Position Statement: In our Prime Recommendation Letter we attempt to identify the recommendation with the highest probability of moving higher.  We recommend that stop orders be placed at the time of purchase,  and once the position has moved profitable we recommend a stop be placed a minimum of $0.375 above the purchase price and moved higher as the position moves higher.

Today's Comments: The overall market finished Thursday ever so slightly lower on a day that saw the various sector indices I track mixed. There was weakness in the Banking, Interactive's, Transports, Broker/Dealer, Retailers, and Networking indices. There was strength in the Airlines, Biotech, Disk Drive Manufacturers, Internet, Technology, Healthcare Providers, Chemicals, Consumer, Insurance, Oil & Gas, Telecom, Commodities, and Natural Gas indices. Money flowed into bonds again as interest rates moved lower. The overall market was sharply lower intra-day before a late day breaking news announcement that the Obama administration is close to unveiling a plan that to subsidize ("assist") US home owners. The plan is rumored to be approximately $50 billion in size. This announcement halted the decline in the market, which was on its lows of the day, and caused a rally that nearly brought the market into positive territory. The problem with such a sharp intra-day reversal is that it makes it extremely difficult to determine the short term trend of the market and individual stocks. The other problem is that I do not think that this program will come anywhere near to solving the problems in the housing market or the credit markets.

As for the announcement itself, I have several problems with the initial reports relating to the proposed program. The 1st is that when policy makers start saying their goal is to support housing prices they ignore the fact that the US housing market is far too large for even the US Government to support. The second is that $50 Billion is a drop in the bucket in terms of the number of home loans that are delinquent. The third is that the long term average yield on 30 Yr. US Treasuries is around 7.5%, subsidizing mortgages at 4.0-4.5% will probably result in the US Government and US Taxpayers loosing 3.0-3.5% on every mortgage it subsidizes. The fourth problem is that it rewards people who made bad decisions and punishes those who did not. (Think higher taxes on people who were financial prudent.) I seriously doubt this program, if it ever gets implemented, will do anything significantly more than cost US Taxpayers money and further damage the housing market. If I subscribed to conspiracy theories, I would think this announcement was timed in order to prevent the market from reaching its lows from last year.

Two things I noticed from my review of the charts from yesterday's trading activity was the utility stocks did not participate in the late day recovery, and money continues to move into biotechs. Also, I would like to point out that many people are talking about how yesterday's rally was a short covering rally, and I would have to agree with them.

Finally, please note that the market will be closed Monday in observance of President's Day.

Recommendation: SELL/SHORT Eli Lilly & Co. 'LLY''

Company: Eli Lilly & Co. Symbol: 'LLY' Closing Price: $36.34 Web: www.lilly.com YH: $53.40 YL: $38.20 EPS: ($1.89) P/E: N/A Shares Outstanding: 1.14 Billion Forecasted EPS:.$4.16 Market Cap.: $41 Billion Dividend: $1.96 Yield: 5.30% Aver. Daily Trading Volume: 6.3 Million Shares   Price Targets:  35.15 & then $31.12 Upside Stop:  $37.27/share Options Rec.: March 35 Puts @ $1.20 Options Symbol: LLY OG Additional information on Eli Lilly & Co. 'LLY' can be found (here)

Company Description: Eli Lilly and Company engages in the discovery, development, manufacture, and sale of pharmaceutical products worldwide. It offers neuroscience products, including Zyprexa for the treatment of schizophrenia, bipolar mania, and bipolar maintenance; Cymbalta for depression and diabetic peripheral neuropathic pain; Strattera for the treatment of attention-deficit hyperactivity disorder in children, adolescents, and adults; Prozac for depression, bulimia, and obsessive-compulsive disorders; and Symbyax for bipolar depression. The company also provides endocrinology products that comprise Humalog, Humalog Mix 75/25, Humalog Mix 50/50, and Humulin for the treatment of diabetes; Actos and Byetta for type 2 diabetes; Evista for the prevention and treatment of osteoporosis in post-menopausal women; and Forteo for the treatment of severe osteoporosis in women and men. Its oncology products include Gemzar for the treatment of pancreatic cancer, and Alimta for malignant pleural mesothelioma and non-small cell lung cancer; and cardiovascular products comprise Cialis for the treatment of erectile dysfunction, ReoPro for use as an adjunct to percutaneous coronary intervention, and Xigris for the treatment of adults with severe sepsis at high risk of death. In addition, the company offers animal health products, including Rumensin, a cattle feed additive; Coban, Monteban, and Maxiban for use in poultry; Surmax for swine and poultry; and Elector, a parasiticide for use on cattle and premises, as well as other pharmaceutical products, such as Vancocin HCl to treat staphylococcal infections, and Ceclor for the treatment of bacterial infections. Eli Lilly serves hospitals, pharmacies, physicians, and other health care professionals. It has a strategic alliance with MacroGenics, Inc.; a licensing and development agreement with BioMS Medical Corp.; and an agreement with Glenmark Pharmaceuticals Limited India. The company was founded in 1876 and is based in Indianapolis, Indiana.. Chart updates daily

Recent News: 02/11 Attention Eli Lilly: Sam's On The Loose at CNBC (Wed, Feb 11)   02/09 US patent overhaul bill seen returning to Congress at Reuters (Mon, Feb 9) 02/04 Lilly's Sepsis Drug Draws FDA Scrutiny at TheStreet.com (Wed, Feb 4) A full list of the news headlines for Eli Lilly & Co. 'LLY' can be found (here)

Our Analysis: The shares of Eli Lilly & Co. 'LLY gapped lower on the open of trading yesterday. They finished the day by closing below a recently established support level. While trading volume was significantly above normal, this is still a bearish trading signal. The shares of 'LLY' should continue to move lower and test $35.15/share, a former point of upside resistance that has now become downside support. If the shares of 'LLY' close below that level as I expect they will, then they should continue to move lower and test $31.12/share, the point from which they gapped higher on the open of trading on December 20th of last year. I see upside resistance on the shares of 'LLY' @ $36.82/share, and have set my stops accordingly at $37.27/share.

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