John Mugarian's Dynamic Growth

As I have mentioned before, Bruce Bittles was our Chief Market Strategist when I was a Limited Partner at J.C. Bradford.

Bruce has some tremendous skills pertaining to insights on the stock market. Read and enjoy.

Bruce Bittles Commentary.

The results are in, and we have 4 new buys, and 4 sells in the Dynamic Growth Fidelity Select Portfolio. Dynamic Growth will also have a portfolio for ETF (Exchange Traded Funds) investors, and since there is no minimum holding period for ETF's, we will back-test the ETF portfolio weekly, and make any changes accordingly.

ETF's are traded on the AMEX, and exchange traded funds can be bought and sold any day the market is open without restrictions.

Here are the results for Top 10 Fidelity Select sector funds, and ETF's for May. Keep in mind that Dynamic Growth will be a paid service in a month or so, and once this happens, future changes in the sector funds and ETF's will only be available to subscribers of Dynamic Growth.

The results of this month's research, and portfolio, are for informational purposes only.

Basically, here's how the Fidelity Select Portfolio works.

1) currently, there are 3 discount brokers that allow investors to buy and sell Fidelity Select sector funds. They are:

E-Trade: etrade.com
Schwab: schwab.com
Fidelity: fidelity.com

2) We re-evaluated and back-test the Fidelity Select no-load sector funds monthly. Since most brokerage firms and fund companies charge a redemption fee if a mutual fund is sold within 30 days of its purchase, it would not be wise to trade or exchange a no-load mutual fund as often as you would a stock. In addition, a brokerage firm may place a trading restriction on an account if a fund is traded within a 30 day period.

Since most sectors do not come in, and go out of favor that quickly, rapid trading activity in mutual funds are not necessary. In addition, every no-load sector fund has a fund manager that is continually making changes in the fund as they deem necessary.

3) Investors can build a portfolio based on our research in one of three ways:

Top 5 : Only for very aggressive investors
Top 10: For growth oriented, aggressive investors ( We will only use the Top 10 as our model portfolio)
Top 15: Growth Investors who want broad diversification.

4) Each and every month we will publish the results of our research, and make any changes to the Top 10 based on our results.

Here are the Top 10 Fidelity Select sector funds for May, and the Top 10 ETF's for the week:

Here are the Top 10 ETF's for this week. This is a continuation from my last journal post.

Next to each ETF I have also included the trailing year's total return

GLD- streetTRACKS Gold Trust +51.5%
IAU- iShares COMEX Gold Trust +51.5%
ADRE- BLDRS Emerging Markets 50 ADS Index Fund +75%
ILF- iShares Trust S&P Latin America 40 Index Fund +94.2%
EWC- iShares MSCI Canada Index Fund +51.0
PBW- PowerShares Exchange Traded Fund Trust WilderHill Clean Energy Portfolio +76.7%
VWO- Vanguard Emerging Markets VIPERs +63.1%
ADRA- BLDRS Asia 50 ADS Index Fund +49.4%
EWZ- iShares MSCI Brazil (Free) Index Fund + 109.9
JKH- iShares Morningstar Mid Growth Index Fund +36.9%

I have been watching Boston Scientific for quite some time, and the BSX insiders have exhibited excellent timing on the buy side as well as the sell side.

Today, we noticed that a company Director, Nick Nicholas, Jr ( related to the founder Peter M. Nicholas) has once again jumped in and added to his position (Insider Transaction).

Given Nick's appetite for the stock, the shares are probably a compelling value at current levels.

If you are a trader, BSX has had a fairly predictable trading range.

Here is the chart of BSX since November 2005.

Since 2005, every time the stock has dipped below $22, the stock's RSI (Relative Strength) also fell below 40. In addition, the stock seems to attract buyers in the low $21 area, and then rallies to the $23-$23.50 area.

If you happen to be a trader, keep an eye on this trading range.

