Bulls Don't Even Have to Charge 10-20-05

Good Afternoon.

The stock market has been slipping throughout the day however, not in any dramatic fashion. A pullback here is not only of little concern but actually healthy. The key is that the Bears don't take the market down too ferociously. The Bears are trying their darnedest to make the case that yesterday was a "one hit wonder". If they fail in that attempt, they will start to give up. The Bulls need only to show that they still have buying interest even if the market closes lower. As long as the Bulls can at least put in a respectable showing and scare the Bears a little intraday then the near-term still bodes well.

Semiconductors are strong which is always welcome. Networking stocks are also acting well thanks largely to the stellar report from Juniper Networks (JNPR). We have mentioned numerous times in prior posts that the Semiconductors and Networking stocks will be key leadership groups in the new Bull market. The Small cap sector is lagging but it is most likely being caused from hot money flowing into the Semiconductors.

There are a lot of non-believers in this rally as is evidence by the high put-call ratio. The market has hurt so many Bulls in the last few weeks that it is not unexpected for the disbelief to linger. The Philly Fed survey was released which shows significant growth which bodes well for the economy. New orders were up nicely however the prices paid component was extremely high. Remember, you can't have your cake and eat it too! Bulls that need growth will have to learn to live with a certain amount of inflation. For this reason high growth stocks will become the sector of choice. Only companies that can truly deliver top line results with healthy gross margins will be able to stare down inflation and laugh! Again, another reason for our bias towards the technology group.

Hope your doing well.

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