My Stock Winners

Telecommunications (TTH)
Bullish
Sector trading above its…
20-day Moving Average: YES
50-day Moving Average: YES
100-day Moving Average: YES

Sentiment: Wall Street and Main Street both remain skeptical of the telecommunications bunch. Short interest has steadily chugged higher during the past three months, increasing nearly 50%. What’s more, the collective bunch has among the lowest “buy” percentage among the sectors that we track, with 29.5%. There are 58.4% “hold” ratings from the 166 total analysts’ opinions on telecom names, along with a hefty 12.1% “sells.” If any of the bears have a change in opinion, upgrades could continue to fuel a nice rally in the sector.

Outlook: The Telecom HOLDRS Trust (TTH ?40.70) bounced back on Friday to reclaim the support of its ascending 20-day moving average after pulling back with the rest of the broad market. What’s more, the exchange-traded fund (ETF) continues to hold support at the 40 level as it consolidates into its rising 10-week moving average. This trendline, in combination with the ETF’s 20-week moving average, has supported the security since late July 2006.

Materials (XLB)
Bullish
Sector trading above its…
20-day Moving Average: YES
50-day Moving Average: YES
100-day Moving Average: YES

Sentiment: Investors remains extremely skeptical of the Select Sector SPDR Materials Fund (XLB ?40.40). Options players have loaded up on put positions, pushing the Schaeffer’s put/call open interest ratio up to 5.25. In others words, put open interest among near-term options outnumbers call open interest by more than 5 to 1. In addition, the number of XLB shares sold short spiked by 27% in May to a 2-year high of 17.6 million. An unwinding of these bearish positions could help to add more fuel to the sector’s rally.

Outlook: The ETF bounced off support at its rising 50-day moving average last week, launching the shares back above support at their 20-day trendline. From a longer-term perspective, XLB has been in a solid uptrend along the support of its 10-week and 20-week moving averages since September 2006. Furthermore, the ETF has tacked on more than 16% since the start of the year, easily outpacing the broad market.

Airlines (XAL)
Bearish
Sector trading above its…
20-day Moving Average: NO
50-day Moving Average: NO
100-day Moving Average: NO

Sentiment: Investors have shrugged off the weight of rising fuel costs within the airline industry and continue to view the sector with complacency. Of the 61 analysts’ ratings on airline stocks, 52.5% of them are “buys.” While this doesn’t indicate that bullish sentiment is at a peak, exactly, it is rather cheerful given the performance of many component stocks of late. Additionally, the sector’s composite put/call open interest ratio weighs in at 0.81, lower than almost 73% of the past year’s worth of readings, suggesting a bullish lean from the options-trading contingent.

Outlook: The AMEX Airlines Index (XAL ?50.40) was recently rejected by resistance at its 50-day moving average and has continued its downtrend. Last week, the index shed nearly 4%, which was far steeper than the less than 2% pullback in the SPX during the same time frame. The index is also feeling pressure from its declining 20-day trendline. Fundamental and technical challenges should continue to stifle the XAL for the foreseeable future.

Last week left many investors feeling more than a little ill at ease. The Dow Jones Industrial Average (DJIA) closed the week with a loss of 1.78%, while the S&P 500 Index (SPX) dropped 1.87%. So far, market watchers have expressed in the financial media that the blame for the drop rests squarely on the shoulders of rising interest rates. The concern is that a higher interest rate environment will negatively impact the liquidity that has been the driving force behind the merger and acquisition, private equity, and share repurchase frenzy. One major assumption in these fears is that interest rates will continue higher, which is not exactly a foregone conclusion.

Yet, as we enter this week, the market finds itself poised to continue the bounce back that was started on Friday. Topping the list of reasons is that we are entering options expiration week, which has historically proven to be a positive week for the market. Since January 2006, 12 of the 17 expiration weeks have been positive for the SPX. That is slightly more than 70%, compared to about 50% for non-expiration weeks. What’s more, this strength has resulted in expiration weeks having an average return between 6 and 7 times greater than non-expiration weeks (0.73% vs. 0.11%) over the same time period.

