Rebound? Forsooth, the Stars Tell It Otherwise

Contrarian's Delight

SAN FRANCISCO -- With the markets in rally mode today, a source noted the following: Arch Crawford, a newsletter writer whose market calls are based on astrology, told CNBC he's looking for a 1000-point drop within two weeks. Second, put/call ratios showed the heaviest put buying in six months. Third, USA Today's front page featured a story entitled "Stock Wealth Slipping Away: With This Setback, Bull Market Might Have Met its Match." Finally, Ralph Acampora, chief technical analyst at Prudential Securities, has gone neutral.

"Perfect time to stop going down," the source quipped.

Although CNBC dotes on Acampora, his short-term track record has been spotty and he's become something of a contrarian indicator to market players, as our source implied.

For the record, "Uncle Ralphie" actually went neutral Friday on Louis Rukeyser's Wall Street Week.

"I was asked where I thought the market would be in three months," Acampora wrote in a research report published Monday (which for some inexplicable reason I didn't get until today). "When asked this, I changed my market stance to neutral without changing any of my estimates. I did this only because in three months we will be in November and confronting Y2K. I believe that we will experience a rally or two before then but at that time I would have a neutral opinion on the market as I feel it will be a choppy market in November, December and January."

The technician maintains his projection of "12,000-plus" for the Dow but with a "huge caveat." Specifically, "the Dow has to maintain 10,334 and the S&P 500 must stay above 1,292."

So if the Dow and/or S&P fall below those levels, look for Acampora to get bearish.

Oh yeah? Well Thanks for Nothing

Speaking of being better later than never, much hype and humidity today about Mary Meeker's lovefest with America Online (AOL Quote). Kind words from the Morgan Stanley Dean Witter analyst helped AOL jump 8.7% and gave the entire Net sector a lift. Additionally, Lehman Brothers issued a report today entitled Believe it or Not, It Looks Cheap and reiterated its buy rating on AOL and $200 price target (vs. "raising" it to $200 as CNBC's Martha MacCallum said repeatedly in her best effort to supplant Maria Bartiromo as the network's chief cheerleader).

That's all well and good. But a source who has -- gasp -- shorted Internet stocks and AOL in the past wonders where Meeker, Lehman's Brian Oakes, Merrill Lynch's Henry Blodget, et al. were when the recent Internet stock cataclysm unfurled on unsuspecting investors.

"The gall and the audacity of the biggest Internet analysts in the business working at the biggest firms to watch stocks go from zero to 250 with never a hint of taking gains," he said. "And then having the additional gall to look us in the eye and see these stocks 75% off the highs to tell the guy who bought at 250 to buy it again at 85? It's outrageous."

Indeed it is. Or am I missing something?

TSC Special

I cannot resist the column's siren squeals: Associate editor Dan Colarusso gets the nod today for Truth Serum: The Irresistible Force and the Immovable Net Stocks.

AluMania

Sometimes it's better to be lucky than good.

Yesterday, you'll recall, I reported Dwight Anderson was one of several analysts/stock pickers to recently part ways with Tiger Management.

This morning, Anderson was gracious enough to return my phone call. He is now a partner at Tudor Investments and will manage about $150 million of Tudor money and be part of a team running a separate hedge fund due to be rolled out in January.

The forthcoming fund intends to focus on "anything in the raw material world" and be about $200 million in size, he said. Small enough to "keep all equity options open but material enough in size to get the attention of companies and investment bankers."

Other than expressing a desire for more "autonomy," Anderson declined to discuss goings on at Tiger, although I hope to bring you more on that situation in the coming days.

So the "lucky" part of this is, given goings-on in the aluminum industry these days, it seemed natural to ask Anderson for his opinion.

"It's about time," he said of the recent spate of mergers. "Basic industries is among the most unconsolidated. Management teams in the paper industry were the first to understand it's cheaper to buy than build. Aluminum, copper, and paper [stocks] were all trading at ridiculous value to discounted cash flow. It's logical you'll start getting some M&A."

Anderson was "definitely surprised" to see Alcoa's (AA Quote) hostile bid to acquire Reynolds Metals (RLM Quote) today and expects the proposed combination to face regulatory hurdles. The Alcoa bid, of course, followed yesterday's news Canadian aluminum giant Alcan (AL Quote) is buying France's Pechiney (PY Quote) and Switzerland's algroup.

"There is definitely more to go," in terms of consolidation, Anderson said, and not just in aluminum. "Steel is the most untapped," given the largest companies in the industry -- such as Japan's Nippon Steel -- "control less than 3% of the world's capacity."

However, the analyst warned against investing simply on the hope for a takeover, recommending investors "find a stock that's cheap, with good management and good industry fundamentals."

Asked for his best idea in the group, Anderson offered AK Steel (AKS Quote).

"In the U.S., AK Steel has the best management team, is best positioned, and has the best free cash flow going forward," he said.

Looking forward, Anderson expects "decently improving positive prices in underlying commodities," and is particularly hot for zinc and nickel (aren't we all?). "At the very least, I'm comfortable at today's price levels," he said. "The downside is flat. There are worse bets to take."

Which is a backhanded way of saying the recent rally in cyclicals may have more room to run.

And Finally

Sorry about the glitch in yesterday's poll about the CNBC ads. The good news is the bug has been fixed and you can go back to the column and register your choice, and check on those of your fellow readers.

To co-opt an old phrase: Vote late, but vote often.