Solid Earnings and Fed Anticipation Will Fuel the Bull 4-12-06

Good Evening.

The market offered traders a little reprieve and a chance to catch their breath after the nasty sell off that has occurred over the past few days. Today's volume was light and breadth steadily improved throughout the day. The generally flat action was noteworthy due to the fact that the consolidation is occurring above important support levels. A few more days of this combined with more pleasantries from corporate earnings would most definitely set the stage for another try for the highs.

The Bears are not dead but clearly lack the ability to show macho follow through. Come on…you can't blame those little critters for 2006 has not been a Bears best friend! Don't get us wrong, they are likely to try a little more shakeout perhaps bringing the NASDAQ to 2290ish before the Bulls find their nerve to get aggressive on the long side. For that reason traders need to expect more frustration as both Bulls and Bears continue to stare each other down for a little while longer.

This particular pullback over the past few days has offered the Bulls something that they were lacking previously. They are still staring down the Bears but this time the Bulls are not bluffing. With the cleansing that has just occurred in the market any rally from this point on will have NICE legs (not as nice as Mary Hart but enough to get the job done). Therefore the path of least resistance still resides on the long side.

If You Held a Taser to Our Head:
The lack of preannouncements seems to have correctly forecasted an earnings season that would exceed most analysts' expectations for many of the important names. While it is still early, we like what we see! A little more sideways action in the market please…spice it up with more 'sweet margin' news stories (like AMD)…top it off with the one and done crowd as we get closer to the next Fed meeting…and the market will poppa boner (did we just say that?). Hey if you want it 'G' rated go to www.nickelodeon.com.

We like the Semi's and the Optical plays here such as BRCM, MRVL, PSI, CSCO, FFIV, GLW, JDSU, and CNXT. Circuit City's (CC) gangbuster television sales bode very well for GLW.

We will be back on Monday. Happy Holidays!

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