Furthermore, this week is a Triple-Witching week, which is when contracts for stock index futures, stock index options, and stock options all expire on the same day. While the financial media has been quick to point out that Triple-Witching week has been weaker in the past than non-triple and non-expiration weeks since 2000, there has been a growing change during the past few years. Since 2004, Triple Witching has been, in fact, growing more bullish with an average return of 0.35% in the SPX.

Another interesting factor worth noting is Thursday’s sharp drop in the ISEE Sentiment Index. This index is expressed as a call/put ratio multiplied by 100 and measures calls purchased to open relative to puts purchased to open for equity, index, and exchange-traded fund options traded on the International Securities Exchange. This index tagged a fairly extreme low of 74 last Thursday (implying traders opened more puts than calls), when the SPX slipped 1.76% and lost its grip on the 1,500 level. We have found that, since October 2002, the SPX has usually rebounded rather quickly after the ISEE index has dropped below 85.

Also on Thursday, we saw the CBOE Market Volatility Index (VIX) spike 14.7%, jumping to its highest level since March 16. These sharp spikes in the so-called “fear gauge” have proven to be good bullish indicators for the broad market. Since 2004, the SPX has returned between 2.3 times and 3.8 times its average return during the ensuing 3 to 50 days following a VIX spike of 14% or more. For example, after a VIX spike, the SPX returns an average of 3.98% during a 50-day period compared to its at-any-time average return of 1.73%.

Finally, Thursday proved to be a “90/90″ day, which is an indicator developed by market technician Paul Desmond. This is simply when 90% of the NYSE volume was down and 90% of the NYSE traded issues were down. When Paul presented his research to the Market Technician’s Association (MTA), he found that clusters of these types of days typically signaled an end to bear-market environments. We find it of interest that there have been four such days since February 27th, a period encompassing about 3-1/2 months within the context of a bull market environment. Such widespread dumping of stocks is indicative of the pervasive skepticism that exists among traders in an advancing market, which could have powerfully bullish implications.

As we head into this week, the various extremes we witnessed in Thursday’s trading, combined with the positive “expiration-week” effect we discussed could be indicative of a market that has reached a short-term bottom. In addition, the market will also have an assortment of economic readings, which could help to spur some heavy trading. On Wednesday, the Fed will release its Beige Book report, giving a look at the health of the economy before its upcoming Federal Open Market Committee meeting at the end of the month. Thursday and Friday carry key inflation reports in the form of the Producer Price Index (PPI) and the Consumer Price Index (CPI). Any signs of an abatement in inflation could lure investors back into the market this week.

Here’s my take on AMZN.
Stock is near its March 2000 glory and has almost doubled in recent months. Currently trading at 123 times earnings and 57 times foward earnings. This far exceeds EBAY (20 times earnings) and GOOG (27 times earnings).

The price now exceeds even the most optimistic analysts. The next earnings release must WOW to the upside or the stock will tank. Now is may be a good time to lock in some profits
It is obviously grossly overvalued, and over the long term will have to fall back down. The fundamentals always win long term but short term anything can happen. The problem is that it is also one of the most manipulated stocks that I have ever traded and is being pumped so much that calling a top can be extremely risky. If you have the ability to ride out the short term when it corrects I believe you will come out ahead but it can be a bumpy ride until it does. If you do want to build a short position I would highly suggest getting in small so you can not get squeezed out and add more as it moves up or down over time(again in small increments). Don’t get in highly leveraged where you will have to cover on short term rises. That can force you to loose it all, and will push up the price more for everyone else. I can afford to ride this baby up over 100, if I have to, averaging up the entire way. I really don’t think it will ever get there but I am prepared if it does. I am fairly confident that in a years time it will be in the 50s or lower, but I do not know where the top is or how long it will take to get there.

