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Upgrades along with S&P shuffle has stocks higher

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Networking equipment maker Cisco Systems (NASDAQ:CSCO) $13.14 is seeing its stock get a boost to $13.94 (+6.08%) in pre-market trading after broker Merrill Lynch upgraded the stock to "strong buy" from "buy," on the belief that macro indicators continue to point toward recovery in communications equipment new orders during the second half of this year. Merrill also believes Cisco's valuation of 23x calendar year 2003 estimates of $0.58 is also a favorable entry point for investors looking out 12 months. Major risks for Cisco would be that economic recovery now underway stumbles.

Also getting a boost from a Morgan Stanley upgrade is telecom equipment maker Brocade Communications (NASDAQ:BRCD) $16.45 to "overweight." Shares of Brocade Comm. (BRCD) jumped 5.7% in the pre-market to $17.40

Last night's news

Last night's news that the Standard & Poor's is going "all- American" with its S&P 500 index of large-cap stocks has given a boost to stock futures here in the U.S.

Stocks on their way out as of July 19th are (RD, UN, NT, AL, ABX, PDG and N), while those to be added are (UPS, GS, EBAY, ERTS, PRU, PFG and SDS).

Shares of online auctioneer eBay Inc. (NASDAQ:EBAY) $57.05 have jumped to $59.80 (+4.8%) and Electronic Arts (NASDAQ:ERTS) $60.78 added $2.47 (+4.06%) to $63.25.

The reshuffling does look to have had somewhat of a negative impact in overseas markets trading as investors show disappointment in having some of their representative stocks being removed from the S&P 500. Most impacted was European markets as France's CAC 40 trades down 2.12%, Germany's DAX was off 0.89%, Netherlands' AEX General was lower by 2.28% and the UK's FTSE-100 was down 0.7%.

Pre-open looks higher

The U.S. Dollar Index (dx00y) 106.08 +0.43% shows the U.S. Dollar getting a bounce higher this morning and most likely will help stocks post a higher open this morning.

In last night's market wrap at premierinvestor.net, we noted some slight weakness in the December Gold futures (gc02z) $317.30 - 0.40% after this futures contract also rallied to a trying-to- round-lower 50-day MA. Near-term, this action may also bode well for the broader markets if other MARKET participants aren't hording gold on "fears" of financial/currency woes.

This morning, short-term traders may want to take a look at shorting 1/2 positions of Anglogold Ltd. (NYSE:AU) $28.79, stop $30.50, target $26.00 near-term, target $22.50 intermediate-term, on thought the US$ can put in a bottom.

Treasuries are also seeing some modest selling this morning after a strong round of buying yesterday as investors fled stock. The benchmark 10-year YIELD ($TNX.X) 4.76% rises slightly, but is once again back below our 50% retracement level of 4.801% and still a more defensive sign from the market as it relates to equities.

S&P futures are gaining 3.8 points to 957.80, NASDAQ futures are up 16.50 point at 1,011 and Dow futures are up 42 points at 9,140.

Fair value for the S&P 500 today is $1.10. That price will not change during the session. HL Camp & Company has their computers set for program buying at $2.04 and set for program selling at $-0.84. Fair value for the NASDAQ-100 today is $3.87.

Jeff Bailey
Senior Market Technician
Option Investor

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