WAITING FOR FED, AGAIN

Futures are all red, a rather encouraging sign after a good week. There's no meaningful news this morning and the focus for the next couple of weeks will be the Fed's rate decision. For today, it's the end of July and never under-estimate the potential impact of month-end from mutual fund mark-up. Winners of last week may get a few additional yards, and losers, oh, well, losers. I will be looking for reversal early in the morning and watch for recent winners.

SYMC

I am considering to add some SYMC here. I thought it had a very good quarter, particularly the top-line growth, backlog and outlook. More importantly, this stock is universally hated by the street, unwarranted I might add. It breaks out today on decent volume and is sitting above its 200-day SMA. The only concern is the condition of overall market, tech in particularly. Having said that, I believe the risk/reward ratio favors owning this one. The overall market probably will be offset by large share repurchase in the next few quarters.

IT'S THE GUIDANCE, STUPID

A few themes have developed so far in this earning season, although still early. The most obvious is that while earnings were generally pretty good, most company are very cautious on the outlook for next quarter and second half of the year, and stocks got hammered in these cases. As a result, owning quality names (i.e. names usually produce quality and consistent earnings) are not necessarily safe, while positive outlook and guidance are given premium. Beating this quarter's number is not sufficient, and cautious guidance is sold off. This illustrates how difficult this market is. It is difficult to figure out the quality of the earnings already, and it is almost impossible to have a good sense of future earnings, particularly for small investors. This is the reason why market reaction to this earning season has been largely negative, despite the decent numbers. The weak outlook clearly indicates that the economy will likely, even probably, slow down meaningfully in the second half of the year. There's not too much place to hide if US economy, and global economies, slow down meaningfully in the second half of the year. The only relatively safe place, I emphasize RELATIVE, is healthcare and large pharmas, which have been the best performance sector in this early earning season.

CRME

CRME, a small Canadian early stage phamaceutical company which I featured on July 10th, announced positive results on one of its key drugs this morning and it appears that the stock will jump by about 25%-30%. While I am certainly not blaming any one for taking some profit right here, I believe the stock still has upside. Remember, it fell down from $13 to $7 due to a specific FDA refusal to accept its NDA, not today's positive announcement. There is a second leg which is when it resubmit its amended NDA to FDA and if accepted, will give the stock another $2-$3 up at least. I believe this is $15 stock when FDA accepts its NDA, and $20 stock when the drug is approved by early 2007.

BTUI

Did I forget to mention DELL? Another large cap, past leader that is not going any where soon.

BTUI, a small cap (unfortunately I do own) reported very strong earnings last night with a lukewarm outlook. Stock run up in front of earnings and it appears that it will give back all and more. While disappointed, I wonder if the management is playing UPOD. Although the stock remains cheap, valuation really does not matter in current market condition. BTUI happens to be in a very weak sector (Semi), industry (tech), and uncertain market (lower growth, inflation, Fed, geopolitical, mid-term election etc). I am holding this one for valuation and growth for now.

QCOM

QCOM's results are in line and outlook a tad low. The stock was sold off by more than 10% last night after-market trading. While it has recovered somewhat this morning, uncertainty remains. Most of analysts' comments this morning are fairly positive, and weakness in price is viewed as buying opportunity, although I noted that price target is cut by more analysts. I thought QCOM is a perfect illustration of this year's market where big tech growth leaders really suffered. Uninspiring earnings, tepid outlook, plus inflation and FED, result in severe multiple contraction. QCOM is considered a premium growth stock and it always traded at a significant premium. That premium is no more. At this level, it is just another large uninspiring tech name, like MSFT, INTC, CSCO, YHOO.

ANY GOOD NEWS THERE?

I am getting a bit of tired of listing all the bad news, and there's no sense to repeat them every day. Let's try some good news for a change.

