'Lotta Weather We're Having! 1-3-07

Happy New Year!

The unbelievably mild weather that has been plaguing the North East (if you're an Energy Bull) had a rather nasty effect on the energy complex today. Most stocks in that group suffered severe dislocations to the downside to the tune of 4% - 6%. A downgrade in the group from Goldman Sachs combined with a disappointing report from NBR added fuel to the fire. Apparently, traders have resigned themselves to the fact that it will NEVER be cold again. Indeed, even if it is cold, the winter is practically over as far as they are concerned.

Never mind that there is plenty of winter left, which could even morph into a colder than expected spring; Energy Bulls have largely panicked out of there positions recently. Most of the names that make up the OIH index are down approximately 12% over the last two weeks. Either the group is truly rolling over or a triple bottom is forming, setting up a great buying opportunity for the T. Boone Pickens type trader. We continue to believe that the energy sector has significant upside before the long awaited and lasting rollover actually materializes.

The market in general shot up in the morning offering hopes that 2006 has not really ended! Unfortunately for the Bulls the artificial bid that has been so prevalent in the market over the past couple of months due to performance anxiety was M.I.A. Therefore, once selling in the futures kicked in, it started to get out of control. Yes Bulls, all good things must come to an end…and your artificial bid, providing you safety, is kaput. This does not mean that all Bulls have received the message as is evident in the fact that Dip Buyers still showed up to save the day from what could have ended very ugly. However, today's extremely sharp reversal to the downside is foreshadowing of how quickly last years second half gains can evaporate.

If You Held a Taser to Our Head:
The game of the Stock Market never ends; as such there will be infinite rallies to capitalize on. Currently we are exercising patience rather than pay up for some of the exorbitant prices that reside in NASDAQ land. While we know all to well that, "The Market can stay irrational longer than an investor can stay solvent", we are also fully aware that one of our greatest strengths is our patience.

Looking forward to a prosperous 2007.

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