Comtex SmarTrend(R) Morning Call -- October 14, 2008

Oct 14, 2008 (SmarTrend via COMTEX) -- WYNN | Quote | Chart | News | PowerRating -- The key needed to unlock frozen credit was the injection of equity capital into banks; and the U.S. Treasury is set to follow the British approach, investing $250 billion directly into ailing banks. In over 9 hours of trading between Friday and Monday the DJIA jumped up 1,550 points, an all-time record. This corrected the market's extreme oversold condition, and the SmarTrend(R) indicators began to rise. They need to rise further to confirm the DJIA bounce back has legs.

The rally by the market indices was dramatic, far less so was the switch by the daily SmarTrend(R) uptrends to downtrends from negative to positive at 18:4. Although narrow in scope, this recovery offered welcome relief for stock buyers, and most of the SmarTrend(R) indicators reacted by moving upward. The IBDI and Trend Ratio both moved north, but neither left oversold territories. Therefore, the intermediate-term downtrend has so far only seen its downward slide halted. It will require several days of uptrends exceeding downtrends to confirm an intermediate-term uptrend, and there can be little help reversing the long-term downtrend until this happens.

A faster response is expected from the near-term trend. Although not as strong as the two longer-term trends discussed above, a near-term uptrend rotation could be confirmed as early as today. At least two of the near-term trend indicators need to rise above 20. The NBDV, which had climbed a point on Friday, yesterday climbed from 15 to 21. The NBDX moved yesterday from 6 to 13, and the SmarTrend(R) Ratio climbed yesterday from 2 to 18. As a result, two of the indicators are close to breaking through and setting off a multi-day, near-term trend rally.

The trade-term trend entered a steady uptrend last Friday at 3PM, which continued until yesterday's close. Much of this was in response to rumors that British, and maybe then American, central banks would shore up the capital ratios of banks by buying equity directly in these institutions. The U.S. plan to do so was announced this morning and that is expected to promote further carry through of the trade-term uptrend. Yesterday the DJIA broke back above 9,100, a key hurdle. The next milestone will be at 9,700. The DJIA could get there before the end of this week, but first it must survive a bevy of earnings reports, which no doubt will begin to tell the tale of how much the recent credit lock-up has damaged businesses in the non-financial sectors. These reports are discussed below, and to examine the list of stocks changing trends in the last week, please click on http://www.mysmartrend.com.

The financial landscape has shifted away from last week's bleak picture of a 1929-like banking system collapse, which some feared could precipitate depressions in economies worldwide. Over the weekend news of plans to shore up UK and European credit markets were answered with the outline of a US plan to shore up capital ratios through the purchase of $250 billion equity stakes in various banks. Markets responded yesterday with clear votes of approval: the DJIA marked its largest single-day point gain, up 11.1%, for a 936-point advance, following the prior eight day loss of nearly 2400 points. Nasdaq and S&P 500 shares roared ahead, up 11.8% and 11.6%, respectively. Crude prices, down 44% from their July $145 peak, gained 4.5% to $81.19, as concerns of demand declines lessened. Commodity prices advanced on an improved outlook for global economies; the Dow Jones AIG Commodity Index jumped 2.7%. Volatility, a noted feature in markets recently and a measure of the market "fear factor," dropped 21%, for its largest-ever, single day loss, to a still-high 54.99. Today is showing signs of further market gains, credit easing, and gaining appetite for risk.

