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Breakfast with Brodsky



Yesterday's action was dull enough to put anyone to sleep. The market took a rest after a week of pretty solid up action. The bears were out in full effect yesterday already starting their calls for a "double top" but I just shrugged them off and tried to add to positions where I saw fit. These calls for a double top are very reminiscent of November, where we "failed" three times at 1060, before going on a fantastic two month run. Will the same thing happen as we attempt to get through 1155? Only time will tell but, in my opinion, there isn't too much to suggest that we won't.

The market needs to take a rest and relax before it can flex its muscles and take us to the next level. Recently, the market has been pretty unforgiving in its attempt to fool us all. Just two weeks ago, the pullback looked like the beginning of the end as the S&P tried, and eventually held the 1122 level. What can we take away from that? I took away that there are still enough dip buyers and still enough short money to carry this market higher. It's the same story that's been going on for the duration of this current bull market we are in. I can't tell you how happy I was to hear everyone criticize the Juniper (JNPR: NASD) / Netscreen (NSCN: NASD) deal and how it marked the top! You could hear and feel the shorts piling in and yelling and screaming how it was 1999-2000 all over again and how bad stock deals are!

Well, I wrote on here the day after the deal was announced that it was good for the market and in fact, consolidation is good right now. Not only does it validate the need for certain technology, it shows that companies are growing and feel confident to take things to the next level. Do I think that Juniper (JNPR: NASD) paid too much? I don't care if they did. I think the deal personifies the market we are in, and that we still have room to run.

When I take a look at the overall marketplace I try to view things from a "forest" view as opposed to looking at the trees. Has anything changed to suggest we are at a top? What, if anything in a bear case makes sense right now? Are they just screaming louder because the market is higher? These are questions I constantly ask myself since I am currently running a portfolio with a net long exposure. Of course there are valid points that many bears make but in my view, they are just too early on the call. Kind of like how Excite@Home was early on broadband but hey, we all use it now! Point of this? There is a time and a place for everything and try to seize the moment while knowing and sensing what is on the horizon.

Lastly, I want to address some views that I have been reading about with increased frequency. Some people are out there pounding the table that we are at a top (same people who have been yelling since March 2003.) I don't claim to be smart enough to pick a top or pick a bottom. I will gladly let someone else have that honor, but I am smart enough to know that that game is often a losing one. The comparisons to 1999-2000 become louder the higher the market grinds. Personally, I think it is a silly comparison since the environment is so different, but that is not my point. My point is that even if we are at a top (which I do not believe) let the market confirm this before piling in on the short side.

Did the NASDAQ go from 5000 to 1200 in one day? No way! Did we all have time to sell out longs and go short? In some cases (although I can't claim that I did) but, more importantly, the market confirmed the top and things changed. So to sum up my point, it is my opinion that to be a successful trader one must go with the ebb and flow of the market. I feel that there are so many people out there with such strong and intense views that we are at a top. I may be proven wrong here but until the market confirms that I will keep doing what I have been doing for the past year or so.

We do have some economic data due out and it is the Friday before a long weekend, which always lessens volume. Take that into consideration into today's trading and have a great weekend!

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