Starting to Stabilize 12-20-05

Good Evening.

Everybody is waiting for the Santa Claus Rally to commence. The closer we get to year-end without hearing sleigh bells, the more discouraged the Bulls get. Discouragement leads to selling which we have seen to some degree in the past two days. The good news is that the market showed signs of stability today after the morning weakness. The bad news is that the market did not yet entice the momentum players to climb on board.

All it will take at this point is one solid up day with attractive breadth as well as Semiconductor and Small Cap participation to bring back big MO. Many traders are doing a good job of de-positioning themselves for such an event.

Today, we lightened up on a few high beta names including F5 (FFIV), Rediff.com (REDF), ValueClick (VCLK), The Street.com (TSCM) and swapped into larger cap, more market correlated stocks such as Microsoft (MSFT), Cisco (CSCO), EBay (EBAY), Adobe (ADBE), and Merrill Lynch Semiconductor Holders (SMH). We remain very net long and are still anticipating decent upside action before year end.

If You Held a Taser to Our Head:
Perhaps this December we will actually get the Hanukkah Harry (from SNL) Rally as opposed to the Santa Claus Rally. This particular kind of rally makes you remember the suffering of past markets and forces you to preserve the miniscule drops of performance oil that is so precious for survival. Fortunately there's just enough time to provide a little miracle to convert some non-believers. Furthermore, don't forget Hanukkah Harry is supposed to provide a little gift for each of the eight days of Hanukkah for good little boys and girls. Then again there are eight trading days left in the year and he may show up early.

WE SHOULD ONLY BE SO LUCKY!

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