As far as options, I find them harder because not only do you have to be right, you have to be rigt within a time deadline. I don’t know when that deadline is. So in this case I’d rather be a long term short. Happy shorting

What is driving Amazon’s stock price?

Since the end of January the Amazon.com Inc (Amazon) share price has nearly doubled, closing at 72.29 on 6 June 2007. This dramatic increase followed the release of Amazon’s first quarter result in late April in which Amazon announced $3.02 billion of revenue for the quarter, a 32% increase on the first quarter of 2006. Amazon also announced an increase in their second quarter guidance and full year expectations forecasting net sales of $13.4 to $14 billion for 2007 and operating income growing by up to 52% to $593 million.

We places a mid-point DCF valuation of $38.88 per share on Amazon based on consensus estimates and own analysis. The DCF mid-point assumes revenues growing to $20.9 billion and EBIT reaching $1 billion in 2009, these are aggressive forecasts. These growth forecasts incorporate Amazon’s potential to diversify into other online retail product lines and the DRM-free music sales opportunity. Although Amazon has been able to consistently produce strong revenue growth it has struggled to improve its profitability margins (EBIT margin of 3.5% in 2006), these forecasts represent an increase in Amazon’s EBIT margin to approximately 5% by 2009. Valuecruncher assumes a long-term growth rate of 5% and uses a cost of capital of 8%. This relatively low cost of capital reflects the dominant position Amazon currently holds in its core markets and product lines and success it has had expanding outside of North America. Despite these aggressive growth, profitability and cost of capital assumptions the Valuecruncher valuation is still significantly lower than the current market price.

Amazon’s Growth Options

Amazon has a number of operations outside of it’s core online retail business including www.a9.com an e-commerce focused search technology, www.alexa.com the traffic ranking site and www.imdb.com the internet movie database. It is impossible to value these and the other growth options Amazon has explicitly due to the lack of information available but it is difficult to imagine these options account for the approximately $5.5 billion difference between the Valuecruncher mid-point valuation and the current market valuation.

Comparable Company Analysis

It is difficult to identify a pure comparable company to Amazon so we’ve compared the forecast EV/EBIT multiple of Amazon of 50.3 with a number of high profile listed companies. eBay, Google and Microsoft have forecast EV/EBIT multiples of 16.5, 25.9 and 13.4 respectively. Admittedly these companies have a range of growth opportunities and have varying levels of risk but it puts into perspective the amount of growth the market appears to be pricing into the current Amazon share price. To take the comparison to the next level eBay whose core business is online auctions had EBIT of $1.4 billion in 2006 (over 3.5x Amazon) and has a number of growth opportunities is being valued at only 1.4x Amazon based on the latest share prices.

Amazon has exhibited strong growth over the last two quarters and the market has responded positively to the latest quarterly result and revised guidance but based on Valuecruncher’s analysis the stock appears over-priced. Even considering growth options potentially not captured in the DCF valuation it is still difficult to reconcile the current market price with our analysis. The current forecast EV/EBIT multiple of 50.3 suggest the market is over-valuing the growth potential of Amazon.

========= Undervalued Stock #1 ==========

—– Marsh & Mclennan Companies Inc. (NYSE: MMC) —–

Insider Name: Marc D. Oken
Insider Position: Director
Insider Action: 8,000 shrs on 5/23/2007 - 5/24/2007
Insider Total Holding: 7,832 shrs

——————————————————-
Undervaluation Merits…

P/S Ratio = 1.52 (Industry Average 1.95)
P/B Ratio = 3.07 (Industry Average 3.38)
P/CF Ratio = 12.5 (Industry Average 13.1)

Industry: Insurance Brokers

——————————————————-
Other Merits…

Dividend Yield = 2.30%

—– Marsh & Mclennan Companies Inc. (NYSE: MMC) —–

Last week’s drop in the Chinese stock market caused weakness in the opening and into mid-day trading as the popular averages were down slightly but have since changed course. Several mergers and acquisitions helped stem the downward tide and propel today’s nice reversal. Commerce department reports showed a lack of demand for cars, boats, and airplanes sending the Dow Transports lower however, and that has not changed.

