Not a "Bulliever" in This Spike 11-16-05

Good Afternoon.

The NASDAQ sold down to 2176 which lead some to believe that the pullback has run its course. Honestly now, how much fear do you think has really developed on this pullback? It seems more like a big yawn rather than teeth chattering. While we recognize that perception is reality and the NASDAQ may indeed run further, we are alarmed by how easy it seems to be a "Bulliever". The breadth is lousy and Small Cap action is M.I.A. Leadership in the internet sector usually does not offer a solid platform for continuation. Furthermore, the Investor Intelligence Survey (IIS) polls are showing significant increase in positive sentiment (a bearish sign).

Fundamentally speaking, Consumer Price Index (CPI) came in tame and Business Inventories came in higher than expected which bodes well for overall GDP growth. This trend will have the positive effect of relieving capacity constraints which have been affecting profitability and productivity in key sectors such as the Semi's. Corporations are still strained to capacity due to years of overly cautious behavior.

We are still mostly net long the market but have used NASDAQ levels between 2186 and 2190 to further lighten some exposure. Should the Bulls fail to follow through on today's action the Bears will finally be able to slap their soiled diapers onto the backside of the Bulls…sorry for the imagery.

Hope you're doing well.

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