Premarket 8-16-05 Exclude food and energy at your own peril.

Good Morning

Overseas markets were mostly higher. US Futures were mostly lower. CPI came in a little hotter than expected on the headline number and basically begnin on the Core CPI. But really, how much longer can we exclude food and energy as an important component? The apparel component of CPI showed prices soften. Housing Starts were slightly better than expected but Industrial Production was weak. Walmart (symbol: WMT) disappointed with weak guidance over the effect of energy prices on their customers. Knowing WMT's customer base, we tend to find this credible. Perhaps a rotation may start into the higher end retailers...NO? Home Depot (symbol: HD) beat expectations and slightly boosted guidance. JC Penney (symbol: JCP) reported an overall better than expected report. American Eagle (symbol: AEOS) had disappointing guidance.

Traders will be focusing on Hewlett Packard's (symbol: HPQ) earnings report scheduled to be released tonight. It will be interesting to see if HPQ can surprise the skeptics that were recently created from Dell's (symbol: DELL) poor report. We believe they will come in with a strong report due to a higher end product mix than DELL was targeting recently. Expectations for DELL are always rather high and expectations for HPQ are usually low. This sets up the perfect opportunity for a positive reaction in HPQ's stock price if they even just meet expectations. We would consider HPQ for a small long-side trade.

The market had an unimpressive bounce yesterday largely due to Oil's decline. It will take more than that to break the markets downtrend, therefore we still remain cautions. However, we are not opposed to entering small and select buying opportunities such as HPQ and possibly some NASDAQ 100 Trust (symbol: QQQQ) for an intraday trade.

-Good Trading-

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