NASDAQ Needs to Kick in Soon 12-15-05

Good Afternoon.

The NASDAQ continues to uninspire. In fact, this morning traders actually received another injection of fear when the NASDAQ Cliffed in a matter of minutes. Clearly the NASDAQ has taken on a minor downtrend with lower lows and lower highs since the Fed meeting. Even the Dow would be doing significantly worse had it not been for the positive news out of Altria (MO).

Yesterday we were complaining about the Semiconductors and today we are more concerned over the Small Caps. The pressure in Small caps continues to provide very negative breadth to the NASDAQ. While we are all for consolidation, we are mindful of the fact that healthy consolidation can morph into something more hideous. If the pullback is lethargic and long lasting the risk for something more ominous developing becomes greater. Thus far, the situation appears to still be healthy. However, like many traders our patience is wearing thin. We believe the NASDAQ needs to make a bold upward move soon or risk destroying the chances for a nice end of year run.

Don't get us wrong, if the NASDAQ deprives itself of more December upside fireworks, the good times would most likely be deferred into January. There are too many fundamentally strong arguments in the stock market for a new Bear market to kick in. Nonetheless, a strong close for 2005 would further entice the investing public into reemerging in 2006.

Our dilemma is that the majority of the stocks in our portfolio are acting well. Do we use our portfolio as a proxy to weigh the health of the NASDAQ or do we rely on traditional measures. Normally we have found that portfolio's we design give us tremendous insight into the speculative underlying demand for stocks. We are wrestling with what is the appropriate net long exposure that we wish to carry into year end. Should the NASDAQ fail to deliver upside glee in the next few days we will definitely lighten up from our aggressively long posture.

Despite our concerns we have been doing small buys in the following securities. IRobot (IRBT) which is gaining traction with consumers for their Roomba Vacuum Cleaner on top of a large U.S. Military order for Roomba's as well. We are also adding to our Microsoft (MSFT) position. Walt Mossberg of the Wall Street Journal has pointed out several new business initiatives for Mr. Softee over the coming year which explains very well our longstanding bullish view for that company (see today's WSJ - Marketplace section).

This will be our only post for today. See you tomorrow.

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