The family feud between Israel and the Muslim world continues. To add fuel to the fire, Iran said that 迭ussia and China had officially informed Tehran they would not support sanctions or military action over the Islamic Republic's nuclear programme." Read Article

From my Birdseye view, I do not think the U.S. has any plans to use military force in Iran. Of course, if Israeli intelligence catches wind that their country is in danger, the Israeli military is more than capable of diffusing the problem. Many of the youngsters today are too young to remember what happened on June 5th, 1967, but Israel single-handedly attacked Egypt, Syria, Jordan and Iraq in a stunning show of force.

If any pre-emptive strike is going to take place in Iran, the U.S. politicians need to sit back and watch how real political leaders handle things. Israel does not mess around. The U.S. has a wonderful military, but our politicians get too many of our servicemen killed with their political posturing and indecisiveness.

As for us, we don't need to read too much into today's report that gasoline demand is going down. As we all know by now, one day does not make a trend.

There are not many market strategists that make much sense to me anymore. Jeff Saut, on the other hand makes a lot of sense.

In this week's article entitled, “Bull or Bear? . . . You Pick It!”, Jeff includes comments by another one of my favor market guru's, Dr. Marc Faber.

Read and enjoy. It is nice to see that others believe as we do.

Once again, former Assistant Secretary of the Treasury, Paul Craig Roberts has done a wonderful job sifting through, and making sense, of the always confusing jobs data that we receive every month.

Similar to the inflation data, you need to look at these reports with a critical eye.

Here's the article.

Bernie Schaeffer is Chairman and CEO of Schaeffer's Investment Research, Inc. and editor of the Option Advisor newsletter.

If you haven't done so already, I encourage you to visit Bernie's website at www.schaeffersresearch.com.

The area of the website I like the most is "Schaeffer's Daily Contrarian" section. Here, Bernie and his staff put into perspective a lot of hype and fluff you hear from CEO's and analysts.

At mid-day, six of the 10 Fidelity Select sector funds in the Dynamic Growth are outperforming the DJIA, and 7 are outperforming the S&P.

Here's the breakdown at 11:53 cst ;

DJIA +.36%
SPX +.22

FSAGX- Gold +.70
FSLBX- Brokerage & Investm. +.91
FSLEX- Enviromental +1.56%
FSAIX- Air Transport +2.18%
FSESX- Energy Services -.28
FNARX- Natural Resources +.20
FSRFX- Transports +2.53
FBSOX- Bus. Svs& Outsourcing +.76
FWRLX- Wireless +.28
FSTCX- Telecom +.34

I have been telling you that Boston Scientific (BSX) was ripe for the pickings, and our friends at Erlanger Squeeze Play (www.erlangersqueezeplay.com) agree with us.

I just received this e-mail from Phil Erlanger and the gang at Erlanger Squeeze Play. Since I have been all over the stock for the past few weeks, I thought you would like to see another opinion.

Erlanger Squeeze Alert
#246, May 4, 2006

Mover and shaker and Coke director, Herbert A. Allen bought 443,888 shares of KO at price ranging from $42-$42.19.

I don't know what your betting habits are, but Herb dropped a cool $18,680,918.00 into KO shares on May 2nd & 3rd.

Just in case you are not familiar with Mr. Allen, he is the President and CEO of Allen & Company, a privately held investment firm.

Each year, Allen sponsors A quiet gathering of top media moguls, and billionaires to discuss possible mergers and other deal making ideas. These events usually take place during the summer, and are held in Sun Valley, Idaho.

One year, the keynote address at the conference was given by the head of the CIA, and some how or another this little tidbit of news was never mentioned by the press.

It is a well know fact that the merger between Disney and ABC happened shortly after Michael Eisner spoke with Warren Buffett at the annual Allen event.

Herb Allen is a very influential person, and he has a knack of being at the right place at the right time. If Herb Allen puts $18.6 million dollars down on an investment, you can safely bet he knows what he's doing.

I continue to believe that Coke (KO) is a great value in the low 40's.

Needless to say, the major market indexes are fast approaching our upside targets. My thoughts are the sooner the better. Since I am not very comfortable with putting my feet on the edge of a cliff, I have built a hefty cash position, and will continue to build that position on days like today.