Wednesday brings the revised first-quarter productivity and unit labor cost reports, with expectations that non-farm productivity growth will be revised to show a 1% annual growth rate. Virginia Fed Reserve Bank Pres Jeff Lacker speaks on; you guessed it, inflation, while New York Security Analysts hold their annual metals and mining conference.

Thursday brings the Labor Department’s report on jobless claims for the week ended June 2, expected to come in at 310,000 while Freddie Mac reports on mortgage interest rates. The nation’s largest retailers post same-store sales for May with that number expected to show an increase and the Federal Reserve reports on consumer credit for April.

The week closes Friday with the Commerce Department’s international trade report for April expected to show a small decrease in the deficit over March’s number. That’s it for the week’s economic news that will power the markets! More soon!

AMZN said it had bought out Joyo.com after it raised its investment in the company, one of China’s online shopping platforms. The truth is that: they bought it in 2004, the release says that it is struggling, so they are pumping more money into it. Nothing will come up from this M&A. “Jeff Bezos will visit Chinese subsidiary, Joyo.com, which is said to have lost $13 million last year, Chinese media reported today.”

“rival Dangdang has since seized the top spot - it now takes 18 percent of China’s online retail sales, compared to Joyo’s 12 percent”

Doubting that statement? Then why do you think AMZN insiders are selling 2 millions shares?

AMZN’s PE = 120, severely overvalued….

This overly inflated bubble stock - AMZN - will reach its fair market value at $40 by the end of the summer.

While the Dow spread its wings to within striking distance of the 13,700 mark and the Nasdaq Composite hit its highest point since February 2001, it was the record achieved by the S&P 500 Index (SPX - 1,536.34) that was especially notable. The broad-market index finally notched a close above 1,527.46, its all-time closing high from March 24, 2000. The index ended the week nearly 10 points above this threshold, and is now staring down its all-time intraday peak of 1,553.11

This achievement in the SPX managed to grab a headline or two, but there certainly wasn’t a broad sense of euphoria accompanying the new high. The vague ennui of the investing public reminded me of the collective “yawn” I perceived several weeks ago after the Dow muscled above the 13,000 level. On April 30, I noted that: “Past breakouts had been met with a great deal of hoopla on Wall Street, but this one seemed to pass with more of a cringe and a groan, which is more encouraging than the rampaging enthusiasm that accompanied the technical breakouts we saw in the early months of 2000.”

Caution and skepticism prevail across Wall Street and Main Street, as investors have yet to fully buy into the market’s upward momentum. Institutions and hedge funds, which dominate trading in the U.S. market, continue to hedge their long positions by shorting other stocks, shorting index futures, and purchasing index put options, which are among the most-active options on a daily basis.

Mutual-fund players aren’t terribly sanguine either, preferring to avoid the playing field. In 2000, when the SPX was last in the 1,550 area, domestic stock funds enjoyed $259 billion in inflows. As of the end of April, domestic stock funds are on pace for only $63 billion in inflows this calendar year, as investment dollars continue to chase overseas markets. All of the broad indices are hitting new highs, yet the public is still not engaged. As contrarians, this is a welcome indication that plenty of money still lingers on the sidelines.

As an example of the pervasive shorting activity that continues as the market achieves new all-time highs, odd-lot short selling continues to build momentum. The smoothed 20-day moving average of odd-lot short positions has been slowly building up speed for the past 2 years and is now near a 7-year peak. Some are viewing the increased shorting activity as the work of hedge funds and thus not an indicator of pessimism surrounding stocks, with the implications being that short interest can no longer be used as a contrarian bull signal. My view is that regardless of the motivation for the huge short positions, they have to be unwound at some point in the future and thus represent future buying power.

Turning to the CBOE Market Volatility Index (VIX: sentiment, chart, options) , I have a few notable observations. The so-called “fear barometer” continues to respect the confines of the 12.50 and 14.25 levels as lower and upper bounds, respectively. The market will tend to struggle as this lower boundary is hit, while it tends to rebound strongly when the upper boundary is reached. Recently, these levels are regularly touched within a day or two of each other.

