Volatile Action is a Bullish Sign 10-26-05

The stock market had a pop and drop so far today. The upside move was most likely fueled by a short squeeze as a follow-up to yesterday afternoon's strong close. The breadth is slightly negative on both the NASDAQ and NYSE after the short squeeze ran its course. Traders are going to have to get used to volatility, not only intraday but intermediate term as well.

Stocks that had good earnings such as F5 Networks (FFIV) and Adobe (ADBE) are holding up rather well, this bodes well for the market once some of the jitters are shaken out a little further. However, stocks that disappoint such as Amazon.com (AMZN) are shown no mercy. Ultimately when the Bull kicks into overdrive disappointing earnings reports will be met with buyers faster than they are today. The fact that disappointments can take a stock down the proverbial 12% shows that skepticism still abounds. For this reason, do not expect the market to move up in a straight line until more things fall into place specifically, improvement in the Semiconductor Index (SOX).

We are using this dip to slightly add to speculative positions such as PRST, HELX, TMTA, ARBA, ISSX, and WEBX.

Hope you're doing well.

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