The faster the indexes can reach their euphoric tops, the sooner we can exit the cyclical bull, finish the cyclical bear, and look forward to a new and robust bull market. I would rather see the market have several big days and reach our targets sooner, than to back and fill and take forever to reach its ultimate climax.

Our upside target on the S&P has been 1350, with the potential to reach 1400 in a blow-off. As for the Dow, 11,750 has been our initial upside target, with a potential to reach 12,000 before exhausting itself. Given what has happened to Microsoft and Intel lately, the NASDAQ will really have to hustle to reach our projected 2400-2450 resistance level.

Upside blow-offs usually occur when investors feel they are missing the train, and the remaining short-sellers throw in the towel. Once this occurs, and the faster the indexes get to their technical peaks, the market will revert to the final stages of the bear market which may begin as early as late summer or fall, and finish its cycle sometime in 2007.

Since bear markets like to inflict as much pain as possible, it will wait as long as possible to suck in as many investors as it can before pulling the plug.

Well, the stage is set. The Fed meets this week to discuss, and finally make the decision that everyone has been talking about; will the fed pause after their next meeting?

If they do, three scenarios come could unfold.

1) Will the market celebrate and drive the major market indexes to our projected highs for the year? Or...
2) Has the market already rallied in anticipation of a fed pause? Or...
3) Will the market rally early, and then be met with heavy selling pressure near the climax?

Any way you cut it, waiting for the final rally is truly "edge of the cliff" investing

Here is this week痴 comment by Jeffrey Saut from Raymond James: Read Article

I don't know if you have looked at the website of Bill Cara (www.billcara.com), but Bill has a keen insight on the markets and the economy.

He is yet another that agrees with us on the direction of the stock market. Read and enjoy: Bill Cara

Here is an article by Lawrence Jones from the "Fund Times" commenting on the May 2006 investment commentary from PIMCO's Bill Gross:

Fund Times: Bill Gross' Grim Economic Outlook
by Lawrence Jones | 05-04-06 | 03:16 PM

Though these are longer-term trends, and things will not change overnight, what does this mean for investors? Gross urges investors to move away from U.S. assets and "toward more competitive economies less burdened by health and pension liabilities, those personified by higher savings rates and investment as a percentage of GDP. Need I say more than to sell U.S. assets and buy Asian ones denominated in their local currencies; or if necessary to hire a global asset manager with sufficient flexibility and proper foresight to thrive in an increasingly difficult investment environment."

Despite what we are hearing from numerous government reports, the U.S. Economy is fading fast. Many on the financial news channels and mainstream media are questioning why Americans are upset at the Bush Administration with the country at almost full employment. The answer is easy; what American's are feeling and experiencing is totally different than what is being reported to them by various government agencies.

Here is the latest take on the state of the economy from Paul Craig Roberts, former Assistant Secretary of the Treasury in the Reagan Administration.

Roberts disects the recent May 5th jobs report released by the Bureau of Labor Statistics: Read Article

On April 28, 2005, President Bush held a press conference to address the high cost of energy. In the meeting he said;

"We must address the root causes that are driving up gas prices. Over the past decade, America's energy consumption has been growing about 40 times faster than our energy production. That means we're relying more on energy produced abroad."- Read Press Conference

Oh, really?

In 2003, the Bush administration introduced as part of their economic revival plan big tax deductions for small businesses that bought big S.U.V.'s like the Hummer H2, Lincoln Navigator, Chevrolet Tahoe, GMC Yukon, and the Toyota Land Cruiser.- Read Article

Now look at what's going on;

As of June 2005, you can now get a tax deduction if you buy a certain new hybrid cars or SUV.- Read Article

I'm a little confused. Are consumers being lead around by the nose or is it just my imagination?

At 2:15 ET, the Fed is expected to raise the key overnight lending rate 1/4% to 5.00%. The bigger focus will be on what the fed says in its policy minutes, and then we need to quickly turn our eyes toward the reaction of gold and the dollar.

If the fed does pause and the dollar continues to slide, followed by a rally in gold, this is a signal that investors believe the fed has more work to do to fight off inflation.