The DJIA surge was led by a 33% jump in General Motors (NYSE:GM) shares, whose future last week appeared bleak in the face of crumbling vehicle sales in the US and Europe. Prospects brightened, however, on the possibility of accelerated government assistance, and news the firm was considering a tie up with Chrysler or Ford (NYSE:F). Alcoa (NYSE:AA) shares rose 23% despite Moody's (NYSE:MCO) lowered outlook. Alcoa's (NYSE:AA) senior unsecured and short-term ratings were affirmed, however, prospects were considered weakened by soft markets, high costs and aluminum price pressures. Chevron (NYSE:CVX) shares jumped 21%, attending the rise in crude prices. Oil prices climbed even as Goldman's (NYSE:GS) oil analysts, long the optimists within the industry, now anticipate 2009 average oil prices of $86 per barrel, cutting estimates by $37 on Monday. Among sector shares, the energy sector posted the sharpest gains, up 16.5%, led by Southwestern Energy (NYSE:SWN), up 37%, BJ Services (NYSE:BJS) up 32%, and Tesoro (NYSE:TSO), up 29%. Material sector shares advanced over 14%, with AK Steel (NYSE:AKS) up 29%, Nucor (NYSE:NUE) up 28% and Freeport-McMoran (NYSE:FCX) up 25%. Health care issues gained over 12%, led by United Health (NYSE:UNH), Boston Scientific (NYSE:BSX), and CIGNA (NYSE:CI), up 35%, 26% and 24%, respectively.

Plans in Europe to invest over $2,500 billion in financial firms were echoed by joint plans by the Treasury Department, Fed and FDIC to take $250 billion equity stakes in US banks. Yesterday's meeting with bank heads forced the majors to accept the deal likely to result in the government purchase of $25 billion stakes in Bank of America (NYSE:BAC) (including Merrill (NYSE:MER)), JP Morgan (NYSE:JPM) and Citigroup (NYSE:C); $20-$25 billion in Wells Fargo (NYSE:WFC); $10 billion in Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS); and $2-$3 billion in Bank of New York Mellon (NYSE:BK) and State Street (NYSE:STT); with the rest for as-yet-unnamed, smaller financial institutions. The plan, to be detailed this morning, is also expected to provide guarantees on banks' new senior debt and expanded FDIC insurance to cover small-business deposits.

This morning witnessed an extension of yesterday's investor applause, with the Hang Seng up 3.2%, Singapore up 4.4%, the Kospi up 6.1%, and the Nikkei, which was closed yesterday, up a record 14.2%. European markets remain strong today as well with US futures pointing to a higher opening on strength in banking shares, with glimmers of improvement in credit conditions. Yields on 10-year Treasuries climbed above 4% for the first time since August this morning. Bernanke, Paulson and Bair described the newly-sculpted rescue plan this morning. Attention to banking solvency issues may now shift investor attention to the current onslaught of third quarter earnings and fourth quarter guidance now underway, with two key questions to be answered. Has the damage to corporate earnings already been done? And has the damage to confidence in financials' well-being generated an unusual, and deep, consumer-led recession?

Today's results include numbers from tech bellwether Intel (NASDAQ:INTC) after the close, expected to post three cents higher than last year at 34 cents per share. Also reporting are Altera (NASDAQ:ALTR), CSX Corp (NYSE:CSX), Genentech (NYSE:DNA), WW Grainger (NYSE:GWW), and Johnson and Johnson (NYSE:JNJ). Economic postings include additional retail sales numbers, the TIPP index of economic optimism as well as the September Treasury Budget. Fed speakers include St Louis Fed President Bullard, and San Francisco Fed President Yellen. European Central Bank President Trichet also takes the podium today.

In the corporate corner, Boeing's (NYSE:BA) talks with the machinists' union dissolved, with no new meetings scheduled... Wynn Resorts (NASDAQ:WYNN) warned of lower Vegas numbers; however, this year's Macau results are expected to show improvement from a year ago... Santander (NYSE:STD) has offered $1.9 billion of its own stock for Sovereign Bancorp (NYSE:SOV), the largest US savings and loan entity, or about $3.81 per share, a 3.5% premium over yesterday's close... Johnson and Johnson (NYSE:JNJ) topped estimates with third quarter results of $1.17 versus 88 cents a year ago and Street estimates of $1.11. The firm also upped 2008 forecasts to $4.50-$4.53, versus consensus expectations of $4.50... PepsiCo (NYSE:PEP) reported disappointing results of 99 cents versus $1.06, missing estimates of $1.08. The firm announced plans to cut 3300 jobs, estimating 2008 earnings of $3.41-$3.44... BJ Services (NYSE:BJS) expects fourth quarter numbers of 55-57 cents, versus consensus estimates of 55 cents, with numbers affected by hurricanes in the Gulf...

