Tying Up Some Loose Ends

SAN FRANCISCO -- The beauty of these slow, sloppy and kinda' uninspiring days is they give you an opportunity to catch up on some overdue chores.

This column's version of an overstuffed "job jar" (ala Hi and Lois) is our semiregular "Accountability Report Card," a popular feature long overdue for update. Look for the latest version in the coming days.

The process of putting the Report Card together provides an opportunity to reconnect with certain sources. Tonight, I offer the latest views from two whose performances were exemplary (or at least, better than the market's).

Way back on Jan. 20, Paul Rabbitt, president of RabbittAnalytics.com in Hermosa Beach, Calif., predicted the Nasdaq Composite would fall to as low as 2900, a 31% decline from its then-record of 4189.51. Thereafter, the Comp rose to as high as 5048.62 on March 10, before plummeting more than 37% to its nadir at 3164.55 on May 23.

Then on March 28, when it was still fashionable to think optimistically, the strategist declared "this market is ripe for a severe correction." He suggested the Comp was "about as overbought as I've ever seen."

The index fell nearly 35% from its closing levels that day.

Past performance is no guarantee of future returns, but Rabbitt deserves kudos (and your attention) for calling the action pretty much dead-on.

Fast forward to Tuesday afternoon. Rabbitt said the Nasdaq, S&P 500 and Russell 2000 are "overbought," with 3% to 5% downside risk each, while the Dow Jones Industrial Average looks "oversold," with 4% to 5% upside potential.

"My guess is we've had this reflex rally off the lows and discounted all the wonderful earnings information that's coming out for second quarter," he said, adding the "jubilation" over the Federal Reserve having passed on raising rates is also priced into the averages, save the Dow.

That view looked pretty sage Tuesday as the Dow outperformed its peers, rising 0.8% while the S&P gained 0.4%, the Comp shed 0.6% and the Russell slid 0.2%.

Before you accuse him of harboring some anti-tech bias, note Rabbitt maintains a long-standing overweight recommendation on the sector and is "hoping for a pullback" so he can buy more favorites such as Seagate (SEG Quote - Cramer on SEG - Stock Picks), Advanced Fibre Communication (AFCI Quote - Cramer on AFCI - Stock Picks), Arrow Electronics (ARW Quote - Cramer on ARW - Stock Picks) and Imation (IMN Quote - Cramer on IMN - Stock Picks).

A re-entry level he's eyeing closely is 50 on the Technology Sector SPDR (XLK Quote - Cramer on XLK - Stock Picks), which closed down 0.8% at 53 15/32 on Tuesday.

Finally, Rabbitt suggests using additional near-term strength in cyclicals as an opportunity to exit the group; the Morgan Stanley Cyclical Index rose 2.4% Tuesday.

Catching Up, Part 2

I first (and last) spoke with Richard Eakle, president of Eakle & Associates, a Fair Haven, N.J., hedge fund and investment advisory service, on March 7. At the time, he recommended long positions in Sirius Satellite Radio (SIRI Quote - Cramer on SIRI - Stock Picks), which is down 25.5% since, and Cerus (CERS Quote - Cramer on CERS - Stock Picks), off 23%.

The hedge fund manager had far better success with his short recommendations: Razorfish (RAZF Quote - Cramer on RAZF - Stock Picks), down 53.6%, Intuit (INTU Quote - Cramer on INTU - Stock Picks), off 15.4%, and Ask Jeeves (ASKJ Quote - Cramer on ASKJ - Stock Picks), down a whopping 84% since March 7.

On Tuesday, Eakle said he's still long Sirius, believing the recent satellite launch bodes well, and still short Ask Jeeves, suggesting there's "no compelling reason to cover" despite having ridden the stock down from around 180. (It closed at 14 Tuesday.)

More recently, Eakle has focused on the biotech sector, taking long positions in PE Biosystems (PE Quote - Cramer on PE - Stock Picks), Medarex (MEDX Quote - Cramer on MEDX - Stock Picks) and COR Therapeutics (CORR Quote - Cramer on CORR - Stock Picks), which accompany a long-standing position in Abgenix (ABGX Quote - Cramer on ABGX - Stock Picks).

"No question they've had some decent moves in the last four to six weeks, but I think it's still a game that has a lot of mileage," he said about the group's recent performance. Biotech will continue to rally in part because the group is "underowned" by institutions that exited during the spring swoon and haven't yet returned, he said.

They also make sense now because "you're not buying on the basis of earnings," but expectations of continued progress on the development side. That may sound counterintuitive, but he finds it comforting vs. the risk of owning tech stocks that might "be vulnerable to a shortfall," offering Aspect Communications (ASPT Quote - Cramer on ASPT - Stock Picks), down 54.2% Tuesday, as the latest example.

Despite the market's current fixation on earnings, Eakle believes momentum will return to the "concept stocks" later in the year, when he predicts a big rally. He sees a striking similarity between 2000 and 1994, when the market bottomed long before the Fed was done raising rates, and jumped in the late fall after meandering through the summer.

"The market is going through a healing process since it bottomed in mid-April [2000] and is going to be acting well in the next couple of months," he forecast. The money manager believes the Fed has overshot in its efforts to slow the economy, and will soon "start to backpedal" in its rhetoric, leading to anticipation lower interest rates are forthcoming. This will be the "real elixir" for equities later in the year, he said.

Other current buy recommendations include Aether Systems (AETH Quote - Cramer on AETH - Stock Picks), Globespan (GSPN Quote - Cramer on GSPN - Stock Picks), Maxim Integrated Products (MXIM Quote - Cramer on MXIM - Stock Picks), Siebel Systems (SEBL Quote - Cramer on SEBL - Stock Picks), Ariba (ARBA Quote - Cramer on ARBA - Stock Picks) and Network Appliance (NTAP Quote - Cramer on NTAP - Stock Picks).

With about $75 million under management, Eakle Associates was up more than 300% in 1999 and 29% year to date in 2000 -- both before fees, he said. The fund has about a 20% cash position in anticipation of a rally later in the year. Of its assets in the market, about 15% are short.

Eakle didn't offer any new short recommendations, but said he's been considering betting against Yahoo! (YHOO Quote - Cramer on YHOO - Stock Picks), which -- of course -- soared in after-hours trading Tuesday after the company reported better-than-expected earnings.

Our conversation took place before all that but it looks like Eakle got lucky, and will now have the opportunity to short Yahoo! at a higher price.