The initial reaction to a fed pause may create a false sense of euphoria, but soon investors will wake up to the fact that the fed may not be through. I don't know how long it will take the financial markets to figure this out, but we are sticking to our initial upside targets of S&P 1350, Dow 11,750, and NASDAQ 2400.

We have been told over and over again that the stock market is based on supply and demand. While that may be true, whose demand are we talking about?

As investors patiently wait for the feds next move, I am amazed at how the S&P, Dow, and NASDAQ are all hovering around the breakeven mark before the 2:15 EST announcement.

Does this mean that every money manager (mutual funds and pension funds) and small investor has stopped trading in unison to wait on the fed? You have got to be kidding me.

Button Pushers are financial elites who control monetary flows, and have incredible power over stock market booms and busts. For now, they are content with keeping the market indexes near par. Let痴 see what they do at 2:15 EST.

Here is the release from today's Federal Open Market Committee meeting:

Release Date: May 10, 2006

For immediate release

In a related action, the Board of Governors unanimously approved a 25-basis-point increase in the discount rate to 6 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Dallas, and San Francisco.
2006 Monetary policy

With the exception of one seller, Boston Scientific (BSX) continues to attract insider buying. The lone seller is
Nancy Ann Deparle, who was a Director at Guidant, was also a senior adviser to JP Morgan Partners. My best guess here is that her services are no longer needed, especially in light of the merger between GDT and BSX.

Today, we see that Director Nick Nicholas has increased his appetite for BSX shares as he added another 10,000 at $21.39. This brings Nicks total up to 40,000 shares purchased in the open market.

In addition, Mr. Nick brought someone else along for the ride as another Director, Ernest Mario bought 50,000 shares of BSX at $21.35.

As the old saying goes, insiders will sell for a variety of reasons, but they usually only buy for one.

In a "real" bull market (otherwise known as a secular bull), the tide usually raises all boats. A secular bull will allow all the major market indexes to reach new highs. Obviously, we do not believe this is a secular bull market.

A few weeks ago, the cover of Barron's was touting "Dow 12,000". While we cannot rule this out, we are not seeing the S&P and the NASDAQ anywhere near their previous highs. This being said, we still believe we are in a cyclical bull market that is very long in the tooth. We also believe there will be another attempt by the Dow to reach euphoric levels before the next stage of the bear market takes place.

For now, look for the S&P to hit support at 1300 on this pullback. Another attempt toward 1350 is our initial upside target with a possible euphoric top around 1375-1400.

The Dow was a stones throw away from our 11,750 target, and support is around 11,450, then 11,000.

Will the power players really embrace alternative fuels like ethanol, and reduce or eliminate our dependence on oil? I hope so, but I am not holding my breath. Do you remember what happened to gasohol? At one time, we had a mix of gasoline (90%) and ethanol that was made from fermenting agricultural crops or crop wastes in the 1980痴.

The other alcohol mixture we had was gasoline (97%) and methanol, or wood alcohol (3%). This process was shelved because Methanol is expensive to produce and is corrosive to vehicle parts, not to mention toxic.

The current ethanol push toward E85; which is a mixture of 85% ethanol and 15% gasoline, has been around since 1998. Where did it go? Why wasn稚 the technology advanced after the (so called) energy crisis we experienced during the Nixon years.

Will the current craze toward gasohol, or ethanol based fuel fade away like it did after the oil cartel fleeced consumers out of billions of dollars during the 70's & 80's, or 妬s it different this time�? Only time will tell.

Remember, during every new found wealth bubble or crisis, it seems to always be 電ifferent this time�.

Today, on Yahoo Finance, the 3 pm report said this;

鄭gricultural Products, however, is extending its leading year-to-date surge beyond 87% as more speculation on the ethanol front renews enthusiasm for Archer Daniels Midland (ADM 46.50 +1.50).�

All the while the Archer Daniels Midland insiders are doing this- Click on Link

Maybe it is different this time. Then again, maybe its not..

The majority of the profit taking we are witnessing is concentrated in stocks that had the biggest gains. If you have been paying close attention, the biggest hits in the market were concentrated among energy, commodities, and the metals.

