happy Anniversary!
This Fed meeting approximately marks the five-year anniversary of Greenspan's famous "irrational exuberance" speech. (Apparently, its a slow news week . . . )

-NOK The world's biggest mobile phone maker, Nokia delivered an upbeat mid-quarter trading update on Tuesday, saying it expected fourth quarter earnings to come in at the top end of its forecasts and even exceed them.

- CPN Shares of Calpine regained some of the ground they lost in the regular session. In a conference call after hours, the company disputed a NYT article comparing it to fallen energy giant Enron. After falling nearly 17 percent to $17.79 in the regular session, shares rose to $18.43 after hours. .

- GE said it expects to meet earnings estimates for the quarter and year, despite the recession and terrorist attacks, and sees growth of 10% or more in 2002. - JDSU Forecasts 5th Straight Decline in Quarterly Sales. Sales in the three months ending in March will fall 10 percent to 15 percent from this quarter, damping optimism for an earlier recovery at the biggest maker of fiber-optic components. Hope of a December bottom in JDSU are now dashed.

- MSFT Microsoft on Monday detailed changes to a proposed settlement of private, class-action antitrust lawsuits in response to critics. The private settlement, which is under review by a federal judge in Baltimore, has no bearing on a proposed settlement agreement with the Justice Department and nine states that would end a federal three-and-a-half year old antitrust case against the software giant.

-VSNX Visionics soared 42 percent yesterday, hitting a new 52-week high and closing at $18.08 after the company said that it has formed a collaborative pact with Raytheon to develop and sell facial recognition systems.

Monday was an extension of the decline we've had since the high mid-day Thursday where we lost momentum and rolled over and extended that on Friday before a rally late in the day.

This morning after gapping down we had a rally that took us right up to the 21-day moving average on intermediate charts, and that proved to be futile. For the rest of the day the market kept drifting lower, making lower lows and lower highs until towards the end of the day we had just a slight firming but not much.

We ended up near the lows for the session. My concern is that the Dow and the Nasdaq Composite closed below major psychological support levels, the Dow down 128 at 9921, closing down below 10,000 and significantly so.

The Nasdaq Composite closed 8 points below 2000 at 1992, and the Nasdaq 100 closed below support of 1650, closing at 1645, down 28. What's more important is that the technicals were poor today, confirming the negativity in the market. The advance-declines were 960 up and 2160 down on New York and about 20-11 negative on Nasdaq.

So it was pretty extreme today and the up/down volume was as bad, showing losses of 3 ?-1 on up/down volume on both New York and Nasdaq.

It was a fairly negative day today but not tremendously so. The Nasdaq 100 broke minor support at 1650 and went into the gap that it created last Wednesday morning when it gapped up dramatically. We'll see if that proves to be support tomorrow and the market can rally off this level. I'm looking for the market at some point to try a rebound rally back up again and test resistance which right now appears to be up around NDX 1685-90. On the S&P 500, we've come down from 1173 to about 1140, or about 33 quick points. I think that index may try a rally back up tomorrow into the 1150-55 resistance zone. That's what I'm looking for tomorrow. (Source: The Technical Trader).

Market Stats

Market	NYSE	Nasdaq
Total Volume	1190.77m	1657.69m
Up Volume	261.54m	448.46m
Down Volume	911.79m	1,191.16m
Advancers	965	1336
Decliners	2152	2311
New Highs	62	95
New Lows	38	28

PSSI PSS Medical Buy 9.50 - 10.50; Stop $8.50
This chart caught my attention yesterday; Its been in a steady uptrend since making lows in May of $3.84; It did well after the 9/11 attack as part of the move to defensive issues, and continues to strengthen. It broke resistance at $10 last week, pulled back a bit, and is getting ready for the next leg up.

With $1.8 Billion a year in sales (they are a medical supplies and drug distributor), and a market cap of $670m, this can hardly be considered a small company.

In September, Goldman Sachs raised their rating to market outperform. Earnings are out January 30.

Things That Warrant Attention On The Charts

Yen Falls to Eight-Month Low on Signs Japan Recession Worsening

New York: The yen fell to eight-month lows against the dollar and euro after a report showed Japanese machinery orders unexpectedly tumbled in October, suggesting Japan's third recession in a decade is deepening. The Japanese currency is less than one yen from a three-year low. It sank as far as 126.40 per dollar, its weakest level since April, from 125.53 in New York on Friday, and later traded at 126.05. The yen declined to 112.25 per euro from 111.70, and reached an eight-month low of 112.31. "There's clearly more evidence of even further deterioration in the economy,'' said Bob Lynch, a currency strategist at BNP Paribas. The 126.84 per-dollar level, the three-year low the yen sank to on April 2, is "the next target,'' Lynch said. Today's declines came after a government institute said Japanese machinery orders fell 10.1 percent in October from September. Economists polled by Bloomberg News had forecast a 4.2 percent increase. (Bloomberg)

It's The Most Wonderful Time of the Year
Jeffrey Hirsch of the Stock Trader's Almanac said December has been the best-performing month for the S&P since 1950, with an average return of 1.8 percent. It's been the second-best month for the Dow, with a return of 1.8 percent as well. And December has been the second-best month for the Nasdaq over the past 30 years.

"There is all the difference in the world between departure from recognized rules by one who has learned to obey them, and neglect of them through want of training or want of skill or want of understanding. Before you can be eccentric you must know where the circle is."

- British actress Ellen Terry (1848-1928)

Beware Dubious Accounting

A series of VERY high profile accounting frauds have rocked both Wall Street and the Big 6 accounting firms. Enron (ENE) is merely the most recent debacle brought to you by the fine folks who failed to perform a competant and legitimate audit; Recall the Cendant - HFS merger, as well as the more recent accounting scam from software firm Aremisoft.

Don't get caught in this web of deceit -- it invariably leads to a drawn out and miserable death sprial. There are a series of warning signs which alert investors can use to avoid Enron like endings:

-- sudden shift to pro-forma earnings;
-- non recurring items (one time fees, special investments) folded into ordinairy revenues;
-- unexplainable business models;
-- excessive rates of earnings growth;
-- a blame on short sellers for share price decrease;
-- excessive arrogance or hubris on the part of management.

Recall that at an open earnings conference, Enron's CEO Lay actually called an analyst who questioned their accounting practives and business model an "Asshole." Yes, he actually said that in an open microphone . . . (I guess we don't have to wonder who is the ass*&%$ now . . . ?)

Its probably a matter of time before Enron's management has their personal assets frozen. This will not be pretty for anyone involved . . .

See the article below in further reading . . .

Unraveling pro forma results
By Leticia Williams, CBS.MarketWatch.com, Dec. 10, 2001

EXCERPT:
The Securities and Exchange Commission is cracking down on companies that use special accounting techniques to boost their dwindling financial results.

"Pro forma" earnings, also known as adjusted results, have made it tricky for investors to get to the bottom line of a company's financial performance. These results, which often represent earnings before interest, taxes and depreciation, can leave out unusual events, costs of mergers, or anything else that may give an unpleasant view of the company's performance.

That's why it's important for investors to understand that any kind of hypothetical earnings numbers, including pro forma statements, have to be reconciled with Generally Accepted Accounting Principles (GAAP) required by the SEC.

Last week, the SEC stepped up to address growing concerns over the pro forma issue and sent a message to corporations that the agency isn't going to tolerate the issuance of misleading information under the guise of pro forma.

The SEC told companies that earnings reports using pro forma numbers should explain, at least to some extent, management's rationale behind their report, in the absence of GAAP.

--Barry Ritholtz
December 11, 2001

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