Tuesday Morning, September 4th

   Dow Stock News

The New York Times also reports that Microsoft's (MSFT) open document format, Office Open XML, is likely to be accepted as the international standard.

INTC - price target upped to $31 at Bank of America

INTC - announced a 12% stake in VMW

The Food and Drug Administration said Friday that the benefits of a proposed HIV drug from Merck & Co. (MRK) outweigh "the currently identified risks." - MarketWatch

Ameriquest Mortgage Co, the largest U.S. subprime lender as recently as 2005, is closing, the latest home loan provider to shut down amid the nation's housing market slump.

Citigroup Inc ( C), the largest U.S. bank, said on Friday it agreed to buy the wholesale mortgage lending and payment collection assets of Ameriquest's parent, ACC Capital Holdings, for an undisclosed price.

   Media Commentators

Cramer's Comments:

Was a previously aired show from May 28, 2007.

Louis Navallier:

Positive: ATRO, AVT, BKR, DCO, DSX, FARO, GHM, HDNG, METH, SILD

Cautious: FTO, HOC, NTRI, SYNL

Zanger:

Rimm
DRYS - could see 100 in a month or so.
EXM great BO last week
ACH - very sepculative.  Needs a lot of rest but is so strong it is
worth looking at
AAPL
BIDU - buy point is 217 with vol
NOV - consider on some weakness
WYNN - could use some rest
GRMN - triggered buy last week Friday but no vol.  Needs some more rest
GOOG - new buy point is 518 with vol

Melvin:

Hello traders!  I hope everyone enjoyed the Labor Day weekend!! -- Recap:  Last week the NASDAQ COMP finished up almost 20+ points.  Our weekly stochastics are moving up and are around 36 and 51.  The daily stochastics are also moving up and around 75 and 87. -- Well we now have a lower high and higher high in place since Aug. 16th, above the 20 dma and still above the 2525 support zone.  So the bulls are back in control?  Well, I don't know that I would go that far just yet, we still have to get through the worst month of the year (historically), September.  We also are hitting the 50 dma and up ahead is the 2625-30 resistance zone.  But I will agree from what the charts are saying at the moment, things do look better than just a couple of weeks ago with all the doom and gloom. -- I will be watching 2587-88, 2579-80, 2574, 2563-65, 2555, 2548-49 as support areas and 2603, 2611-13, 2625-27, 2633-34 as resistance areas on the COMP.  Good trading! -- Melvin
 
Stocks with charts that I found interesting:
 
GRMN - up near 52 week highs ... may need to consolidate a little more before breaking out
SNDK - possible bull flag setting up on weekly chart
BIDU - is consolidating up near its 52 week high
CWTR - keep on watch the next couple of days for a dead cat bounce
RACK - have had on watch for awhile ... it has been basing for months, last week it finally broke over the $13 mark and had above average volume on the gap up also ... now need to see the follow through
 
Some notable NASDAQ stocks with earnings this week:
Wed:  ADCT
Thurs: CHINA, JOSB
 
Some % movers last week:  SCON, LEND, JRCC, JADE, BONT, SMSI, TGIC, CWTR, WINN, PDLI, ENER;

   Ice Cold Commentators

Break Man Video Summary:

Break out buy (or short sell) watch list for short term gains September 4 includes: IAH, ESL, AHO, CAM, MR, CSCO, ABB, MON, CLS, GRMN, HPQ, MYGN, ILMN, RIO, RYI.

Several candidates for break out or short sell  plays for at least short term gains by buying the break out (or selling the break down) on good volume and closing at least some on the  first day.

Swing Man Market Recap:

Back and forth action this week continued but late in the week the Bulls took back some important levels with a few more yet to be tested as we will see later.  During the week we got an early push to the downside but it was apparent that the Bears were running out of gas on that move as most of our Daily MACD's on both Sector and Index Charts lagged on the move which was our cue to start repositioning in on the long side.  Sentiment on balance continues to remain bearish which we believe has kept the market from falling harder than it has placing somewhat of a floor under the market itself.    Bear markets do not start with bearish sentiment but rather complacent market conditions which we have not seen in recent months thus we continue to believe big picture that our recent pullback will be yet another within the context of a primary bull market trend.

