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D Fry Market Outlook 28 03 2007

Homebuilders having some problems? And here I thought they were "value plays" according to some prominent Wall Street analysts. The one thing that seems so amazing is that no one seemed to take seriously any of the warnings, not to mention insider selling, issued by CEOs of all these firms. It's bizarre on the surface, but perhaps just reflects the high levels of cash rationalizing investments.

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There's some spillover as the subprime story has become a bobber that pops to the surface every few days only to be pushed lower quickly by officialdom. Bernanke gets his shot Wednesday with congressional testimony. Can the man successfully talk out of both sides of his mouth? On the one hand he'll be suggesting that the Fed is "vigilant" in fighting inflation which might help the dollar and push gold lower. On the other, he'll be under pressure from politicians to do something about mortgage issues a-la lowering interest rates. He can't have it both ways can he? Five will get you ten he's undergoing intense rehearsals with his handlers tonight.

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Does Chucky have another sequel in him?

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Chucky the Consumer had a rough day today. Consumer Confidence data was slightly lower. That doesn't mean you should mess with Chucky. The one story I found interesting was the supposed rub-off from the subprime mortgage issues to Harley-Davidson Inc. (NYSE:HOG) where it was reported that their borrowers are well, somewhat subprime. So, if you're looking for a used chopper, you might get one cheap soon.

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The dollar was only slightly lower today despite strong German data and lousy U.S. data. Again, Bernanke might be ready to say something to lift Bucky. However, if he does, gold will decline and so will everything else one would think.

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Okay, let's talk "a little" about the stock market since I think we'll see more meaningful and decisive action Wednesday with Bernanke's testimony.

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Elsewhere and overseas...

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That's enough charting for Tuesday, since Wednesday could be more significant in terms of volume and trend. But again, the news cycle is impossible to predict. [As I write this Beazer Homes (NYSE:BZH) is according to the Charlotte Observer under a criminal investigation. Its stock, already down 1% during regular hours, is down another 15% in after hours trading.]

I see that bond market Big Daddy Bill Gross of PIMCO stated that the Fed will have to either cut interest rates low enough so that mortgages would be at 5% or, he continued, home prices will have to fall 20%. He says the Fed's hands are tied. I just said that which means, well, nothing at all really.

Disclaimer: Among other issues, the ETF Digest maintains positions in: PowerShares DB US Dollar Index Bearish (NYSEARCA:UDN), streetTRACKS Gold Trust ETF (NYSEARCA:GLD), PowerShares DB Energy Fund (NYSEARCA:DBE), PowerShares DB Commodity Index Tracking Fund (NYSEARCA:DBC), iShares Lehman 7-10 Yr Treasury Bond ETF (NYSEARCA:IEF), MidCap SPDRs ETF (NYSEARCA:MDY), Telecom HOLDRS ETF (NYSEARCA:TTH), Rydex S&P Equal Weight Energy (NYSEARCA:RYE) and iShares MSCI Germany Index Fund (NYSEARCA:EWG).