Delayed Reaction Expected 10-17-05

Good Morning.

The stock market is essentially flat-lining today. In its usual manner it is providing maximum frustration. Most market participants entered this week expecting that the stock market would mount a rally in anticipation of earnings. Indeed, the fact that the market failed to rally prior to earnings over the past week or so, has given tremendous confidence to the Bulls that a rally will materialize on Monday for sure. Traders are asking themselves, "How could there be absolutely no attempt at a higher move prior to earnings?" We must remember that since so many traders are feeling exactly that way, the market will be sure to disappoint them; hence the flat action.

As the stock market continues to defy the "Bullish logic", frustration and fear will start to build again. The likelihood is for the market to rally this week only after it throws a few people out of the passenger window one more time. Similar to post Hurricane Rita, when the market failed to rally at the immediate start of the week, market participants threw up their hands and then THREW-UP! The puking of positions set the perfect whipsaw opportunity for the market to deliver its usual dose of misery. Only once traders unwound their Bullish positions Tuesday and Wednesday of that week, did Mr. Market decide to turn on its rocket boosters and blow its exhaust in the face of every trader standing on the launch pad. We should expect similar action this week.

Despite the Breadth being slightly negative, Oil and Gold trading higher, and Small Caps lagging, we are not abandoning our Bullish posture. The Semiconductors which are trying to stabilize are a positive indication of what is likely to materialize later this week. Do not let yourself get shaken out of good positions today and tomorrow.

Hope you trade well.

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