Let's take a look at some charts and see how things are setting up going forward.   Both the Nasdaq and the NDX  cleared through their respective 50 MA's during the week a positive development.  The Dow index also cleared both Trendline Resistance and 50 MA's by the close of trading Friday.  We expect that Trendline to get a backtest early in the week ahead in the 13,250-300 area and it will be an important one.  Moving onto our 4th chart below we've included a 60 Minute chart of the NDX which clearly tagged our recently highlighted 1990-2000 resistance and the expectation here would be for a mild pullback early next week to form a right shoulder or handle off this key level to unwind the oscillators some.

Now let's talk about a potential scenario that's setting up here by focusing on our 2nd chart below...namely that of the SP 500.  The Daily SP 500 chart below shows that we've tightened up into a large Symmetrical Triangle with our key upside pivot being the 1475-80 area.  As mentioned above we could pull in some early in the week but if we clear the top of our Triangle the pattern measures up to/near recent highs of 1550ish.  Our current thinking is that we'll get this move after some initial pullback next week and then pullback considerably off the top of a large base that can be seen forming by studying the bigger picture borders of a likely base that's taking shape. A move back to the 50 MA would really serve to setup things and we think this is the most likely scenario over the next 1-2 months.  As always we'll refine and adjust to the market if it decides otherwise.  For now we continue to hold to a cautionary bullish bias and continue to seek out objective entries in the best stocks in those sectors that are setup best.

In summary, the Bulls took back some important levels last week and now we'll have to watch closely if these levels will act as support on any pullback.  We are not out of the woods yet and will need to examine the extent of any pullbacks next week.  The markets continue to remain fixated on the Fed and thus we'll need to monitor how the market reacts to any policy changes as we move forward.

Good Trading.

   CNBC Fast Money Review

1. Trading The Baby Boomers

  Baby Boomers make up what is perhaps the biggest Sea Change of all. There are 78 million Baby Boomers - people who once caused baby food sales to spike in the 1950´s and who are now causing botox sales to spike.
  Adami: likes ZMH a pure play on orthopedic manufacture and design. He also recommends WB as a wealth management play.
  Macke: recommends MRK as well as MRX, which specializes in helping patients look young and healthy.
  Najarian: likes MO because Boomers smoke, as well as BMY and LLY because they´re on the cutting edge of pharmaceuticals.
  Bolling: likes HCR and SRZ. He also likes a casino play and recommends BYD.
  
2. Trading The Digital Revolution

  Newspapers, DVDs and CDs are disappearing; replaced by a series of clicks. From Google and Apple to Cisco and Viacom, billions of dollars are being spent to be the supplier, aggregator and backbone of your digital needs. Internet advertising alone will rise by double digits through 2011, when it will total nearly $79 billion, according to PriceWaterHouseCoopers.
  Macke: Likes NILE because it´s revolutionized an old industry.
  Bolling:  Recommends GOOG, AAPL, and AMZN.
  Najarian: likes NVDA and NOK.
  Adami: Recommends EMC.

  3. Global Warming Trade

  It started out as a fringe movement, but now most everyone has accepted the idea that global warming is on the rise. Now that our energy-intensive lifestyle is spreading from America to the rest of the planet, there will be big money in the solutions to the energy crisis. With China passing the US this year in carbon emissions and oil prices showing no signs of a long-term pullback, how can you put your money behind the fight for cleaner energy and a cleaner world?
  Bolling: Dependence on fossil fuel is a problem and thinks the only answer is nuclear energy. He says the trade is CCJ and UCU.
  Adami: Likes FLR.
  Macke: prefers XOM.
  Najarian: Recommends TM because they´re working on diesel clean advanced technology sometimes called “DCAT’.
  
