It Is Balloooooon!! 1-11-06

Good Evening.

The market reminds us of when Captain Wilton Parmenter (Ken Berry) from the 1960's hit show F Troop was floating in a hot air balloon only to be spotted by Indians who tried to take him down with their bow and arrows. The difference is that today's Indians have claws and use shorting as their ammunition. They're shorts will be aimed at the most speculative names which in many cases are up over 10% in just a few days. Some will remember that Captain Parmenter was extremely vulnerable and easy pray as his balloon offered very little maneuvering ability. Bovines that have not taken chips off of the table (and we literally mean chips) or worse yet have fully immersed into the market will find themselves in a similar predicament. The market is partying like it's 1999 and will likely spring a trap that is too painful to "bear".

Have you noticed that Google (GOOG) has been lack luster recently? Perhaps this can be explained in that it is no longer the only game in town for substantial mo. Other stocks such as Rambus (RMBS) up almost 100% in just a few days, Broadcom (BRCM), Cisco (CSCO), Corning (GLW), and JDS Uniphase (JDSU) to name a few are stealing the show from the once sought after GOOG. Don't get us wrong, we firmly believe that the action in the past week is foreshadowing of the good times yet to come in the stock market. However, we are simply stating that the market has gone up too much too fast and is likely to be shot down sooner rather than later.

The beautiful thing is that once the balloon is shot out of the sky, the hatred towards the stock market will be in the stratosphere. Accordingly the Volatility Index (VIX) should achieve a higher trading range. All of this will likely set the stage for a powerful rally in the second half of '06 that will have this market breach the highs that are currently being created. However, there is plenty of time in between today's highs and our predicted '06 year end highs where the market can still offer significant volatility, creating attractive trading opportunities.

If You Held a Taser to Our Head:
Perhaps the Ben Bernanke Fed will not be perceived as dovish as is currently expected. Maybe Big Ben will want to initially dress up in his "hawk" suite to gain a little respect and credibility from Wall St. In any event, something will ruin this party and this is your time to run out the back door before the parents come home!

Hope you're playing it smart.

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