A Return to Resiliency

Back from the Brink

Resilency abounded on Wall Street Thursday. Tellingly, tech stocks led the comeback despite IBM's (IBM) cautious comments and subsequent 14.6% decline.

The Dow's ability to recover from its intraday low of 10,177.38 was significant, according to Peter Green, director of technical research at Gruntal. A close below 10,200 would have broken the Dow's "rising wedge" formation and indicated a near-term target of 9800, the technician said.

For the S&P 500, 1261 is the key near-term level, he said; the index traded as low as 1265.61 before closing off 5.82 at 1283.61.

The bounce notwithstanding, the averages are "moving in the wrong direction on balance," he said. "Unfortunately, you're not getting a bounce in IBM as you would in bull markets. I'm not really seeing any buying."

Big Blue closed up from its low of 89, but -- at 91 -- ended off its session high of 93 3/16, leading Green to "suspect we may get another washout."

In contrast to blue-chip averages, the Nasdaq Composite is "acting really well," he continued; the tech-riddled average closed up 0.5% to 2801.95 after trading as low as 2724.74.

Still, "many stocks within the comp are making lower tops," Green cautioned. "It looks like we're forming a head and shoulders [pattern] since Sept. 10."

The comp's close above 2790 suggests the index could go as high as 2864, he said, but "my suspicion is we'd see selling again" at that level. "Unfortunately, we made a lower low on Oct. 18 , which indicates this [move] has not been resolved on the downside yet."

So does Green's cautiousness suggest Joe Battipaglia, Gruntal's chairman of investment policy, has shed some of his ultrabullishness? Battipaglia could not be reached for comment, but the technician replied with a definitive "no."

Whew!

Brinkmanship Politics

Similar to market gauges, Tyco International (TYC) bounced from its session low of 85 1/16, closing at 87. Still, the stock declined 1.6% as its strong earnings elicited more relief than celebration.

Tyco, you'll recall, got whipsawed (if not pistol-whipped) last week when David Tice & Associates questioned its accounting methodology (charges the company steadfastly denied).

Tyco: Join the discussion on
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"Earnings were right in line with expectations of what [chairman and CEO Dennis] Kozlowski told us to expect, which was better-than-expected earnings," said Barry Hyman, senior market strategist at Ehrenkrantz King Nussbaum. "I was pleased to see that. Anything but would have been an outright disaster."

Ehrenkrantz King Nussbaum has retained its stake in Tyco, Hyman said, but the firm would "probably lighten its position" if the stock returned to the mid-90s.

That the stock still "languishes" in the mid-80s "tells me the Tyco story has opened the eyes of Wall Street in terms of really examining the quality of earnings," the strategist said. "I think the concept of one quarter allaying all the fears is premature. It's become a 'prove it to me' stock."

Moreover, Tyco represents a microcosm of what's going on overall, Hyman said. "When the market was peachy -- when interest rates were going down -- who concentrated that closely on the quality of earnings? It was earnings. Now, there's no room for error."

Lucent (LU), for example, is laboring under similar earnings-quality concerns as Tyco, Hyman noted.

Finally, the strategist reiterated a belief Tyco is struggling because it is "over-owned" by institutions, meaning there are few new buyers to support the stock.

That concept came to mind when I was speaking with Alan Hoffman, senior portfolio manager at Value Line, which is long Tyco.

Before getting into money management, Hoffman covered Tyco as an analyst and has been "very respectful of the company and its business strategy and its account presentation for the last decade. I don't think there's really anything to rumors about accounting shenanigans."

Yet while Hoffman is not selling and Tyco sports Value Line's highest ranking, "I'm not buying any more because I'm fairly full up," he said (meaning Tyco has reached the maximum level -- as a percentage of assets -- Value Line allows any one stock to represent in its funds).

"For someone who has no exposure, I think it's an excellent opportunity," the fund manager said.

I know Hoffman didn't mean it this way, but given all that's transpired with Tyco, that almost sounds like a dare.

BTW, neither Tice nor Tyco's PR department replied to calls seeking comment.

Media Meandering

Recently, I was included on a group email from a friend at The Wall Street Journal asking us to use a different email address for her.

"Dow Jonesers (DJ) have been reminded to use work email only for work issues, so there you have it," she wrote.

Thus, my interest was already piqued when I read the Journal's three (3!) articles today about "Virtual Morality."

While interesting, the series failed to reveal Dow Jones' view on the subject, which Dick Tofel, vice president of corporate communications, said is not unique: "Officially, you're not supposed to use email for personal purposes. But one has to understand that within the context of a rule of reason. You're also not supposed to use the phone for personal reasons. [Frequently] calling your aunt in Indonesia is a problem. An occasional call to your significant other is certainly not. It's the same thing with email."

Dow Jones recently sent out a "reminder" about its policies, Tofel said, which was probably the impetus for my friend's email.

The decision to omit the policy from the stories was an "editorial issue" and not a corporate one, he said. However, the spokesman was quick to note Dow Jones does not engage in the "monitoring-type" activities described in the articles.

FYI, TheStreet.com's (TSCM) email policy is: "Any email sent from or received at your business email address is the property of TheStreet.com. Please use your discretion as to what is appropriate use of a business email address."

Finally, my recent quip about the declining quality of commercials on CNBC drew some inquisitive emails. Specifically, I'm talking about ads hawking "Tae Bo," the "Tap Light," "Metabolize & Save," "Vibra Touch" and the "Smart Chopper."

A CNBC spokeswoman said there has been no change in the network's ad policies, but suggested the flexibility enjoyed by local affiliates could account for this recent phenomena.

On closer examination, many of these infomercial-esque ads are from a single organization, IdeaPlanet.net, whose home page is, indeed, a gateway to "some of the most fascinating products ever."

When all is said and done, this era will surely make the European Renaissance look downright timid.

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