4. Big Brother Getting Bigger

  Regardless of how you feel about the war on terror, the amount of money being spent protecting the United States is more than it´s ever been. Homeland Security spending topped $200 billion between 2002 and 2006. Since the 9/11 attacks, the Transportation Security Administration has spent over $3 billion on explosive detection systems and the international biometrics market has nearly tripled in the same period. As the country uses technology to fight terror, how can you trade this security sea change?
  Adami: Recommends LLL, one of the biggest manufacturers of x-ray machines used in airports. And DRS, which makes thermal imaging devices and air combat training systems.
  Najarian: Likes TIE, which supplies BA and other manufacturers of planes, satellites and tankers being used around the world. Also recommends FRPT, the maker of advanced military vehicles in line to replace the aging Humvee.
  Macke: Recommends ATK, and CSCO who´s' number one customer is the U.S. government.
  Bolling: Likes HON, a conglomerate that makes turbines as well as instrumentation panels for Boeing aircraft.
  
5. The Final Word In Trading Trends

  Macke: Is banking on a combination of the baby boomers and obesity and recommends DKS.
  Najarian: Not completely convinced that global warming is man-made, likes TM for its exposure to energy-efficient vehicles.
  Adami: Baby Boomer trade is ZMH.
  Bolling: The biggest sea change of them all has to be the digital revolution, and GOOG is the best.

   News and Events Digest

Breaking News

Computer Sciences Corp. (CSC) said Tuesday it has been awarded a contract by the U.S. Air Force Space Command to provide technical services at the Air Force's Eastern Range, headquartered at Patrick Air Force Base, Fla. CSC estimates the value of the agreement, which has a 10-month base period and nine one-year options, to be $820 million if all options are exercised. - MarketWatch

MEMC Electronic Materials, Inc. (WFR) said Tuesday that it expects third-quarter revenue to come in about 5% below the previously forecasted $500 million and sees margins roughly flat sequentially. The St. Peters, Mo., maker of polysilicon wafers cited costs related to a construction incident last week that resulted in a power outage at its Pasadena, Texas, polysilicon facility. According to the company, the incident was caused by a subcontractor working on the facility's expansion. "We believe we will have an opportunity to recover some of this lost production in the fourth quarter and thereby potentially reduce the impact on the full-year targets," said Nabeel Gareeb, the company's president and chief executive, in a release. "The specific quantification of this potential recovery will not be available until after the end of this quarter, and will therefore be provided when we report our third-quarter earnings results." - MarketWatch

Acacia Research Corporation (ACTG) announced today that its Disc Link Corporation subsidiary, which is part of its Acacia Technologies group, a leader in technology licensing, has entered into a license agreement with Oracle Corporation covering patents relating to portable storage devices with links. The agreement resolves litigation that was pending in the United States District Court for the Eastern District of Texas with respect to certain Oracle products.

Local.com Corporation (LOCM), a leading local search engine, today announced that it has renewed a multi-year agreement in which Yahoo! will continue to deliver its sponsored search results to Local.com, including Local.com's recently expanded local search network.

Goodrich Corp (GR) shares could rise nearly 20 percent over the next year, lifted by an upswing in global aircraft sales, Barron's said in its Sept. 3 edition. - Reuters

SMSI - Piper is showing strong music phone sales.

September Overview from WSJ

September is a month many investors equate with stock-market declines, The Wall Street Journal reports. In the past 50 years, the Dow has fallen on average 1.2% in September, making it the index's worst month, the paper says, adding that this could be because funds that close their books in October sell stocks for tax-loss purposes, or because an expectation of September declines has become self-reinforcing. Last month, even with all the volatility, the DJIA ended 1.1% higher than it began, and it turns out that liquidity worries didn't completely shut down the credit markets, because the more-than-$70-billion issued in investment-grade corporate bonds marked the biggest August on record and the sixth-biggest month ever, the Journal says, citing IFR Markets and Thomson Financial. In the weeks ahead, banks will be looking to raise money to finance several major buyouts, and that could pressure the junk-bond and leveraged-loan markets, the Journal writes, citing Mark Kiesel, portfolio manager at bond giant Pimco. Mr. Kiesel says companies at the mercy of domestic economic cycles, such as homebuilders and retailers, are going to have to jack up yields to sell bonds, while noncyclical businesses like telecom and mining firms will fare better.