Meanwhile, the 30-day historical volatility reading on the SPX has been in a 9-10% range over past month, so VIX “premium” strikes me as being larger than normal. It could be that put sellers are no longer willing to accept the lower VIX levels of earlier this year, and put buyers jump in sooner on VIX pullbacks. Considering that this pattern is taking place amid a market making new highs, I view this activity as bullish, as put buyers are willing to pay higher premiums for portfolio protection, whereas the expectation would be that they are becoming more optimistic and thus unwilling to pay a premium for portfolio protection..

Additionally, even with the market at all-time highs, VIX futures remain flat, indicating an unusually high expectation for short-term volatility that has in the past always been associated with market weakness as opposed to the current upside momentum. Big volume on out-of-the-money VIX call options also continues to bear watching, as some investors are looking to cash in on a “VIX pop” that would result from a huge decline in the market and such expectations have a way of not being realized.

Overall, this landscape strikes me as quite bullish in its implications and provides a strong rebuttal to the “low VIX/complacency” argument that’s still out there.

This week, the economic calendar is fairly light; we’ll learn the results of April’s factory orders, wholesale inventories, and consumer credit and analyze the latest weekly crude data. Earnings season is certainly on the home stretch, with the retailing sector coming into focus. Among the names on deck for the earnings spotlight are Jos. A. Bank Clothiers (JOSB: sentiment, chart, options) , Guess (GES: sentiment, chart, options) , and Dollar General (DG: sentiment, chart, options) . We could well see another record or two, but don’t hold your breath for any high-profile celebrations.

Telecommunications (TTH)
Bullish
Sector trading above its…
20-day Moving Average: YES
50-day Moving Average: YES
100-day Moving Average: YES

Sentiment: Pessimism dominates the sentiment backdrop of the telecommunications sector despite its impressive technical uptrend. In fact, Wall Street continues to wager against the group. Of the 160 analysts ratings on the components of the Telecommunications HOLDRS Trust (TTH ?40.80), less than 30% come in at a “buy,” while a robust 11% rate them a “sell.” This bearish configuration leaves ample room for potential upgrades across the sector.

Outlook: Technically speaking, the ETF continues to consolidate its recent gains along support at the 40.50 level. The security is also moving into support at its ascending 20-day moving average, which has carried the shares higher since mid-March. What’s more, the trust remains in a long-term uptrend, rising along the support of its ascending 10-week and 20-week moving averages. As pessimism toward telecommunications stocks unwinds, it should add more buying pressure, keeping the group aloft.

Utilities (UTH)
Bullish
Sector trading above its…
20-day Moving Average: NO
50-day Moving Average: NO
100-day Moving Average: YES

Sentiment: Skepticism is extremely heavy in the sentiment backdrop of the utilities sector as well. Wall Street has placed some heavy bets against the group as less than 27% of the 189 analyst ranking on the components of the utilities sector come in at a “buy.” Any upgrades from this dour group could help to add more lift to this sector. Meanwhile, the number of Utilities HOLDRS Trust (UTH ?145.88) shares sold short rose by 2% in May, the ETF still has a hefty short-interest ratio, pointing to high levels of pessimism among short sellers.

Outlook: The shares of UTH fell sharply last week, dropping below support at their 20-day moving average. However, the trust is still trading above support at its 80-day and 100-day trendlines. Furthermore, support in the form of the equity’s 20-week trendline is moving into the region to add another layer of support. UTH has finished only 3 weeks below this trendline in more than a year. A bounce off support at the 145 level could bring in more of the bears from the sidelines, pushing it even higher.

