CLOSING COMMENTS 3-7-05

The Last Week in Review:

The market ended last week with solid gains across the board. Both the Dow and S&P 500 set new 52-week highs and closed at their highest levels since June of 2001. The leadership continued to be from energy. (Oil Service +1.7%, Oil +1.3%, Natural Gas +1.4%), Steel +3.5%, Housing +3.3%, Paper +3.6%, and Chemicals +2.6%) Technology stocks continue to lag, with Semiconductors -0.2%, Networking -0.1%%, and Telecom +0.1%, all underperforming. Despite the breakout to new highs on the Dow and S&P 500, volume was just slightly above average on the NYSE. Energy prices rallied again last week as Oil rose $2.29 for the week and is currently at $53.78 per barrel, another new high.

For the week the Dow added 99 points, or 0.9%, and now is up 1.5% for the year. The S&P 500 rose 11 points, and is up the same for the year. The NASDAQ added just 5 points for the week and is still down 4.8% year-to-date. The Russell 2000 rose 7 points, or 1.2%, and is also still down 1% for the year. The NASDAQ is attempting to break above its Jan/Feb trend line and 50 day moving average at 2082/2084, but so far it is proving to be a real struggle. Negative news for two Biotech stocks last week certainly didn't help the NASDAQ. Elan Corp. (ELN) and Biogen (BIIB) both voluntarily suspended marketing (commercial distribution), and dosing in clinical trials of their multiple sclerosis-fighting drug Tysabri. The result was ELN getting hammered, down 78.8% for the week, while BIIB plunged 44.2%. You can read more at http://www.tysabri.com/ .

As we have been saying in recent weeks the Semiconductor Index (SOX) must show leadership if the NASDAQ is going to join the other Indexes and move to new 52-week highs. So far the SOX has repeatedly failed to penetrate the 450 level where it has stalled on several attempts. The SOX 200-day moving average, currently at 439 is even proving to be an area of resistance. The SOX closed Friday at 433.

What to Watch for this week:

The markets seem to be very focused on energy prices. Energy prices may have to soften if the overall market wants to get legs and move higher. The technology sector could see some action this week. Mid-quarter updates will be announced from semiconductor companies Texas Instruments (TXN) on Monday, Xilinx (XLNX) on Tuesday, and Altera (ALTR) on Wednesday. Intel Corporation (INTC) announces on Thursday and will set the tone. Seagate Technology (STX) will also provide a mid-quarter update on Monday after the close.

This weeks calendar is full beginning with Morgan Stanley hosting a three-day Semiconductor Conference on Monday in California. CSFB holds a two-day Small/Mid-cap Communications Equipment Conference beginning Monday in Boston. Deutsche Bank Securities will hold a two-day Global Software Conference starting Monday in Miami. Raymond James hosts a three-day Institutional Investors Conference beginning Monday. Merrill Lynch holds a Communications Forum in Dallas on Tuesday, featuring Cisco Systems (CSCO). Lehman Brothers holds a two-day Global Software, IT Services and Internet Conference beginning Tuesday in San Francisco. JP Morgan hosts a Small-Cap Conference on Thursday in Chicago. Goldman Sachs holds a two-day Small-Cap Growth Conference in New York. Finally, Wedbush Morgan holds a two-day Software Conference in New York beginning Thursday.

The weekly energy inventory will be released Wednesday, and weekly jobless claims come out on Thursday. Both have the potential to influence trading activity. Wednesday, the Fed will release its beige book. January Wholesale Inventories will be reported on Thursday. Last but not least, the International Trade Report for January will be released Friday, which could show a larger deficit after December's contraction.

In summary, watch for the NASDAQ to break technical resistance at the 50 day moving average lead by the SOX Index. The need for softer energy prices will continue to be one of the key factors for further gains in the market.

Stay tuned!