One early test of the market's appetite for debt will be an offering of $24 billion in loans and bonds to pay for the buyout of First Data Corp. by KKR, the New York Times writes. The aggressively structured deal is likely to include covenant-lite loans, which place few restrictions on how much debt the company can take on, and pay-in-kind toggles, or bonds that can be repaid by issuing more notes, the Times reports, noting that investors have recently rejected both as unacceptable. "We are basically down to getting ready for a road show," First Data's chairman and chief executive, Henry Duques, tells the paper. "It would be nice if somebody wanted to buy the debt at a reasonable price."

Meanwhile, there are signals to please both the optimists and the pessimists. Yesterday, the cost of borrowing money for three months in the London interbank market rose to 6.74%, its highest level since December 1998, while Euro Libor and dollar rates for the same period hit their highest levels since 2001 "as some banks are scrambling to raise funding in an increasingly frenetic manner," the Financial Times reports. Today, Deutsche Bank announced that the recent turmoil has forced it to mark down valuations, but said it has no liquidity problems, its exposure to hedge funds is "fully collateralized," and it has seen signs of market stabilization in the past few days, as Dow Jones Newswires reports.

Media Summary:

According to Reuters, American Blind & Wallpaper Factory Inc has dropped its long-running suit against Google (GOOG) for running ads for competitors when search results for a company appear.

Reuters writes that Starbucks (SBUX) will begin to sell its coffee to work in Kraft (KFT) Tassimo home coffee makets.

Reuters writes that Sony (SNE) will list shares of its financial company and raise about $3 billion.

The Wall Street Journal writes that Mattel (MAT) is being investigated by Consumer Product Safety Commission over how quickly it disclosed problems with some of its toys.

The Wall Street Journal writes that Sony (SNE) is expanding its video download service.

The New York Times writes that the UAW may not accept new pension and health plans which are part of current negotiations with car markers.

The FT writes that the CEO of Acer has hit back over crticism that his firm is buying Gateway (GTW).

Barron's writes that the financing of First Data's buy-out will answer questions about the current appetite for private equity debt.

M&A Activity:

Carlyle is to invest 20 million in a Chinese firm that runs language schools, part of a strategy of taking minority stakes in private companies there. - WSJ

Celera Group (CRA) agreed to acquire privately-held Berkeley HeartLab Inc. for $195 million in cash. Celera, a Rockville, Md., molecular diagnostics company and unit of Applera Corp., said it expects the acquisition to boost earnings, excluding amortization and other costs, in the second half of fiscal 2008. BHL, a Burlingame, Calif., cardiovascular healthcare company, is expected to post 2007 annual revenue exceeding $85 million, more than doubling 2006 revenue levels, Celera said. Celera shares closed Friday up 15 cents, or 1.2%, at $13.17.

Advanced Semiconductor Engineering, Inc. ("ASE Inc.") and ASE Test Limited ("ASE Test"), a majority-owned subsidiary of ASE Inc., today jointly announced that the two companies have signed the Scheme Implementation Agreement for ASE Inc. to acquire the remaining ASE Test ordinary shares which ASE Inc. does not directly or indirectly own. ASE Test's ordinary shares are listed on The Nasdaq Stock Market, Inc. ("Nasdaq") and, in the form of Taiwan Depositary Shares ("TDSs"), on the Taiwan Stock Exchange (where each TDS represents 1/80 ASE Test ordinary shares). Under the terms of the proposed acquisition, the all cash acquisition consideration consists of US$14.78 for each ASE Test ordinary share listed on Nasdaq and the NT$ equivalent of US$0.185 (based on the prevailing exchange rate) for each ASE Test TDS. The proposed acquisition will be effected by way of a scheme of arrangement under Section 210 of the Companies Act of Singapore ("Singapore Companies Act"). The proposed acquisition is subject to approval by a majority of ASE Test shareholders (other than ASE Inc. and its affiliates, including without limitation its directors and managers)("Unaffiliated Shareholders") holding at least 75% in value of the total outstanding ASE Test ordinary shares held by Unaffiliated Shareholders, present and voting either in person or by proxy at a meeting of Unaffiliated Shareholders to be convened in a court proceeding in Singapore in accordance with the Singapore Companies Act. The proposed acquisition is also subject to certain other conditions precedent, including customary approvals and filings in Singapore, Taiwan and the United States. If the requisite shareholder approval is obtained and the other conditions precedent are met, upon the consummation of the proposed transaction, ASE Test will become an indirect wholly-owned subsidiary of ASE Inc. and the ASE Test ordinary shares will be delisted from Nasdaq and the TDSs will be delisted from the Taiwan Stock Exchange. The proposed acquisition is priced at a premium of 25.6% above ASE Test's closing price on Nasdaq as of August 31, 2007. Holders of ASE Test options will be separately informed regarding the treatment of their options in the proposed transaction. The estimated total acquisition value for this transaction is approximately US$784,000,000.