1. The earnings, while again mixed are encouraging with broad market, weakness in tech notwithstanding;
2. What ever the CPI numbers and Bernanke says today, we know the Fed is close to DONE;
3. The market is oversold in near term;
4. Dip buyers are coming out from their hideout;
5. There are sectors are doing reasonably well, healthcare, and big pharm;
6. Sentiment is very negative overall;

Having said that, sustained rally is unlikely. There are simply too much negatives to overcome.

RECESSION

I kind of have a 15-year plan for financial independence. In the plan, I know there will surely be a couple 0f recessions on the road when market will give negative returns. Is this year one of them? There was certainly no such indication early this year, and it surely feels that way now, and there's an increase of talking of R word among the talking heads.

As for this morning, crude is up, Mideast the same, earnings mixed, and we are waiting for PPI, where do you think futures are heading, red, obviously.

EARNINGS, EARNINGS, MORE EARNINGS

While geopolitical situation remains very volatile, the future market appears to stabilize a bit. Crude oil also fall despite the Mideast Crisis. Early morning earning releases also have a positive bend. Does today have potential for a reversal day? Despite the Crisis, I believe the earnings will be the dominate force at least for this week, and the early returns, while mixed, seem encouraging. There will be at minimum some pocket strength, particularly in those companies that deliver strong earnings. Again, quality and consistency will be the key factors.

BOUNCING FRIDAY?

Futures are all over the place, up, down and up again, while pre-market trading are mostly green. While it is possible that the market bounces back a bit today given the near term over-sold condition, a strong rally is unlikely, certainly not sustainable. It is Friday, summer and nice day, after all, and given all the negative news, I do not believe traders would want to open new positions over the weekend. The strong opening will likely be faded and the market probably would not do anything for the rest of the day.

STEALTH CAPITULATION

The most frustrating aspect of this market is that it lacks intensity on both rally and decline sides, hence the "Dove Rally" earlier this year and "Stealth Capitulation" right now (several times I might add). Without intensity, the reversal tends not to occur and generally not as strong as expected. The action this morning is a perfect illustration. The futures seemed to indicate a potential waterfall event this morning. While it was no doubt ugly, there's no intensity on the selling side, even on the tech names, and the reversal, which appears to occur right this moment, is also slow and uninspiring. Without a intensive capitulation, neither bulls, nor bears can claim this market.

AKAM

I am watching AKAM closely. This has to be my favorate tech name in the growth stock arena right now. Despite the weak market in NASDAQ, this one is holding really well and its up trend is really not broken. It might testing its June low of $27 if the marekt continues to fall, and its net resistence is its 200 SMA. If either hold, I may take a position again on this name.

CAPITULATION?

Futures are all deep in red, and sentiment is as negative as it gets. And news is as bad as it gets. Disappointing earnings, slow down of global economies, political uncertainty, and a lot of negative analyst reports. This feels like a capitulation day, or capitulation morning. Is there a mid-day reversal coming?

DOCTOR'S ORDER

I had an order for some DR.UN and was filled yesterday afternoon. The trust has been falling for a while and currently yields at just a bit north of 12%. I did not think the decline is warranted. The trust's results have been rather healthy, payout ratio stable (89% last quarter), in a very defensive sector (healthcare/hospital), clean balance sheet, and a reputation for an excellent hospital operator. Given the current market conditions, a 12% return would not been too bad. Moreover, I believe the down side risk is at about $8.5, its recent low, while upside could go as far as $12 level. A defensive stock with very favorable risk/reward ratio.

Trust sector has been under a lot of pressure lately due to the raising rate. Could Bank of Canada's decision to stay put this morning be a catalyst in the near term?

CRME

CRME, a small Canadian biotech company based in Vancouver, continues to move up, after reaching its low On June 1st, after it received a RTF letter from FDA for its NDA. While not out of wood yet, indications are that the issues of RTF are largely administrative, not efficacy, which could be amended and refiled in the near future. I believe the stock will move back to $12 level as soon as CRME re-submits its NDA, and could go up further to break its all time high upon approval, expected by the first half of 2007 (although this timeline might be pushed back a quarter). At currently level of $9.5, it remains a great deal of value and should be added.