A lot of this profit taking comes from hedge funds that are desperately trying to show their investors significant gains over the market averages in order to justify their high fees .

This being said, nothing has changed fundamentally to convince us that the energy crisis is over, or that the commodity boom is coming to an end.

Finally, news about inflation is beginning to hit the newswires. I have been telling you that inflation was a bigger problem than what investors were being told, and low and behold we were not only right, but among the first and the few to report about it.

The most over sold sector right now looks like oil. We are literally a few weeks away from the start of hurricane season, and predictions from NOAA say that this year will be another very active season.

Gold prices took a big hit, but after the huge run up in prices this is to be expected. The reality is, there were too many speculators buying the Midas metal. As inflation jitters creep back into the market, gold will more than likely resume its run.

Sorry for the lack of journal posts on Friday. I was traveling with my son to a baseball tournament, we got back this morning at 2 am.

We really do not need to micro-manage the markets however. The best strategy most of the time is letting the market come to you.

Marc Faber is the editor and publisher of the investment newsletter, The Gloom, Boom and Doom Report, and is a guest on the Barron's Roundtable.

Here is another great article which can be found at www.gloomboomdoom.com.- Read Article

We currently have 5 covered calls written in the IA Portfolio. If they were to expire today we would have the following stocks called away;

Bank of America (BAC) 47.5 + .75 premium = $48.25
J.P. Morgan (JPM) 42.5 + .70 premium = $43.20

This leaves us with the following positions still out of the money;

Chesapeake Energy (CHK) 32.5 + .90 premium = $33.40
Sunoco (SUN) 85 + 1.85 = $86.85
Valero (VLO) 62.5 + 1.65 = $64.15

Stay Tuned.

Here's Jeff Saut's weekly commentary. It is really comforting to see that there are others who can see through Wall Street's smoke screen as well.- Read Article

Hey! They're finally admitting it. Inflation is for real.

The PPI numbers released yesterday showed the total PPI up +0.9%. This is no surprise to us, in fact when they remove all things inflationary from the data they come up with this mysterious "core" rate which came in at 0.1%. After removing the "all things inflationary" from the PPI, we are left with the spin which says that the 田ore inflation remains tame".

All I can say is "Talk to the hand".

This morning the CPI data came in at +0.6%, with the core up 0.3%, both higher than expected.

I am taking advantage of the current weakness in energy and the metals to add Goldcorp (GG- Buy Limit $33), and Schlumberger (SLB- Buy Limit $70) to the IA portfolio.

No, I don't think this is the beginning of the" big one" (Fred Sanford), but I do think the market will attempt one more move to the downside before we see a reversal.

Whenever you see a sizable sell-off, reversals usually occur the same day. This means the market is sufficiently oversold, sometime during the day the market will reverse and close up on high volume.

Today's meager attempt was not a reversal.

Yesterday's release of the April CPI report caused a mini inflation panic, and major market averages took a beating. At the close the Dow dropped 214 points, the S&P 500 21 points, and the NASDAQ 33 points.

The April Consumer Price Index (CPI) rose 0.6%, but after removing the food and energy components, the core index rose to 0.3%, which put both numbers above consensus estimates.

Nobody wants to catch a falling knife, but today has all the earmarks of a reversal of fortune. Our target downside on the S&P is around the 1250-1260 mark. We hit 1260.80 this morning. The 1250-1260 level could provide the springboard for a reversal.

Options expire today, so expect some increased volatility.

Magically, oil prices and precious metals began to fall just as the Bush Administration began to figure out that their low approval ratings were tied to inflation, and the high price of energy. With one wave of the magic wand, prices began to fall.

The negative sentiment in the market is beginning to thicken. Any market rally into the summer will probably be a technical rally back to the old high's, and maybe a bit higher. This will be the final icing on the cake, and I would expect the market to begin putting the final touches on the bear market which could extend into 2007.

So, if you are a trader, more than likely you will get one more chance to play a rally. After that, you need to begin thinking in reverse, and put your shorting caps on. We will soon see why all of those insiders have been dumping their shares.