Basin Water Inc.  (BWTR) announced today that it has signed a definitive agreement to acquire the stock of Mobile Process Technology Company (MPT) (Memphis, TN, USA). Subject to completion of certain ongoing customary and other closing conditions, the parties expect to close this transaction within the next few weeks. The acquisition of MPT is expected to represent a synergistic expansion of Basin Water's business in the municipal drinking water treatment market via smaller-capacity treatment systems and central regeneration facilities. It is also expected to accomplish geographical expansion for Basin Water and create a platform for entry into the industrial service market.

The key components of the acquisition are MPT's expertise in process design and engineering that is anticipated to facilitate new application development. These capabilities are expected to drive new opportunities for Basin Water in both municipal groundwater and industrial service markets. MPT's technology is expected to expand Basin Water's ability to offer technology+service solutions that deliver guaranteed performance and guaranteed costs for drinking water, process water and wastewater projects.

IPO Central:

No IPOs scheduled for week of 9/03/2007

Economic Data:

10:00 Construction Spending

10:00 ISM Index

5:00 Auto & Truck Sales

   Upgrades and Downgrades by Sector:

Internet:

OPCO is trimming their advertising estimates for GOOG, YHOO, and RATE due to the loss in financial (subprime) leads but maintains Buy ratings on all three stating the businesses are intact.

Biotechnology:

Bernstein upgrades AMGN, DNA, CELG, GILD, VRTX due to seasonality.

Banking:

Merrill Lynch trims estimates for big regional banks: BAC, BBT, FITB, KEY, MTB

Advertising
 MNST Monster Worldwide UBS Downgraded from Buy to Neutral

Aerospace Design
 SPR Spirit Aerosystems Lehman Brothers Initiated at Overweight $43

Biotech
 VR Validus Holdings Wachovia Initiated at Outperform
 XNPT Xenoport Cowen & Co Initiated at Outperform

Business Services
 HSII Heidrick & Struggles UBS Downgraded from Neutral to Sell
 PSPT PeopleSupport JMP Securities Downgraded from Mkt Outperform to Mkt Perform
 RHI Robt Half UBS Downgraded from Buy to Neutral

Computer Hardware
 PANL Universal Display Brean Murray Initiated at Buy $20
 SMOD Smart Modular Tech Citigroup Downgraded from Buy to Hold

Computer Software
 INFA Informatica CIBC Wrld Mkts Initiated at Sector Outperform $17

Construction
 IFS InfraSource Services Stifel Nicolaus Coverage Dropped

Finance Companies
 KFN KKR Financial UBS Downgraded from Neutral to Sell

Gaming - Chinese
 PWRD Perfect World Susquehanna Financial Initiated at Positive

Healthcare
 VRTX Vertex Pharm Stifel Nicolaus Price Target Raised Buy $35 to $45
 EXEL Exelixis Wachovia Downgraded from Outperform to Mkt Perform

Healthcare Equipment
 SYNO Synovis Life Tech Feltl & Co. Price Target Raised Buy $20 to $22.50
 PODD Insulet BWS Financial Initiated at Buy $25
 DVA DaVita Deutsche Securities Upgraded from Hold to Buy $61 to $68

Heavy Machinery
 AG AGCO Corp Credit Suisse Upgraded from Underperform to Neutral $17 to $46
 DE Deere Credit Suisse Price Target Raised Outperform $141 to $160

