The Transportation Average remains a party-pooper

***** The Transportation Average remains a party-pooper

***** But stocks look set to go higher, so long as no one oil spikes the punch

***** Besides, the holiday season is just beginning! Let the good times roll!

***** Microsofts latest Tai Chi move: overcoming by yielding.

-------------------------------------

Stocks retreated marginally from their highs of last week, but theres no strong evidence to suggest the short-term bullish trend is over. Nonetheless, like a swarm of black flies buzzing around the back of your head, a few items are starting to make us nervous. First and foremost, the Dow Transportation Index gave a pretty poor showing last week. It appears to have broken its short-term uptrend, and is less likely to confirm the recent highs in other market averages. (To recap: according to Dow Theory, no confirmation by transports = no sustained bull market.)

Last summer, we predicted new highs in most averages, with the caveat that the transports needed to join the party. Since then, while most averages have indeed been enjoying new highs, the transports remain sitting in the parking lot, looking for an excuse to call it a night. Of course, the transports could change their mind and decide to come in for at least one quick drink, just to be sociable. But until they hit a new high, we hold to our belief that the party hasnt really got started.

We also have noticed some additional signs that the economy is weaker than we hoped. In addition to the recent drop in housing prices, unemployment insurance claims rose last Thursday. While they are nowhere near the level that would indicate a recession, they are the highest theyve been in several months. This is another critical indicator, which we will keep a close eye on. Ironically, commodity prices are the strongest economic indicator at the moment.

The raw commodities index remains near all-time highs, and in a steady uptrend. History shows that a high in commodity prices means we have a long wait before the next downturn in the global economy. So we take this as a sign that the economy is in good shape. Our technical indicators also remain bullish. As long as no oil spike occurs, our overall view remains that stocks will keep rising. But despite the generally sunny outlook, we would not be surprised if this week turns out to be the second consecutive week in which stocks give a little ground.

Every market ebbs and flows, and a decline of 3% to 4% would be well within the expected range. More than that, however, is unlikely. We just dont see sufficient weakness or divergences that typically warn us of a sell-off. On top of everything

THE PARTY SEASON LET THE GOOD TIMES ROLL!

November marks the beginning of the Party Season, beginning with the victory/consolation parties after this weeks election, and continuing through Thanksgiving, the December assortment of religious holidays, on through New Years, and finally (for some Christians) ending with Epiphany on January 12th.

Its a time of year for celebrating, a time when optimism reigns, and spending is high. And typically, its the time when stock prices are least likely to perform a nosedive. Some people refer to the January Effect, but more accurately its the whole three months of partying. The Party Season is not one of the indicators we include among our in-house indicators, but we must admit that November-January is traditionally the strongest period for stocks. And November is the best month of all. Its the month when everyone breathes a sigh of relief after getting through October (the most infamous month for stocks).

In fact, we cant recall a single instance where a major market setback occurred during the Party Season. Even in 1973, after the Arabs placed an embargo on oil and oil prices quadrupled overnight, the market held firm at least until the end of January 1974, when it finally began to tank. Regarding the longevity of the current trend i.e. just how far into 2007 stocks will keep rising the most important technical indicator to watch will be the Transportation Index, an index thats very sensitive to the economy.

If it were to make new highs, confirming the other averages, that would be an all-clear signal for the market. We can all look forward to making solid returns. On the other hand, if transports continue to lag, we will stay on high alert for any further signs of economic weakness.

THE COMING REBOUND IN OIL

Oil remains likely to head higher this winter, for a variety of reasons. In the first place, once the election results are in, the government will likely step up its hostile rhetoric towards Iran. And it wont be alone. The last thing anyone wants is for Iran to acquire nuclear technology that it can couple with its existing missile expertise to strike not just Israel but its oil-rich neighbors in the Persian Gulf.

Remember, there is little love between the Shiites in Iran and the Sunnis in Saudi Arabia. Of course, Iran claims it just wants nuclear technology for peaceful energy production. However, its program seems to be creating a nuclear peace race in that part of the world. According to an article in The Times last week, six other Arab states Egypt, Morocco, Algeria, Saudi Arabia, Tunisia, and the UAE have announced they are starting peaceful nuclear programs as well.

Perhaps they want to deter Iran from using its peaceful nuclear program to advantage. Clearly, with the geopolitical environment showing little sign of calming down, oil prices are unlikely to stay docile either. In addition, recent oil inventory figures have shown higher drawdowns than expected. If this continues, it too will push oil prices higher. In short, oil prices under $60 a barrel seem to be offering investors a bargain. Energy stocks are even more of a bargain. And our favorite group of energy stocks is the oil service companies, the biggest bargain of them all.

Until next week,

Stephen Leeb

Editor,

The Complete Investor

http://www.completeinvestor.com/mf/

****************************************************************

Emerging Investments Weekly Market Update

------------------------------ ------------------------------------

U.S. EQUITY PRICES PULL BACK, CHINDIA STOCKS CONTINUE TO RALLY FEDS RATE HIKES ARE WORKING, ARENT THEY?

