Only Take Action at Major Levels. 11-4-05

Good Afternoon.

When analyzing yesterday's large gains we have some complaints about the breadth. For a huge up day, although the breadth was positive, it could have used a lifesaver. However, the NASDAQ continues to add to the new high list. We were especially pleased to see the huge volume.

The hallmark of a Bull market is that the dips become increasingly shallow as time progresses. Resistance levels seem to be ignored as well as any fundamentally negative news. Emotions and liquidity are far stronger than anything else when the market finds itself in the early stages of a major Bull run. For this reason your friendly neighborhood Kcap Team intends on being very forgiving as the market approaches resistance levels that normally would require defensive action. In other words, it will take an awful lot to get us to sell simply because a minor resistance level is approached or some bad news is thrown in our face. In fact, we will even act lethargically in lightening exposure as the market approaches major resistance levels (next major resistance level between NASDAQ 2185 - 2195). When we do finally sell a little we still plan on maintaining a very Bullish posture of at least 75% invested. We will be very quick to replace our positions after a few days regardless of price.

Avoid the siren song of the Bear and burn your technical charts at minor resistance levels. Ignore the sell side analysts who downgrade on valuation. Laugh at the negative fundamentals when they appear such as this morning's jobs report. The market wants to go higher and who are you to argue with it.

The NASDAQ pulled back in classic form after the NASDAQ 100 Trust (QQQQ) breached the $40 price point. As long as the sell off is contained we expect the dip buyers to charge into the market over the next couple of days like Toys 'R Us shoppers lined up for Beanie Babies, Pokemon, Cabbage Patch Dolls, Tickle me Elmo, or whichever shining example of classic human behavior helps you envision the euphoria.

Buy the dips!

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