Hoping To Temporarily Lose Some Money! 11-11-05

Good Afternoon.

At this point, everybody knows the market is tired and could use a pullback. Yesterday's consolidation was just not enough to work off the overbought condition and extended nature of the market. The wait and see game that people are currently playing is to see if the Bears can strut their stuff intraday. Bulls that are nervous about buying before a healthier consolidation has occurred choose to wait for the 3 O'clock all clear signal. When it is clear that there is not enough time for the Bears to flex their muscles; the Bulls rush in all at once creating an accelerated up move into the close. Our complaint with this action is that the market needs to have a healthier consolidation for intermediate-term survival.

This is our new concern for the market that we expressed yesterday. Specifically we are unhappy with the fact that this market has yet to pull back in a noticeable fashion. In order for our intermediate Bullish strategy to play out, the market must not get too extended in the near-term. Since we believe that the tail often wags the dog, an extended stock market would be susceptible to much sharper declines than we have factored into our analysis. These sharp declines can cause self-fulfilling destruction in the financial markets further eroding confidence in the real economy. Therefore, although we are maintaining our very Bullish posture we will be on guard for revisions in our viewpoints should the market not provide a better shakeout in the next couple of weeks.

Evidence of the markets tired condition can be seen in the diminishing new highs for the S&P 500 and NASDAQ while the averages are surpassing their recent highs. An ideal situation would be for the NASDAQ to Spike above the year high of 2217 perhaps approaching 2230 by early next week. This action would be sufficient to suck in more players suffering from performance anxiety creating another opportunity for a healthy consolidation. Should this happen the consolidation would need to last several days taking the NASDAQ back down to 2190ish. A subsequent move back to 2230 after such a pullback would reaffirm our extremely Bullish thesis for the stock market.

We are very much hoping for such a scenario to play out in the next two weeks due to the fact that we would be highly disappointed to have to abandon our very Bullish forecast. The market has the best window of opportunity in 5 years to explore the upside and it would be a shame if the persistent 3 O'clock Bullish hedge funds ruin it by chasing until their dry...then simultaneously short the market causing it to die.

Hope you are doing well.

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