Wall Street Next Week JANUARY 26, 2004

WALL STREET, NEXT WEEK

Financial Astrology for successful investors and traders"

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WALL STREET, NEXT WEEK: JANUARY 26, 2003
FINANCIAL ASTROLOGY FOR THE SUCCESSFUL INVESTOR AND TRADER

1. JANUARY MARKETS
2. UP STARS/DOWN STARS
3. ASTRONUT
4. QUOTES
5. ON THE WEB
6. LETTERS
7. AFUND LETTERS

SHORT TERM OR INTERMEDIATE TERM TOP FORMING?
US stock markets seem to be forming a topping pattern. While they are likely to retain some bullishness at least, until midweek, there is little impetus for fresh buying. By the end of January, more momentum traders will be neutral, instead of bullish. A lack of sellers could move them above Dow 10800 and Nasdaq 2200. This will be tested this winter with new bearish battles fought early February. Initially, investors are likely to remain complacent. Should they care if Nasdaq retreats to 2000 and the Dow to 10250? Yes, because that may not be the end of the correction, but just the beginning. Investors will have a clearer picture before the Ides of February. Stay tuned!

HYDE PARK SOAPBOX
Levi's Closes Last Two U.S. Sewing Plants; M&A will accelerate strongly in H1 2004. Financial take over synergies will force more back office workers off the payroll. Add technology trends of low cost high-speed global telecommunications, and the secular trend for QUALITY US job growth looks increasingly bleak. Fast forward to 2008, will it better or worse than 2004? Sending the National Guard to IRAQ was never my first choice for a temporary job creation program. Can you imagine the benefits of 200 Billion invested instead in US R&D, infrastructure, job training, and education? Come November 2004, it will be interesting to see how many voting Americans agree with me.

TRADERS: SELL STOCK MARKET RALLIES. While gold stocks are still expensive, over the next two weeks, accumulate on weakness and/or buy a break out above 413.
INVESTORS: REDUCE MARKET EXPOSURE NO LATER THAN EARLY FEBRUARY.

KEYDATES:       JANUARY 28
DJIA:                   S1 10500 S2 10400 S3 10250 R1 10600 R2 10650 R3 10800
NASDAQ:        1980 Support, 2160 Resistance
GOLD:                400 Support, PIVOT 408, R1 413 R2 417 R3 420

MARKET SENTIMENT: OPTIMISM, RETHINK AND THEN SKY’S THE LIMIT!
DON’T BUY AND HOLD: THE STOCK MARKET IS ON BORROWED TIME. ELIMINATE MARGIN DEBT, BE HIGHLY LIQUID, AND KEEP A BALANCED AND DIVERSIFIED PORTFOLIO!
12/31/2003 EOD:    SPX   1111 DJIA 10453 NASDAQ 2003.
FAIR VALUE:        DJIA <10,000,    NASDAQ <2000, GOLD >400

2. Citibank (C ), GE, IBM and JPM all report good earnings as American Express (AXP) is likely to on Monday. It should be no surprise that much of the good US corporate earnings, even outside of the financial sector, are based on financial transactions (cheap interest rates, cheap US dollar and currency trading), as much as core businesses. Still a strategic emphasis has to be maintained on cutting costs, because the profit future of many businesses will be increasingly difficult, whether this is seen before or after November.
WSNW subscribers can review our newly updated premium post S: DJIA.

A number of Telecom stocks, not surprising, were down on Friday. We don’t expect great profit growth in 2004 for this sector, just increasing competition. Even Blue chips like Cisco (CSCO) and Nokia (NOK) are likely to under perform intermediate term. One notable exception is ATT. M&A action should be the key stock profit driver. We hope to see T again at 18-18.50 for another run up to/past 22.50.
WSNW subscribers can review our newly updated post S: AFUND 12 TELECOM.

3. GM Daewoo has been offering car loans at –1% interest in Korea. “We thought it was a really nice idea”, said Nick Reilly, CEO of Daewoo. YIKES, what does this portend about the future of GM, Korea and the direction of global bonds (interest rates)? All seem toppy to me. However, we still maintain our ratings of neutral, out perform and distribute respectively. Most ominous, the US Bond supply will continue to increase. Will the US Treasury succeed in keeping rates at 1% H1 2004? Canada and the EU could lower their interest rates beyond G7, but not England and Australia.
Bottom line: New TIPS in the pipeline because of strong demand.
Bottom line: Continue to reduce/hedge US Bond exposure.

4. "You have to have a lot of courage to buy stocks at the current levels, and many portfolio managers and savvy investors are thinking twice. There's still uncertainty about the pace of the recovery, and current prices already reflect the good earnings news and then some."
Hugh Johnson, chief investment officer, First Albany Corp
HW: I think it takes strong faith in the “greater fool theory” as much, if not more than, courage.

“The first half of the year has positive energy. The current optimistic mood is likely to hold on for a while.
Look for the market to peak during this period. January or April/ May are most likely to see the highs for the year. The second half of the year is considerably weaker and likely to erase whatever gains we see in the first 5 months. 2004 will be a roller coaster year for stocks, probably ending more or less flat.”
Four Pillars Finance Outlook 2004
HW: I hold similar astrological views, baring external shocks to market, which are ever present.

“If the eastern central banks tire of their new dollar assets—even if they stop buying, let alone start selling—the fall in the greenback could be spectacular.”
Chris Huhn member, European Parliament
HW: Yes, indeed.

5. Be Greedy for Value

What to Do With Worthless Stock

6. READER: What do you think about construction stocks and commodities?
HW: Given Saturn is in Cancer and will be turning SD March 7, I would be cautious here. We rate most of the companies in this sector Distribute or Underweight, with one obvious, biased exception. These companies’s profits have largely peaked. I believe this applies as well to Home Depot (HD) and Loews (HD).
As for commodities, it is a mixed picture. Oil, for example, is more likely to decline than rally much further. The China Boom and Dollar weakness is positive, while a future global slowdown would be negative for the base metals. Gold is to be sold on strong rallies and accumulate on weakness. Fundamentally, we see most commodities as inflation hedges or trading vehicles, not long term investments.

7. HERE WE TALK ABOUT AFUND CLIENTS.
Gallery should trade on the US Bulletin Board in February. I will be updating our Gallery post after this happens. My preliminary view is that April is a possible time for positive stock moving news. This, plus favorable midFebruary gold aspects, make this a potentially attractive purchase over the next month.
IHI continues to trade at good discount to book. That is one reason why we continue to rate accumulation of this client stock a good long term small cap value play.

READER: After checking IHI after a 3 weeks holiday, disappointed as usual, hope things will change very soon, if not bye bye IHI.
HW: I naturally share your hope, but current market action does NOT take into account sales and marketing developments. I wake up most days with the expectation to see it very soon sky high, not bye bye.

READER: The Psychic you have on staff re you asking them when another very worried Investor asked you last year about whether IHI would go up, has he got an excellent record re predictions?
HW: If he did not have a good forecasting record, he would be our staff psychic. Of course no forecasting record is perfect, but past performance, while not a guarantee of future-forecasting ability is well above average.

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