At a time when are citizens our up in arms about protecting our borders, this artcle from Canada's "Daily Bulletin" (dailybulletin.com) says that the the U.S. Border Patrol is telling the Mexican Government where the volunteer "Minutemen" are patroling. Unbelievable! - Read Article

Boy, this story just keeps on amazing me.

While former US Senator Phil Gramm's wife, Wendy Gramm was a member of Enron's audit committee, and also serving on the company's of the Board of Directors, UBS was a consultant for the State of California in 2002 to help fix the State's energy crisis.

The Foundation for Taxpayer and Consumer Rights (FTCR) wanted Governor Gray Davis to fire UBS, saying the company had a conflict of interest since they represented both the State of California and Enron.- Read Article

Senator Gramm defended Enron, and basically told California that the state's energy problems were of their own making.

Shortly after, Enron went bankrupt, and Gramm resigned taking a job with UBS Warburg as a Vice President.

After Enron went bankrupt, UBS Warburg bought Enron's energy trading operations. UBS PaineWebber which is a subsidiary of UBS Warburg, was in charge of Enron's employee stock option program.

Two of our 5 covered call plays were called away on Friday;

J.P. Morgan (JPM)- We sold the May 42.5 call and received a premium of .70. We our officially our of the stock at $43.20 for a gain of 25.21%. We bought the stock in May 2005 at $34.50, and we did not include the dividends we have received in the gain.

Bank of America (BAC)- We sold the May 47.5 call and received a premium of .75. This gets us out of the stock at $48.25 for a gain of 12.36% or 16.47% annualized. We officially bought the stock in August 2005 at $42.94. The gain does not reflect the dividends we have received.

Our other three covered call plays expired, and we kept the cash. Given that these calls were all oil related, the recent sell-off in oil allowed us to keep the cash and hang on to the stocks. These positions were;

Subject: market selloff
Comments: Hi,
I just found out about you thru Bill Caras website...i wanted your opinion about what some radio pundits are saying caused the recent selloff.
1) Cramer said Friday night that "the fed reserve govs have been PRIVATELY telling people that commodities HAVE to come down, or else rates will keep going up", something to that effect. And so that led to insiders selling off big.
First, do you think thats true? And secondly, if it is true, isnt that like insider trading, since the Fed did not give a chance for the small investor to know, while the big boys sold off and locked in profits?

2) Phil Grandy, another puindit said that the selloff was due to the housing bubble(people have tapped out their equity, which had kept them buying more stocks), and also due to the weakening dollar. But gold usually goes UP, due to the weaker dollar, no?
Thanks

I have been calling for a decline in the markets for quite some time. My rationale all along is exactly what you are hearing about inflation today, but, until recently, Wall Street would not admit it.

The causes of inflation were very apparent to consumers, but the skewed economic numbers were saying otherwise. Since I do not believe economic reports that are carefully designed to hide the obvious, I did not buy into their spin.

As far as Cramers comments that "the fed reserve govs have been PRIVATELY telling people that commodities HAVE to come down, or else rates will keep going up", I have felt all along that this was the feds motivation for continuing the rate hikes. The only problem is the fed was affraid to admit there was a problem.

I think that commodities and energy are in a longer term bull market, but they will have nasty corrections along the way. Personally, I will use this weakness, and other corrections to come to add to my portfolio.

I have watched insider trading for a long time, and the corporate insiders have been tipping their hand for many months. That being said, I do not think this is the beginning of the major sell-off that many have been anticipating. I think we will have one more significant rally sometime this summer, and late summer/ early fall will bring the final leg of the bear market into play. Short interest is building, and these shorts normally provide the fuel for rallies like the one I am anticipating this summer.

The housing bubble is also something I have been pointing to for over a year. Unfortunately, many investors cannot see the bubble when everything is in a state of euphoria. They only recognize there was a bubble after the fact. The deflating of the housing bubble may actually benefit the stock market as cash gets sucked out of one investment and into another. I just don't know when that will happen.