Airlines (XAL)
Bearish
Sector trading above its…
20-day Moving Average: YES
50-day Moving Average: NO
100-day Moving Average: NO

Sentiment: Optimism permeates the sentiment backdrop of the airline sector despite its weak technical performance. Wall Street is enamored of the group, as roughly 52.5% of the analysts ratings on the components of the sector come in at “buy.” Any downgrades from this optimistic pack could fuel additional losses in this group. Options players have yet to levy heavy bearish bets against the group, as the composite Schaeffer’s put/call open interest ratio sits lower than roughly 61% of the readings taken during the past year. This complacency against the sector’s weak technical backdrop has bearish implications from a contrarian perspective.

Outlook: The AMEX Airlines Index (XAL ?51.35) remains in a steep intermediate-term downtrend beneath its 10-week and 20-week moving averages, which have acted as paired resistance since February. In addition, the index continues to be capped by resistance at its 50-day moving average. A rejection at either these trendlines could result in further downside as the remaining optimism unravels in the form of increased selling pressure.

In the sessions surrounding the 2006 Memorial Day holiday, the Fourth of July holiday, and Thanksgiving, the Dow Jones suffered triple-digit losses. In addition to the general malaise that could strike trading, the SPX is struggling with a series of “speed bumps”. Despite a few attempts to break out, the broad-market index has yet to close above 1,527.46, its all-time closing high achieved on March 24, 2000. Above this bump is the 1,553.11 level - marking the index’s all-time intraday high.

Added to this thick soup of resistance is a heavy accumulation of calls at the 1,540 and 1,560 strikes. In the June series alone, there are nearly 266,000 open calls perched overhead between these two strikes. These bullish bets could act as a troublesome roadblock during the near term.

Shifting gears slightly to the S&P 100 Index (OEX), we find another annoying “speed bump” at the 700 level. This psychologically significant round-number level has succeeded in rejecting the index since May 18.

Meanwhile, put open interest is swelling on the SPX. During the past week, the number of put contracts on the SPX increased by 593,000 contracts, more than doubling the number of new call positions added during the same time period. While institutional traders may not expect a correction, it could just be a case of institutional investors chasing the rally, but chasing with caution. In other words, index puts are accumulated as institutions accumulate stocks. Since institutions/hedge funds are the only players in the market, as they get overly invested, as is evident by rise in index put accumulation, the market has tendency to run out of gas. However, the index puts suggest any corrections will be short lived and shallow in nature.

This building put open interest is also very interesting in that it confirms what I’ve been saying for months in this column about the tendency for portfolio mangers to accumulate index puts as the CBOE Volatility Index (VIX) declines to levels that are attractive for picking up portfolio insurance. As trading opens again following the Memorial Day holiday, the VIX is hovering close to the 12 zone, which has held as support on a number of occasions since mid-March. We are now faced with the potential for the a VIX bounce to 14-15 from this support level.

Another point worth noting is that bonds are currently trading at the top of their range and a move back into the range would imply weakness for stocks.

Despite being a short week, it will not be without potential fundamental catalysts that could work to temporarily de-rail the current uptrend. Thursday kicks things off with the revised first-quarter Gross Domestic Product (GDP), which is widely expected to be lower from its initial reading. Then Friday floods the Street with the May nonfarm payroll figures, the May Institute of Supply Management report, and the Core PCE Inflation report. Any weaker-than-expected reports could act as the spark that lights selling fire that could consume the Street.

However, as I stated last week, I’d fully expect such a pullback to generate more than enough bearish sentiment to set the stage for a major push by the S&P to all-time highs and beyond, as the major drivers for the bull market skepticism, and put buying, and short selling in the face of strong price action, reasonable valuation, and massive liquidity - remain firmly in place. I’d therefore advise all but the shortest-term traders to forget about trying to position for the pullback.

We picked Amazon (AMZN) for a Downside Trade (Short position)
TRADE QUALITY: 90%, which is rated Excellent
TARGET 1 Price: 61.38 Profit: 11.8% , for a typical pullback.
Cover Limit/Trailing Cover Limit: 71.22 Loss: 2.3%
Profit/Loss Ratio: 5.1 : 1 - Excellent

TARGET 1 POTENTIAL Excellent, there are 0 support areas on the way to Target 1.
Stocks may quickly fall to Targets when there are not many support areas blocking the way.