By Chip Brian, Editor-in-Chief, Comtex news Network

www.Comtex.com -- editor@mysmartrend.com

The following equities mentioned above include:

Comtex SmarTrend Alert ---------------------------------------------- Ticker Last Close Trend Direction Trend Price Trend Date ---------------------------------------------------------------------- AA 13.82 Downtrend 38.35 6/20/2008 AKS 14.20 Downtrend 54.66 8/5/2008 ALTR 17.50 Downtrend 20.82 9/3/2008 BAC 22.79 Downtrend 28.62 10/7/2008 BA 47.08 Downtrend 63.24 7/25/2008 BSX 9.22 Downtrend 11.57 10/1/2008 BK 30.68 Uptrend 26.50 9/29/2008 BJS 12.57 Downtrend 28.70 8/4/2008 C 15.75 Downtrend 15.17 10/8/2008 CSX 49.87 Downtrend 58.05 8/13/2008 CI 27.50 Downtrend 39.18 9/5/2008 CVX 69.89 Downtrend 80.15 9/30/2008 DNA 81.18 Downtrend 90.98 9/17/2008 F 2.39 Downtrend 4.28 10/3/2008 FCX 45.37 Downtrend 65.48 9/26/2008 GS 111.00 Downtrend 109.74 10/9/2008 GM 6.51 Downtrend 9.83 9/26/2008 GWW 80.45 Downtrend 88.85 8/27/2008 INTC 16.30 Downtrend 22.20 9/3/2008 JNJ 62.68 Downtrend 69.62 9/22/2008 JPM 41.99 Downtrend 39.30 10/8/2008 MER 17.62 Downtrend 16.76 10/8/2008 MS 18.10 Downtrend 23.26 9/29/2008 MCO 24.82 Downtrend 36.20 9/15/2008 NUE 39.29 Downtrend 41.99 9/29/2008 PEP 61.77 Downtrend 69.00 10/3/2008 STT 48.35 Downtrend 59.00 9/18/2008 STD 14.50 Downtrend 17.51 8/15/2008 SOV 3.68 Downtrend 8.97 9/22/2008 SWN 28.44 Downtrend 28.43 10/2/2008 TSO 10.82 Downtrend 14.42 10/2/2008 UNH 23.43 Downtrend 27.59 9/5/2008 WFC 28.40 Downtrend 30.60 10/7/2008 WYNN 63.37 Downtrend 85.81 9/26/2008

INX -- S&P 500: 1,003 Lo: 913 Hi: 1,007 Change: +104.13

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INDU -- DOW JONES: 9,388 Lo: 8,462 Hi: 9,428 Change: +936.42

http://www.mysmartrend.com/images/INDU20081014.jpg

QQQQ -- NASDAQ: 1,844 Lo: 1,716 Hi: 1,844 Change: +194.74

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This report is divided into three sections. The first deals with our 5 proprietary market indicators, the second section examines important economic and business happenings which are expected to affect U.S. Stock market movements and the third section describes specific company announcement and earnings releases. Experience demonstrates that when these 5 indicators reach extremes they can shortly be expected to change direction and move in the opposite direction. When such happens in all or most of the 5 indicators, on or about the same time, followed by a move from below an extreme (oversold) to above that extreme (or vice versa for overbought), a change in market direction is very probable. The near term market moves are measured to identify the best possible returns for traders/investors. Daily price/volume examinations provide the best data upon which to base such forecasts. In this report though, intraday indicators are examined to improve the point of entry timing for the expected move.

Comtex News Network, Inc. is not a registered investment advisor and does not provide investment advice. Investors bear complete responsibility for their own investment research and decisions and should seek the advice of a qualified investment professional prior to making investment decisions. SmarTrend is a registered trademark of Comtex News Network, Inc. Copyright, Comtex News Network, Inc. 2008

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