What's around the corner? 11/06

On this day in 1869 America was changed (as is often the case) by the whim of its young people. Several movements were underway – notably the National Women’s Suffrage movement. Health and dependency were also flashpoints (ring any bells?!) and the temperance union was a new national force. We had a Republican president in whom we had immense respect for from a military standpoint but weren’t too sure of his economic fluency.

For you football fans, today marks the birth of intercollegiate football. Princeton and Rutgers butted heads and in just under and hour Rutgers soundly defeated Princeton 6 goals to 4.

Traders weren’t kicking any footballs yesterday, they were too busy kicking themselves. In the words of Peter Gabriel ... "You know you're plastic from your cash." Keep you cash handy as we move forward.

I don’t want to be too long winded so let me get straight to the point with some highlights:

* Much of the weakness in the market can be attributed to the transition period between administrations and parties that we are in the midst of.

* High Volatility has real potential – our fearful and fragile market is trying to envision what would happen if another Bear Stearns or Fannie Mae popped up between now and Inauguration – now that both parties are in the sandbox how well are they going to play together?

* The Bulls need to protect the 9000 level in the Dow – a break could raise the odds of a retest. If you follow the S/P500 you’re looking at 920.


A major, major rally could follow a successful retest. We are making history and it’s not just from an election standpoint.

Recognize that the markets historically start their recoveries in the midst of very bad news and most of the recovery in a few days.


Lastly, by not doing anything you are perfectly positioned for the past.



http://fa.ml.com/Rachel_McLaughlin

Sources: Art Cashin-UBS and Merrill Lynch Research – Proprietary PIA Research. This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of November 5, 2008, and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources deemed by Merrill Lynch to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. Past performance is no guarantee of future results. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Investment involves risks. International investing involves additional risks, including risks related to foreign currency, limited liquidity, less government regulation and the possibility of substantial volatility due to adverse political, economic or other developments. The two main risks related to fixed income investing are interest rate risk and credit risk. Typically, when interest rates rise, there is a corresponding decline in the market value of bonds. Credit risk refers to the possibility that the issuer of the bond will not be able to make principal and interest payments. Index performance is shown for illustrative purposes only. There may be less information available on the financial condition of issuers of municipal securities than for public corporations. The market for municipal bonds may be less liquid than for taxable bonds. A portion of the income may be taxable. Some investors may be subject to the Alternative Minimum Tax (AMT). You cannot invest directly in an index. Discuss your investment needs with your financial professional before investing