My Home     About Me

We start this week with some uncertainly and perception of being at major crossroads essentially across most all World markets, the resolution of which as we near month's end that could determine the next major trends going forward into year's end and even beyond well into 2006. The European markets broke sharply leading the rest of the World lower, but the strongest of the markets have exhibited corrective wave activity, opening the way for a resumption of the very strong uptrends in the most bullish of markets that just a month ago were setting new records and in some cases new all time record highs especially in Latin America.

The Japanese Nikkei is a case in point. Less than one month ago, the Nikkei was soaring in an almost parabolic up-mode, as the Japan Smaller Capitalization Index JOF was setting new all time record highs, indicating an accelerating recovery in Japan. At the same time, its post WWII partner economy in Germany was emerging out of a long malaise of anemic performance and was starting to show signs of real recovery along with Japan. The implications of this are profound, because for most of the 1990's, it was the US economy that carried the rest of the World and led those economies higher absent Japan and Germany. Now over the past few years the US Economic Engine has been joined by the leading economies of China, India and Latin America as the main engines pulling along the 200 odd countries of the World along with them like an accelerating freight train. Now for the first time ever perhaps with a synchronized Global recovery we have almost all the engines and cars on the train driving it forward with unified momentum. This is an enormously powerful trend that has the potential to last for years, if not decades, as long as the Federal Reserve doesn't brake too hard and de-rail this incredible synchronization that's taken so long to foment. In fact, at the end of last month, we surmised that perhaps for the first time ever, more markets Worldwide set new records in terms of volume and activity or even new all time highs than at any other point in history, an exceptionally bullish omen. So, this week, World markets, may provide answers to: Were the past 4 weeks a correction or is something more ominous at hand? The Fed continues to raise rates, but so far the impact remains benign for long term rates and there is a sense that the Fed has gotten the upper hand some as Energy prices have begun to ease and Gold and Silver's advances have slowed. In spite of the Fed's efforts, the economy remains more or less on track and relatively unfazed having been clobbered with one exogenous event after another, to seemingly little avail thus far which leads us to the markets and how they'll react anew and that is a tantalizing dichotomy right now.

Back in April when we made the major lows in US Equity indices following the first quarter correction, that was a very hard bottom to figure and yet it produced a hundred point rise in the S&P 500 on the coat-tails of new all time record highs in the S&P 400 Midcap and Russell 2000 among others. The S&P's bottoming attempts of last week are reminiscent of the April lows and if the Nasdaq can rescue the rest of the markets by leading them higher as it so valiantly attempted to do late last week, then there is a sense that an equally difficult and extremely volatile bottoming formation a la the April lows, could in turn foment some equally spectacular upside.

That is really what we need to be looking for as the week unfolds. We need to keep this theme in our minds as a guidepath as the coming days unfold. Obviously, if we break down, all bets could be off, or it could be a bear trap, not unlike what occurred in April, but the important thing to bear in mind is if we see strong upward action on heavy volume, one would have to view this as a "go with" market that could develop a lot of upward power and momentum. Earlier last week we reminded subscribers of the similarities with 1999. Back in late October going into November, no-one was ringing a bell heralding in a spectacular tech rally that would lead the rest of the indices in the US and markets around the World in a stunning move higher. Conditions could be ripening for at least a low key repeat performance to begin with, that could add traction if the Fed hints at easing or Energy prices tumble or especially if tech earnings continue to surprise.





Many of the dogs of the past are beginning to look like recovery candidates and some look to have awesome potential. The long term chart of Yahoo looks impressive enough and appears poised for a significant upside breakout.







{%2f52%2fyhoo10.jpg}





{%2f52%2fyahoo1yr.jpg}

Even one of Warren Buffet's rare one-time follies Level 3 Communications LVLT looks finally ready for liftoff.

{%2f52%2flvlt.jpg}

In the same sector ATSI Communications Inc ATSX looks cheap with a 30% higher book value than current, a PE ratio of 0.68 (not a typo) and earnings per share of 53 cents. Fact is VOIP is in its infancy and this sector appears poised for hyper-growth, just as the Internet did in the 90's.

{%2f52%2fatsx1yr.jpg}

Trade Well
From the desk of Savant

Technical chart patterns   support/resistance levels   S&P 500 chart pattern   ETFs (exchange traded funds)   Deron Wagner   emini's S&P 500   earnings   economic data   Biotech HOLDR (BBH)   Emini's Nas 100   Short selling ETFs   exchange traded funds   sector rotation   etfs   corn futures   selling options   commodities   mcio   minecore   sapphire