EARNING SEASON UPON US

It's summer, it's Monday, it's the earning season, and futures are all in green. How can this positive opening be trusted. Monday had been brutal for the market lately. Could today be the same? AA's earnings probably will be alright, which could prompt the market somewhat, particularly in the base metal area. Crude remains high. There's no meaningful news this week other than earnings. Be careful, cautious, and take position only on those who have delivered earnings consistently. This is the earning season where consistency gets paid!

MFLX

MFLX was down by 18% yesterday, on no meaningful news. It has fallen from $65 in March this year to current $26 level. It appears that the immediate catalyst was a weak earning report from MFS, an Singapore based company that is a friendly take-over target of MFLX. However, the purchase of MFS will have minimum impact to MFLX's earnings, and therefore, a 18% fall appears excessive, particularly on top of 100% fall from March already. The fact is investors are very nervous with this stock, given it depends on Motorola (85% of revenue), whose new phone (Q) has not sold as well as expected. Investors appears to be discounting a miss for the quarter, and lower guidance for the year. Morgan Stanley issued a note late yesterday:

• "We remain confident in our C2Q06 estimates for M-Flex earnings of $0.52 on sales of $132 million. We do not believe the company is experiencing the same weakness as MFS since the companies have minimal model overlap, Motorola's overall handset business appears to have had a solid C2Q06, and M-Flex set a manageable bar with its original C2Q06 guidance. The intrinsic value of MFS has declined since M-Flex announced the acquisition and we believe M-Flex management may consider renegotiation deal terms, although the valuation depends more on how M-Flex can utilize MFS's assets than on MFS's current business."

If the company is able to deliver its earnings this quarter, the stock appears to be extremely cheap.

JOB NUMBER

The job number is out and the future is all over the place, down, up and down. The anticipation of a strong number, hence more Fed rate increase, is replaced with fear of recession. The bulls simply can't win. They might as well throw towel and call it quit. Is there a fade in place here? Possible given a rather weak week thus far, particularly if the selling is hard and volume is strong.

DTAS 2

Here's the reason DTAS falling this morning.

• WR Hambrecht downgraded the marketing services company to hold from buy, citing concerns over the potential loss of American Express (AXP : American Express Company News , chart, profile, more ) as a customer. "Our recent channel checks have confirmed that American Express is seeking ideas from competitive agencies for its commercial card advertising and marketing business currently held by Digitas," said Analyst Denise Garcia in a note to clients. She said that while it's not certain that Digitas will lose the business, the news could still "weigh heavily" on the stock, given that American Express business represented 26% of Digitas revenue over the last year.

The potential loss of such large customer makes it a bit speculative at this point. Caution is required.

DTAS

DTAS got whacked this morning, down almost 20%. I could not find any news out there, and there's rumor that it might lose one major contract. Even assume it were true, a 20% haircut appears to be excessive to me. The stock has bee falling for a while and chart looks really ugly. There's really no support what's so ever. On the other hand, valuation begins to feel attractive. I am really attempted here. I might open a small position here.

ALDA

I added a bit of ALDA here this morning. Is this another falling knife? Could be. I expect the company to make about $3.25 this year and at this level, the stock is traded at less than 8X of this year's EPS. While I understand there's a lot of risks out there and this may not be the best time to add on, this is ridiculous cheap. The company has a ROE of 35%, growing more than 50% annually, has $3/sh cash and no debt. At the end of day, it is earning that will determine the level of stock. If I believe this is a very good stock, then this has to be the time to buy.

HANGOVER

Just as the market is ready to move up, another "failed missile testing" crisis. You can't hear anything on CNBC other than the Crisis. What crisis? The missile failed! Shouldn't the market celebrate? That's how nervous the market is.

Futures are all red, Asian markets are mostly down, and there's really no good news at all, and a lot of traders are probably in hang-over from last night's party. It's hard to imagine how could the market move up.