Now that the various indexes have pulled back from their highs, some area's of the market are oversold, and some remain overbought.

S&P:

The S&P looks very oversold and we are looking for a rally back to the 1300 level. If the index fails to break above 1300, the correction we were reserving for the late summer/ early fall will begin sooner than anticipted. Lets see what happens as we approach this level.

Dow:

The Dow does not look as oversold as the S&P, but a break below 11,000 could lead to another leg down of 200-300 points.

NASDAQ:

At this point the NASDAQ looks like a basket case, and we may see a snap-back rally soon.

Gold:

The rally up was a classic sucker rally; too much, too soon. Still overbought, I would not be surprised to see a further pullback to the $600 level.

Oil:

Oil got a liitle ahead of itself and still remains a little overbought. I wouldn't be surprised to see $65/bbl soon. Given that hurricane season is right around the corner, the prospects for a rally back to the highs are favorable.

Unless I am way off base, today's rally looks more like a snap back, or an oversold reflex bounce.

Real reversals usually occur when the markets sell-off sharply intra-day, then reverse and close up on high volume. This being said, the market has probably another day or so on the upside, and then I would expect a re-test of the current lows.

I hate to be a party pooper, but this is normally how markets work.

Today, the oils and metals are rebounding. This is due to forecasts yesterday from the National Hurricane Center who said they expect another active hurricane season. Also, Valero, a major refiner, reduced production of low sulfur diesel and gasoline after a fire at its facilities in Louisiana.

BCA Research is a highly respectable firm. Here's their latest take on the current market correction- Read Article

The group responsible for the push toward globalization, the Bilderberg Group, will be holding its annual secret meeting in Ottawa, Canada, on June 8th-11th at the Brook Street Resort.

Our Canadian friends should take some time and stop by to say hello.

I think you'll be surprised at what you see.

The Bilderberg Group has the power to black out media coverage of their meetings in the U.S., but that doesn't stop others like the BBC from exposing their meetings and intentions.- Read BBC Article

For those of you who have been wondering where all of this "New World Order" stuff, and loss of American jobs because of outsourcing and globalization is coming from, you can start with the Bilderberg Group.

Wake me up when its over. Today, the DJIA traded in a 138 point range to close the day up +18.97 points. The Dow traded down most of the morning, and reversed around 1:30 to close into the plus column.

The markets digested today's economic reports well as durable goods orders for April fell 4.8% easing tensions over inflation. New home sales for April were stronger than expected, but as I have been saying all along, whose going to buy the existing homes. Apparently, no one, as existing home inventories are building.

With signs that the economy may finally beginning to slow, investors are hoping the recent news will convince the Federal Reserve to stop raising interest rates.

On the energy front, a report on U.S. gasoline supplies showed a build up. this was not expected and Crude closed below $70/bbl and unlead gas closed below $2.00.

Former Enron CEO, Ken Lay was found guilty on all six counts of conspiracy and fraud, and his counterpart Jeff Skilling was found guilty on 19 counts that included, conspiracy, fraud, making false statements and insider trading.-Read Article

What about the investment bankers involved? Oh, I forgot. They are the untouchables, aren't they?.

Before investors put another nickel into the stock market, they need to read "Wall Street Meat" by Andy Kessler. Andy Kessler worked on Wall Street for 20 years as a research analyst, investment banker, or Paine Webber (Now UBS), and Morgan Stanley.

Ever since the Enron debacle and the NASDAQ crash of 2000-2002, brokerage firms have been working feverishly at repairing their images. You've heard them; "U and us UBS"; Introducing "Total Merrill". You get the picture.

Investors are paying outrageously high prices to brokerages that have conflicts of interests with many of the companies they cover in their research reports.

In his book, Andy Kessler basically said that analysts arrived at their earnings estimates by knowing someone inside the company that fed them the information, and not by number crunching and doing in-depth analysis.

In a securities fraud case against Merrill Lynch, United States District Judge Milton Pollack basically said that investors who believe the advice of Wall Street analysts have to accept the responsibility for that choice.

