Mid Morning Post 9-14-05

Good Morning.

Overseas markets were mixed and Oil and Gold are looking perky. Oil inventories were just out and showed a larger drawdown then expected in Crude and Distillates however, Gasoline showed possible waning demand with a slight build. This should provide ammunition to Oil Bulls and Bears alike. In the face of confusion, the prevailing trend will likely win, therefore Oil should continue higher.

Retail sales came in worse than expected at -2.1%. Under the surface Retail sales were actually even weaker when you factor out the increase from gasoline revenues. Even July Retail sales were revised lower.

The stock market is on watch for Delta Airlines (DAL) and Northwest Airlines (NWAC) to declare bankruptcy. Lehman Brothers (LEH) had VERY good earnings as usual but will more likely be perceived as company specific.

Yesterday the market put in a distribution day with broad selling on large volume. We believe this was the first shot across the bow from the Bears. The stubborn Bulls will likely continue to buy the dips but they are now faced with more emboldened Bears. In other words, the first shot usually results in a stale mate. Sideways, choppy action can be expected in the major indicies as the Bulls and Bears wrestle for control. Most dips will be bought and most rallies will be sold.

Trying to decide which way the market breaks after some flat lining is what separates the men from the boys. Those expecting the break to be event driven are often disappointed. The stock market will make a dramatic move before any such event gets pinned with the blame. The key to decide which way this move occurs will be close observation of the market internals. Our belief is that the market will break to the downside as a prelude to establishing a wonderful longer term buying opportunity.

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