Insurance
 AFG American Fincl Credit Suisse Upgraded from Neutral to Outperform $38 to $33
 AGP Amerigroup Stifel Nicolaus Price Target Raised Buy $31 to $37

Manufacturing
 HOKU HOKU Scientific Piper Jaffray Upgraded from Underperform to Market Perform
 TYC Tyco Deutsche Securities Upgraded from Hold to Buy $52
 LIMC Limco-Piedmont Oppenheimer Initiated at Buy $18
 KDN Kaydon Deutsche Securities Downgraded from Buy to Hold $58
 UFS Domtar RBC Capital Mkts Upgraded from Sector Perform to Outperform
 KOP Koppers Holdings Jefferies & Co Downgraded from Buy to Hold $37

Motion Pictures
 CKEC Carmike Cinemas Soleil Upgraded from Hold to Buy

Oil and Gas
 PXP Plains Exploration Credit Suisse Upgraded from Underperform to Neutral
 RDS.A Royal Dutch Shell UBS Upgraded from Neutral to Buy
 OII Oceaneering Intl JP Morgan Initiated at Overweight
 REXX Rex Energy KeyBanc Capital Mkts / McDonald Initiated at Buy $13
 CHK MOCC Downgraded to Market Perform
 CHK Chesapeake Energy BMO Capital Markets Downgraded from Outperform to Market Perform

Paper and Packaging
 ABY Abitibi-Consol UBS Upgraded from Sell to Neutral

Personal Services
 CLUB Town Sports Intl KeyBanc Capital Mkts / McDonald Initiated at Buy $23

Personal Svcs-Fitness
 LTM LIFE TIME Fitness KeyBanc Capital Mkts / McDonald Initiated at Buy $65

Pharmaceuticals
 HSP SOLE Top Pick Replacing HOLX

Regional Banks
 CBH Commerce Bancorp Friedman Billings Price Target Raised Outperform $45 to $47

REITs
 TMA Thornburg Mortg Friedman Billings Upgraded from Underperform to Outperform $5 to $14

Retail Trade
 AEO American Eagle Cowen & Co Upgraded from Neutral to Outperform
 HGG HHGregg UBS Initiated at Buy $20

Semiconductors

SNDK - Piper sees growth in the NAND flash sector for Sandisk. The AP also reported that Global Semiconductor sales grew 2.2% in July.

Solar Cells - China
 JAVA Sun Microsystems Matrix Research Upgraded from Hold to Buy

Technology
 BLOG BladeLogic Wachovia Initiated at Outperform
 NZ Netezza Needham & Co Initiated at Buy $18
 TYPE Monotype Imaging Jefferies & Co Initiated at Buy $14.50
 TYPE Monotype Imaging Banc of America Sec Initiated at Buy $15

Telecommunications
 TI Telecom Italia Citigroup Upgraded from Hold to Buy
 AMX America Movil SA Pali Research Price Target Raised Buy $72 to $82
 NIHD NII Holdings Pali Research Price Target Raised Buy $98 to $113
 TSU TIM Participacoes Pali Research Price Target Raised Buy $61 to $63
 KPN Royal KPN Citigroup Downgraded from Buy to Hold
 OTE Hellenic Telecom Bear Stearns Downgraded from Outperform to Peer Perform
 RIMM Research In Motion Bear Stearns Downgraded from Outperform to Peer Perform
 TEF Telefonica S.A. Citigroup Downgraded from Buy to Hold
 CTCI CT Comms Stifel Nicolaus Coverage Dropped

Transpo-Railroads
 KSU KC Southern UBS Upgraded from Neutral to Buy

Transportation
 CVTI Covenant Transport AG Edwards Upgraded from Hold to Buy

Transportation
 GNK Genco Shipping & Trading Cantor Fitzgerald Price Target Raised Buy $68 to $69

Utilities
 PCG PG&E Lehman Brothers Upgraded from Equal-weight to Overweight
 WEC Wisconsin Energy Lehman Brothers Upgraded from Equal-weight to Overweight
 D Dominion Bernstein Downgraded from Outperform to Mkt Perform