Bears Still in Labor. 9-4-06

Good Evening.

After last weeks slow drift higher which caught so many off guard the market continued its merry ways today with most of the Big Boys back in play. The slow drift higher certainly created performance anxiety over the past several days , as so many were poorly positioned for further upside. Therefore, it is not surprising to see a little scramble to the upside today on any hint of good news. Fed governor Poole was more than happy to offer such ammo to the Bulls by describing the housing sector as not expected to cool too fast while inflation is not expected to rise too fast... in other words the man is sporting "golden locks" and licking porridge from the bottom of the bowl. This of course sent the Bears searching for the toilet bowl as their indigestion is really starting to percolate. Unfortunately for the capitulating Bears and underinvested Bulls, the huge sucking sound seems well underway just in time for the expected downside fireworks to shortly kick in.

The market also found some comfort in the drop in the price of oil due to the discovery of a new Gulf oil field. Furthermore, the Semiconductors kicked into gear primarily due to an AMD upgrade (another analyst with superb timing) and chatter about the planned layoff announcements from INTC. The layoff announcement is being delivered as we type and seems to be less than expected at only 9500 jobs sending INTC down approximately 1% after hours.

If You Held a Taser to Our Head:
The fundamental concerns over high inventory levels in Semiconductor land still exists and will likely take center stage soon. The NASDAQ is running into serious overhead resistance around these levels or perhaps 1% - 2% higher. Therefore we continue to slowly build short exposure in order to exploit the performance anxiety that is kicking in for the underperforming money managers.

Hope you traded well.

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