2006 Starts On Better Footing Than 2005

We started the year 2005 on the heels of a strong Santa rally that had the market trading at new highs. The market rewarded exuberant traders with a long bloody slide that lasted until April 2005. For those fearing a similar scenario, fear not as conditions are distinctively different this year. We now embark on 2006 with oversold stocks, which have not only evidenced strong accumulation creating a nice divergence, but also with major indices having merely pulled back toward their multi year breakout levels. Don't underestimate the significance of last November's market breakout. Yes we experienced profit taking into the year's end, but indicators reveal strong signs of accumulation taking place during this bout of profit taking. We won't make any predictions about today as the immediate down trend is still in effect until its not, but we will make the argument that this market is setting itself up for a continuation of November's breakout.