TARGET 2 Price: 58.13 Profit: 16.5% , Profit/Loss Ratio: 7.2 : 1 - Excellent for an extreme pullback.

BREAKDOWN WATCH for possible breakdown below 67.72, no support in area just below.
Type: Continuation breakdown from single support.
Target: 61.67, 11.4% Cover: 71.22, Loss: 2.3%, Profit/Loss ratio: 5 : 1 - Excellent

SUPPORT BELOW -11.8% at 61.38 (we expect AMZN to reach these level in 3 months)
-35.5% at 44.89 ± 0.9, type single, strength 2
-39.6% at 42.03 ± 0.84, type triple, strength 9
-43.9% at 39.06 ± 0.78, type triple+, strength 10
-46.5% at 37.26 ± 0.75, type triple, strength 9

Bubbles in markets are, as the name implies, unsustainable. They are manifested by inflated prices that go up and up to achieve unthinkable levels for awhile. But inevitably, the bubble pops, with the unfailing result that prices soon thereafter drop back to earth. Thus, like their soap-bubble counterpart bubbles in the market clearly lack something even more fundamentally important- they lack reality.

There is one very strange thing about bubbles. Even though prices are out-of-line with value based on any prudent historical measure, people don’t react as one would logically think, Instead of recognizing a bubble for what it is, people instead tend to rationalize why prices are so high. They try to explain to themselves why prices are supposedly reasonable.
This attempt to rationalize what is illogical and abnormal is a unique characteristic of bubbles. But it is not too difficult to see why this thinking happens.

When you are living in a bubble, it is very hard to accept the fact that you are indeed in the middle of a bubble. The reason for this inability to perceive foolhardy thinking is that most everyone acts as if there were no bubble. Everybody is saying, doing and thinking the same thing. This mutual & identical action reinforces one’s view to mistakenly believe that what they are thinking is correct & normal instead of what it really is, namely, the illogical & abnormal pervasive thinking that is found in a bubble.

We heard it all before-the reasons-new economy; advance in technology, increased technology, increasing production, inflation is under control. –In Short, its different this time, but in reality its never different. —
Only when the bubble pops does the bubble become obvious.

AMZN is overvalued by any normal fundamental analysis.

You want to compare AMZN to EBAY and YHOO.

Why don’t you compare the Balance Sheets and Earning Stmts of both of them to AMZN’s and you will see they are much stronger. You will discover that they have more cash, less liabilities, and much greater stockholders’ equity. They are also much more profitable and have much higher Free Cash Flow.

AMZN has $1.2 bn in long-term debt and $3.3 TTL Liab, ($1.4bn in Cash and Invtms),

EBAY has no Long-Term Debt with $2.7 bn TTL Liab, ($3.3 bn in Cash and ST Invstms

YHOO’s LT Debt is around $700ml with TTL Liab of $2.5bn (they have $2.4 bn in cash and invstms)

You will find that all of their financial ratios are also better. You emphasis on free cash flow is not that meaningful.

AMZN Music Download Business will Fail and it will effect the bottom line. The cost of the rights to the music are enormous. You can already download all of the same music files from foreign distributors like www.mp3sugar.com for less than half of what iTunes or mp3.com or even AMZN will be able to offer.

AMZN will just be one in several hundred retail sources for downloads now, one in a thousand by the years end.

The unrestricted format is an attempt to undo the Amazon Unbox blunder that has plagued them and caused disgruntled e-patrons to find alternative download formats.

The Television Cable Service providers will be the next to have their hand in the music download sector. They have far more reach than anyone when it comes to marketing, and they also have far greater technology. Watch as they dominate NFLX,BBI and even TIVO in the coming years. AMZN is not a player in this and never will be.

