Comtex SmarTrend(R) Morning Call -- November 12, 2008

Nov 12, 2008 (SmarTrend via COMTEX) -- VZ | Quote | Chart | News | PowerRating -- Fears that the economic slowdown is spreading to other sectors of the economy helped drive the market indices down again yesterday. With retail sector earnings starting to take the spotlight, investors will hold their collective breath while assessing how bad consumer sales are contracting. Many SmarTrend(R) indicators can still go lower as stock prices seek bottoms before a rally, expected to start after Friday.

Stocks proved very vulnerable yesterday, and the daily SmarTrend(R) uptrends to downtrends became polarized to the downside at 9:257. This state of being acutely oversold may lead to a mild upward correction today by the DJIA; but the adverse impact on the Trend Ratio and IBDI was substantial, and will have a lingering effect until the end of this week. The only good news in this regard is that the IBDI has declined about as low as it can go. However, for the past two weeks the IBDI has languished in oversold territory, and it is unlikely to climb out of that zone until the daily uptrends surge to correct the polarized state to the downside; that is projected to happen later this week. Thus the intermediate-term downtrend is unlikely to bottom out and begin a rally until next week. In this lingering downtrend state the intermediate-term trend is unable to trigger any change in the long-term downtrend and together they are not helping to break the decline of the near-term downtrend rotation now in progress.

Yesterday the DJIA struggled to hold its fall at the 8,600 level, even attempting to rally slightly in the afternoon. But this was futile as the near-term trend indicators all continued their southward march. One, the NBDX, dropped below its oversold zone line, but the other three indicators are yet to become oversold. It is likely that at least three out of four near-term trend indicators will become oversold before this near-term downtrend rotation is complete. The important question lies in a forecast of how low is the next DJIA near-term bottom. As indicated in this report yesterday, the DJIA is at risk to drop below 8,000 before any multi-day help from the intermediate-term trend can materialize at the end of this week. If the DJIA is unable to find a bottom above 7,882, its recent intraday low, then this bear market has the potential to drop even lower on the next downtrend rotation. However, that is not deemed likely, as there are preliminary signs emerging that the long-term downtrend is approaching a state of exhaustion.

Tuesday was a relatively tame day for the trade-term trend. Its course followed a steady shallow-to- down path for most of the day, and thus the high-low range for the DJIA was only 300 points. By late in the day the trade-term trend had become slightly oversold and tried to rally; but like most rallies in such a downtrend environment, it was short and weak. Expect more of the same this morning as the trade-term trend will be impacted by a retail sales report, although perhaps not as dismal as expected; this report is discussed below. Even if the report is not as bad as feared, it will likely take the rest of this week for a meaningful change in the overall direction of the market indices to materialize. For a complete list of all stocks changing trends in the last week, please click on http://www.mysmartrend.com.

Indigestion from a meal of sour corporate entrees sent stocks lower for the second day on Tuesday. Off more than 300 points at its intraday low, the DJIA finished the session down 177 points, or 2%, with all but one component finishing lower. Nasdaq shares fell 2.2% as Google (NASDAQ:GOOG), off 2.3%, reflected concerns regarding its search-engine revenues. S&P shares declined 2.2%. Market breadth was negative and volume light, as NYSE declining shares outpaced advancing issues over four-to-one and volume dipped to 1.2 billion shares, 16% under the 3-month daily average. Volatility, however, stayed high, with the CBOE Vix up for the second day to 61.44, a 2.4% increase. Crude oil prices sank 4.9%, or $3.08, to $59.33, a 19-month low.

On the DJIA, General Motors (NYSE:GM) again led among percentage losers, off 13.1%, at its lowest since 1943, on bankruptcy fears combined with concerns a government bail out would not benefit shareholders sufficiently. Alcoa (NYSE:AA) shares dropped 7.1% on its announcement of production cuts for the second time in five weeks, claiming an "unprecedented" decline in prices. The company received an analyst downgrade from FBR from "outperform." And this morning aluminum prices remained under pressure despite the cuts, off 1.2% to fresh three-year lows. American Express (NYSE:AXP) shares declined 6.6%, reflecting concerns over the company's outlook, believed clouded by slowing consumer spending and rising defaults. This morning's news shows the firm believed to have requested $3.5 billion in aid from the federal government. Boeing (NYSE:BA) shares sank 4.7% reflecting weakness in Mideast airline industry traffic growth, a region whose customers total over 20% of Boeing's (NYSE:BA) and Airbus' firm orders this year. All nine of the S&P industry sectors showed losses in yesterday's session, led by declines in material shares, off 4.1%, and financials and consumer staples, off 2.3%. A negative Goldman Sachs (NYSE:GS) report on life insurance firms sent shares of Lincoln National (NYSE:LNC), Prudential Financial (NYSE:PRU), Principal Financial Group (NYSE:PFG), and Hartford Financial Services Group (NYSE:HIG) sharply lower yesterday. The analyst warned additional losses in commercial real estate and annuities may force capital-raisings.

Comments continued negative regarding equity markets, government rescue plans, global economic pressures, and corporate outlooks. Credit Suisse (NYSE:CS) lowered its target for the S&P to 1,050 from 1,200 for mid-2009, also cautioning developing economies headed for the worst recession since 1945. Merrill's (NYSE:MER) CEO John Thain advised investors need to "look back to the 1929 period to see the kind of slowdown we're seeing now." Goldman Sach's (NYSE:GS) CEO boasted of company agility in the face of the current market turbulence, although warning "I will never imply that we will never have losses."

