Scotch on the Rocks! 4-5-06

Good Evening.

The NASDAQ continued its winning ways adding further frustration to the Bears and underinvested Bulls. Unlike yesterday the SOX led the charge today which is a good thing…no? There's nothing like a pair of "warm SOX" to make traders dance like twinkle toes as they find the nerve to build back long exposure.

Importantly, the NASDAQ continues to make new multi-year highs as it marches towards 2400. Although the breadth was positive by 16:13, we can only characterize it as OK but pushing on a string. There are clear signs of deterioration in this rally but the underinvested Bulls seem to have no choice but to join the party at these late stages.

Some signs of "crackage" (imagine what you will) are evident in yesterday's underperformance of Networking stocks which have clearly been overextended. Although some names came back nicely today, this complex probably needs a little more profit taking. Now don't get us wrong, it is the Networking stocks that are likely to lead the NASDAQ to glorious new highs throughout 2006 - 2007. However a little cat nap would go a long way.

Apple Computer (AAPL) did what finally should have been done many years ago by introducing a Mac that can also run windows without degradation. Although some of the AAPL cult may consider this to be heresy, we would strongly disagree. AAPL need only to find a methodology to bring its sexy computer hardware into American homes so the consumers can experiment at their own free will by alternating between the Windows and Mac operating systems. Any good sales man would tell you that "getting your foot in the door" is the most important part of the selling process. This strategic decision will accomplish this task and perhaps allow AAPL to finally expand their market share beyond the 3% - 5% they presently enjoy. All in all, AAPL's 10% rise today seems justifiable assuming no financial preannouncements from the company are pending.

WATCH OUT MICHAEL DELL THERE'S ANOTHER BULLSEYE ON YOUR BACK!

If You Held a Taser to Our Head:
Your friendly neighborhood Kcap Team has been slowly and reluctantly adding exposure in the Semiconductor complex. The group is still 5% - 10% below its 52 week highs which offers an attractive vehicle for a potential blow off in the NASDAQ. We are more net long than we are comfortable with considering our concerns with the underlying internals in the market. However, we choose not to anticipate the markets demise but to play the game of musical chairs a little while longer.

Now if you'll excuse us…we're heading out for a stiff drink!

Hope you traded well.

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