------------------------------------------------------------------

While U.S. economic data remains somewhat mixed, technical indicators of the markets health continue to be bullish. Investor sentiment readings, which are contrary market indicators, remain significantly below peak levels. Several economic statistics clearly reveal that the U.S. economy has continued to slow, which is exactly what the Fed was striving to orchestrate by raising short-term interest rates over the two-year period between June 2004 and 2006.

Whether or not the Fed went too far with its rate hikes is yet to be known. Although economic growth slowed to an annualized rate of 1.6% in the third quarter from its torrid pace of 5.5% in the first quarter, the employment situation continues to be strong.

On a positive note, non-defense ex-aircraft capital goods orders a key leading economic indicator and barometer of business confidence has continued to trend higher, rising at a year-over-year rate of 12.3% in September. The housing market, however, has continued to soften and non-residential construction spending (which has been compensating for the slowdown in the residential construction market) flattened last month.

Meanwhile, the Institute of Supply Managements Purchasing Managers Index a key leading economic indicator continued to trend lower during October, falling to its lowest level since June 2003. Recent announcements from the nations major retail chain-stores also indicated the moderating consumer, with same-store sales growing at a year-over-year rate of 3% in October; analysts expected 3.4%. While Federal Reserve rate increases have helped cool the economy, inflationary pressures are still a concern.

Last weeks report from the U.S. Department of Labor showed that unit labor costs rose during September at the fastest pace in 23 years, while productivity gains increased at the slowest rate since early 1997. While this is a product of the Feds policy, if these trends continue, corporate profits could suffer and inflationary pressures rise.

With the Fed currently being as concerned about the slowing economy as it is about inflationary pressures, we expect them to remain on hold at the next monetary policy meeting and keep short-term interest rates at their current level of 5.25%. In regards to energy prices, unseasonably warm weather over the past week and temporary increases in oil inventories have resulted in oil futures falling to just below $60. During September, the Bridge/Commodity Research Bureaus index of spot commodity prices continued to trend higher, rising at a year-over-year rate of 17%.

If oil does in fact soon resume its long-term uptrend, commodity prices in general should follow suit. Although a significant increase in inflation rates would be a negative for stock prices in general, rising inflationary pressures would benefit those with precious metals holdings.

Until next time,

Your Emerging Investments Team

http://www.emerginginvestments.net/mf/

***************************************************************

Leebs Index Trader Market Recap

Halloween week was a bit scary for the equity markets, but a strong showing on Monday and Tuesday of this week have taken away some of the eeriness. After pushing to a new all-time closing high on October 26th, the Dow Jones Industrial Average along with the other major equity indices suffered six straight days of declines before recovering this week.

The selling abated on Monday on the heels of a spur of buy-out deals. Another key support for the buying is the fundamental picture, which remains solid as third quarter earnings have come in above expectations and accompanied by a sound economic picture. Looking at the third quarter earnings, as of Tuesday November 7th, 85% of Standard & Poor's 500 companies had reported. Earnings grew by 20% from the third quarter of 2005.

That's an extremely strong rate of earnings growth and, based on those that have reported, 73% companies had positive earnings surprises while 15% reported below estimates. The third quarter of 2006 will mark the thirteenth straight quarter of earnings growing more than 10%, equaling some of the longest streaks of double digit earnings growth since 1950s.

The closest was in the early 1990s - profits rose for thirteen straight quarters from the fourth quarter of 1992 to the fourth quarter of 1995. Very strong profits from energy producers have been a primary contributor to the surge of earnings growth in the past few years. Energy companies reported a 44% increase in earnings for the second quarter of 2006 and should post a 29% increase in the third quarter on a year over year basis.

One concern regarding earnings growth is that the energy sector earnings may be poised to slow down. Given the decline in the price of oil since July, earnings in the energy sector will likely be much lower in the fourth quarter. This is a double edged sword: lower energy prices fuels consumer spending and helps to lower costs on other corporation's bottom lines but will also lowers earnings for most energy companies thereby reducing the overall earnings growth for the S&P 500.

Hand in hand with concern about slowing earnings growth is investors' anxiety regarding the slowdown in the economy. On October 27th Gross Domestic Product in the U.S. for the third quarter came in at 1.6%, below the 2.0% estimated and down from the 2.6% reported in the second quarter and far below the 5.6% reported for the first quarter.

On an annualized basis, the U.S. is expected to grow by 3.3% in 2006 on the heels of the healthy pace of 3.2%, 3.9% and 2.5% posted in 2005, 2004 and 2003 respectively. The concern about the U.S. economy is similar to the apprehension about earnings with estimates for the U.S. economy to slow in 2007 to a more modest 2.7% rate. And while the economy and earnings are expected to continue to grow, the slowdown is making some investors nervous. The ultimate test of investor confidence will be if capital continues to flow into equities.

Until Next Time,

Peter Dunay

Leebs Index Trader

http://www.leebindextrader.com.

TCI Enterprises LLC
500 5th Ave., 57th Floor
New York, NY 10110

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