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Choppy session in the making

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If this morning's stock futures action is any indication of what today's trading session is going to be like, then hold onto your hat as stock futures have been all over the board.

It has been up, then down, then up and back down again for stock futures this morning after copy machine maker Xerox (NYSE:XRX) $8.00 said it may have actually overbooked revenues by $6 billion from 1997-2001, $3 billion more than previously thought, after a recent audit of its books. Xerox (XRX) has been under scrutiny from the Securities and Exchange Commission for its accounting practices and this morning's news looks like the problems have resurfaced and continue to grow. The SEC found that Xerox's accounting manipulation inflated sales by $3 billion and boosted pretax profit by $1.5 billion. But the new audit, which Xerox (XRX) ordered as a result of the April settlement with the SEC, also looked at 2001 results and discovered fresh accounting problems. Shares of Xerox (XRX) plummeted 37.5% to $5.00 in overseas trading.

Stock futures then recovered back into positive territory after this morning's personal income and spending data was released. The Commerce Department said that personal income for May rose 0.3%, which was in line with economist's forecasts, while personal spending (not adjusted for inflations) fell 0.1%, which was below the 0.3% rate forecasted by economists. Economists are saying that spending may have come in below consensus as prices paid by consumers fell 0.1% as energy prices tumbled.

Stock futures rebound after the economic data was released, but have since turned lower. Currently, S&P futures (sp02u) are down 1.8 points at 990.20. NASDAQ futures (nd02u) are down 8.5 points at 1, 051 and Dow futures (dj02u) are down 16 points at 9,250.

Fair value for the S&P 500 today is $1.50. That price will not change during the session. HL Camp & Company has their computers set for program buying at $2.70 and set for selling at $-0.58. Fair value for the NASDAQ-100 today is $4.68.

This morning's news from Xerox (XRX) and a continued stalemate in the House regarding attempts to lift the budget ceiling as the U.S. Dollar continues its decline. The U.S. Dollar Index (dx00y) $105.69 -0.63% now sits at its lowest levels since June 2000.

August Gold futures (gc02q) $320.80 +0.37% are gaining ground this morning, after testing their upward trending 50-day moving average yesterday at $316.95, hinting that gold stocks (equities) may see some rebound today after yesterday's declines.

In last night's market wrap at premierinvestor.net, I felt the pending bill before the house to raise the budget ceiling might be a "wild card" in how the U.S. stock markets trade near-term, and the rise in gold futures this morning, coupled with some of the volatility we've seen from stock futures hints that this issue is on investor's minds.

Jeff Bailey
Senior Market Technician
Option Investor

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