No institutions are buying at this price.
Friday volume was only 9.9 million shares compare to average volume of over 13 million shares. It’s been trading over 20-40 million shares a day since the big pop up from 62 range and this is huge drop in volume from that point under 10 million shs. Everyone knows it’s overpriced and went down when other tech companies went higher Friday. It will be below 60 soon because when it falls, it will fall like hot knife through butter.

On May 12, 2006, the euro’s rally from the November 2005 lows exceeded the 61.8% retracement resistance of the decline from the highs of December 2004 (Fig. 3a, point 1). This indicated that the euro’s uptrend had resumed, which is consistent with the completion of the falling wedge formation that was shown in Fig. 2. Now, let’s look more closely at the rally from the November lows at 1.1661 to the May highs at 1.3003. So far, the euro has held above the 38.2% support level at 1.2500 with next support at 1.2330, the 50% retracement level. The daily chart does show a flag formation, lines a and b.The completion of this formation would indicate that the Euro’s uptrend had resumed.

Telecommunications (TTH)
Bullish
Trading above its…
20-day Moving Average: YES
50-day Moving Average: YES
100-day Moving Average: YES

Sentiment: Pessimism dominates the sentiment backdrop of the telecommunications sector despite its impressive technical uptrend. In fact, Wall Street continues to wager against the group. Of the 161 analysts ratings on the components of the Telecommunications HOLDRS Trust (TTH ?40.47), less than 29% come in at a “buy,” while a robust 11% rate them a “sell.” This bearish configuration leaves ample room for potential upgrades across the sector. What’s more, the number of the exchange-traded fund’s (ETF) shares sold short jumped sharply in April, pushing its short-interest ratio even higher to more than 10 days to cover. This growing short interest underscores the pessimism that continues to surround the sector.

Outlook: Technically speaking, the ETF has overtaken psychological chart resistance at the 40 mark and hit a new annual high late last week. What’s more, the trust remains in a long-term uptrend, rising along the support of its ascending 10-week and 20-week moving averages. As pessimism toward telecommunications stocks unwinds, it should add more buying pressure, keeping the group aloft.

Sector
Utilities (UTH)
Bullish
Trading above its…
20-day Moving Average: YES
50-day Moving Average: YES
100-day Moving Average: YES

Sentiment: Skepticism is extremely heavy in the sentiment backdrop of the utilities sector as well. Wall Street has placed some heavy bets against the group as less than 27% of the 183 analyst ranking on the components of the utilities sector come in at a “buy.” Any upgrades from this dour group could help to add more lift to this sector. Despite the fact that the number of Utilities HOLDRS Trust (UTH ?151.80) shares sold short dropped by 12% in April, the ETF still has a hefty short-interest ratio, pointing to high levels of pessimism among short sellers.

Outlook: The shares of UTH have moved sideways recently, consolidating into support at their rising 20-day moving average and hurdling through the 150 level. In addition, an unwinding of the existing pessimism toward the sector should help to fuel further gains in the sector.

Sector
Airlines (XAL)
Bearish
Trading above its…
20-day Moving Average: YES
50-day Moving Average: NO
100-day Moving Average: NO

Sentiment: Optimism permeates the sentiment backdrop of the airline sector despite its weak technical performance. Wall Street is enamored of the group, as roughly 52.5% of the analysts ratings on the components of the sector come in at “buy.” Any downgrades from this optimistic pack could fuel additional losses in this group. Options players have yet to levy heavy bearish bets against the group, as the composite Schaeffer’s put/call open interest ratio sits lower than roughly 70% of the readings taken during the past year. This complacency against the sector’s weak technical backdrop has bearish implications from a contrarian perspective.

Outlook: The AMEX Airlines Index (XAL ?51.26) remains in a steep intermediate-term downtrend beneath its 10-week and 20-week moving averages, which have acted as paired resistance since February. In addition, the XAL’s 50-day moving average is also approaching the shares and could add another layer of resistance, keeping the group moving lower during the near term. A rejection at either these trendlines could result in further downside as the remaining optimism unravels in the form of increased selling pressure.