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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: Sully- who wrote (44529)	11/28/2001 7:44:31 PM
From: stockman_scott	Respond to of 65232

******* MARKET COMMENTARY November 28, 2001 - The Right Line Report The stock averages ended sharply lower for a second straight session as the collapse of the Enron/Dynegy merger caused losses among bank shares and gas utilities and the Beige Book report from the Fed dampened investors' enthusiasm. Market losses increased during afternoon trading. The DJIA fell 1.6% or 160.74 points to 9711.86, whiled the Nasdaq lost 2.5% or 48 points to 1887.97. In the tech group, Chip, Internet and Networking issues were hit the worst. The bank sector also fell, with J.P. Morgan and Citigroup especially weak due to their exposure to the Enron/Dynegy transaction. Also falling were airline, utility, natural gas, biotech and brokerage shares. Only the gold sector turned in a positive day. Despite the small bounce sparked largely by zero-interest car purchases, consumer spending for much of the country remained at or below pre-September 11th levels. The Beige Book showed that the manufacturing sector continued to worsen. Although nothing in the report was really a surprise, the markets, nonetheless, reacted negatively to the news. The report further stated that "economic activity generally remained soft in October and the first half of November." "Tourism remained weak and non-auto sales were spotty, with stronger sales growth in some areas offset by weaker sales elsewhere." It also stated that "Store managers had already begun discounting prices in some areas to counteract weak customer traffic, while in other areas retailers' expectations for the season had brightened recently. "Discount retailers saw the most traffic, while spending on luxury goods fell. Merchandise buyers have mixed expectations for the holiday shopping season, the Fed said. In separate speeches delivered Tuesday, Fed Gov. Laurence Meyer and St. Louis Fed President William Poole, both indicated they thought the Fed should be willing to be aggressive with rate cuts in order to assure the economy's recovery next year. Their comments were seen as increasing the odds of at least a quarter point cut in the fed funds rate at the December 11th meeting. Labor markets were said to be deteriorating, putting downward pressure on prices. Capital spending plans pointed to continued production weakness. Shipments and orders of construction supplies and heavy machinery weakened, while some regions said furniture and clothing demand was also down. "Businesses continued to draw down their inventories with most districts suggesting that the bulk of reductions was behind them," the report said. Several districts said banks were using tighter credit standards in lending to businesses and individuals, while loan delinquencies were on the rise. Residential real estate activity was mostly unchanged. As dire as it may seem, we'll remind traders of our view in last weekend's RightLine Report: ".. while the powerful run has certainly qualified technically as a new "bull market," a retest of the September market lows could still easily occur. From a technical analyst's point of view, such a retracement would be welcome, for a solid market bottom usually requires a challenge of existing price lows to convince everyone that the bear is dead . . . or at least unconscious. A return to that support level could provide an old fashioned downdraft - sufficiently stomach-churning enough to send the weaker players running for the exits, while at the same time signaling corporate buyers who have remained on the sidelines over the past year that it's time to board the train. The result of a return to that level would be a "W" shaped bottom as opposed to the current "V" shape. Without getting into all of the rocket science behind these chart formations, a "W" is usually a much more stable foundation than a "V" from which to launch a sustained bull market." TC Salmon, Senior Analyst siliconinvestor.com