Morning post 9-8-05

Good Morning.

Overseas markets were weak across the board. U.S. Futures have been trending down slightly all morning. Gold is looking up as well as Oil. Key tell stocks to watch today are Ebay (EBAY) which is in talks to buy internet telephony company Skype, Zilinx (XLNX) reaffirmed guidance, and Apple (AAPL) and Motorola (MOT) as a follow up to yesterdays good news announcements. Most importantly, we will be focusing on Hovnanian (HOV) which had a poor earnings report as well as Sears (SHLD) which also disappointed.

The new high list has been steadily dropping which is of concern. Clearly the Bearish sentiment is picking up. We have been expecting this rally to continue with perhaps one final push higher. However, we continue to contemplate the risk/reward ratio in playing the final piece of the move. Usually the last gasp of a rally is the juiciest. As much as we would like to capture that, we will not hesitate to exit this market should cracks develop in our thesis. The action in our key tells above will be indicative of the probability for the stock market to put in a final panicky upside burst.

Most importantly we will be watching for rotation from the Housing and Oil sector into Technology stocks. This type of action would demonstrate to us that our longer-term bullish thesis for the Technology sector is alive and kicking.

Good Trading.

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