If you have considered buying the new IPO, Vonage, I suggest you read former analyst Andy Kessler's comments first;

Andy Kessler on Vonage

Yesterday the market reacted favorably to the announcement that Ken Lay and Jeff Skilling are going to jail, and is building on yesterday's gains on news that the price inflation numbers were in line with expectations.

Of course, investors are hoping that further news on inflation will be tame.

The next fed meeting isn't until the end of June, and today investors will be leaving early to celebrate the long Memorial Day weekend. This afternoon, trading will slow considerably as traders will be leaving their posts early.

My best guess is the market will probably drift higher, and the S&P will test the 1300 mark. If the index fails to break above this level, we may see a re-test of the recent lows.

I have said this many times, but the revolving door policy between Wall Street and Washington continues to prove that the investment banks/brokerages are the "real" untouchables in our society. Henry Paulson, has been the chairman and CEO of Goldman Sachs since 1999.- Read Article

The Current Chief Executive Officer of the New York Stock Exchange ,John Thain, also came from Goldman Sachs as did Former Treasury secretary, Robert Rubin.

During the Reagan years, Donald Regan, former Chairman and Chief Executive Officer of Merrill Lynch, was picked to be the 66th Secretary of the Treasury.

On May 25, 2006, in my alert that Lay & Skilling were found guilty, I said " What about the investment bankers involved? Oh, I forgot. They are the untouchables, aren't they?".

You cannot, and will not win when you go up against these guys. That being said, why waste your time and money dealing with these firms. Run while you can.

The market had a lot of news to digest today. General Motors was downgraded to a "sell", Wal-Mart said that same-store sales in May came in at the low end of the company's forecast. The Consumer Confidence numbers fell. Oil prices began to rise, and the a member of the fed said inflation was a concern. President Bush has picked yet another Wall Street insider, Henry Paulson of Goldman Sachs, as new the Treasury Secretary.

So, the hits just keep on coming.

Last week, I said that I was expecting a re-test of last weeks lows. In fact, I think the S&P will try and re-test the 1250 mark before making any attempt to reverse itself.

In my humble opinion, I don't think it really matters. I have been preaching about "edge of the cliff" investing. Even if we do have another rally to the upper end of the recent trading range, I doubt if the stress of the whole thing is worth it.

A few months ago, many were thinking we had lost our marbles when we turned cautious on the stock market. Despite the possibility of a pause in interest rate hikes, there are just too many headwinds to call for the beginning of a new bull market. A new bull market will come eventually, but we do not think that will happen until we get a major shakeout later this summer/fall.

The recent downdraft in the market may be the beginning of the shakeout, but our instincts are telling us that there will probably be one more attempt at the 2006 highs before the correction begins in earnest.

Why We Remain Cautious

My initial concern for the economy and the markets have been inflation. The causes of inflation were very apparent to consumers, but the skewed economic numbers we were receiving were saying otherwise. I have a difficult time believing economic reports that are carefully designed to hide the obvious. We all were aware of the skyrocketing price of energy, but commodity prices were also skyrocketing due to the massive growth in China. When economic reports do not account for inflation in area's like food and energy, I have a hard time buying into the "no inflation" spin.

Well after the bell, and late into the night, Sun Microsystems (SUNW) announced it was cutting "4,000 to 5,000 jobs in an effort to return to consistent profitability". This is yet another example of the wave of merger related layoffs occurring around the nation.- Read Article

Oil prices declined in hopes for a peaceful resolution to the Iranian nuclear program. Then tonight the Iranian government said that a U.S. offer for face-to-face talks was "a propaganda move."- Read Article

The market managed an oversold bounce, and ended the day;

DJIA: 11168.31, up 73.88
S&P 500: 1270.09, up 10.25
Nasdaq Composite: 2178.90, up 14.10

The market celebrated the U.S. offer to enter into multi-lateral talks with Iran over its nuclear program, but after tonights news, we may see a reversal of today's fortunes.

Also, the market is still jolding out hopes that the Federal Reserve may be near the end of its series of interest rate hikes. In the recent release of the fed minutes, the meeting revealed policy makers are uncertain about the future course of rates.