Yesterday's declines in US shares as well as additional pressure on resource stocks this morning generated further losses in Asian markets, with the Nikkei closing off 1.3%, and the Hang Seng down 0.7%. Crude prices sank to fresh 20-month lows on news the World Bank revised downward its projections for developing country 2009 growth to 4.5% from 6.4%, noting the estimates may prove optimistic. The International Energy Agency is also expected to lower its 2009 demand outlook on declining fuel usage. Gold prices also fell, as the president of China's largest mine said China will produce 280-300 tons of gold in 2008, up from 270 tons a year earlier.

Although there are few economic events of note on today's calendar, there are several key speeches forthcoming. Treasury Secretary Paulson takes the Administration's rescue program for Washington review, with questions likely to revolve on the timing for the originally planned acquisition of toxic assets in proposed reverse auctions to facilitate balance sheet clean-ups of banks, as opposed to the direct stakes taken in banks to date. The Administration has also received low marks on its plans to stabilize housing markets, even as it announced plans yesterday to modify mortgages through Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE), which fell short of offering direct government assistance to homeowners. Citigroup (NYSE:C) also joined JP Morgan Chase (NYSE:JPM) and Bank of America (NYSE:BAC) with its plans to adjust $20 billion in home loans to avert 130,000 homeowner defaults.

In the corporate corner, quarterly returns today are expected from Applied Materials (NASDAQ:AMAT), Macy's (NYSE:M), Progressive (NYSE:PGR), NetApp (NASDAQ:NTAP), and Computer Sciences (NYSE:CSC)... Tyson Foods (NYSE:TSN) received a JP Morgan (NYSE:JPM) downgrade to "underweight," with a share decline of 40% possible, as next year's losses may place the firm in jeopardy of violating debt agreements... Microsoft (NASDAQ:MSFT) is said nearing an agreement with Verizon (NYSE:VZ) in which it will be the default search engine provider for Verizon's (NYSE:VZ) mobile phones... ING (NYSE:ING) reported its first quarterly loss since it was founded in 1991... AK Steel (NYSE:AKS), the fourth-largest US-based steelmaker, announced plans to cut production at two of its plants... Prudential Financial (NYSE:PRU) halved its annual dividend to 58 cents...

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 10.81 Downtrend 38.35 6/20/2008 AMAT 10.50 Downtrend 17.51 9/3/2008 AKS 10.13 Downtrend 54.66 8/5/2008 AXP 22.04 Downtrend 35.02 9/16/2008 BA 43.62 Downtrend 44.52 11/11/2008 BAC 18.26 Downtrend 28.62 10/7/2008 C 10.52 Downtrend 14.52 10/21/2008 CS 29.89 Downtrend 29.92 11/11/2008 CSC 29.17 Downtrend 30.83 10/16/2008 FNM 0.67 Downtrend 0.64 10/24/2008 FRE 0.80 Uptrend 1.32 9/23/2008 GM 2.93 Downtrend 9.83 9/26/2008 GOOG 306.72 Downtrend 527.13 6/27/2008 GS 72.62 Downtrend 108.86 10/23/2008 HIG 10.74 Downtrend 12.57 11/11/2008 ING 10.06 Uptrend 11.53 11/4/2008 JPM 35.64 Uptrend 40.73 11/3/2008 LNC 15.96 Downtrend 42.75 9/30/2008 M 9.26 Uptrend 12.29 10/31/2008 MER 14.50 Downtrend 17.23 10/23/2008 MSFT 20.81 Downtrend 25.50 9/17/2008 NTAP 11.59 Downtrend 23.92 8/21/2008 PFG 19.90 Uptrend 27.50 11/4/2008 PGR 12.22 Downtrend 18.74 8/13/2008 PRU 26.73 Downtrend 33.02 11/7/2008 TSN 5.01 Downtrend 14.89 8/29/2008 VZ 29.44 Uptrend 30.50 10/29/2008

INX -- S&P 500: 899 Lo: 885 Hi: 917 Change: -20.26

http://www.mysmartrend.com/images/INX20081112.jpg

INDU -- DOW JONES: 8,694 Lo: 8,561 Hi: 8,868 Change: -176.58

http://www.mysmartrend.com/images/INDU20081112.jpg

QQQQ -- NASDAQ: 1,581 Lo: 1,564 Hi: 1,612 Change: -35.84

http://www.mysmartrend.com/images/QQQQ20081112.jpg

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

Comtex News Network, Inc. ("Comtex") obtains information from sources deemed to be reliable; however, Comtex does not guarantee the accuracy of any of the information or commentary provided. Comtex makes no warranties, expressed or implied, as to the fitness of the information for any purpose, or to results obtained by individuals using the information. In no event shall Comtex be liable for direct, indirect, or incidental damages resulting from the use of the information. Comtex shall be indemnified and held harmless from any actions, claims, proceedings, or liabilities with respect to the information and its use. Comtex does not make specific trading recommendations or provide individualized market advice. The information contained in the Morning Call product is provided as an information service only.

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