Indices
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Market Wrap
(Briefing):

Lackluster trading left Wednesday's market vacillating within proximity of the flat line for most of the session. A market-dragging drop in the Energy sector, coupled with a sharp decline in December home sales, squelched the early bullish bias and closed the indices with modest losses.

Although crude futures recovered much of their day-long decline, their pullback gave energy traders incentive to take some profits. An unexpected drawdown in crude supply was a bearish factor for the broader market, and the fact that gasoline and distillates inventories rose much better than expected exacerbated selling across the Energy sector (-2.0%). Further reports of solid earnings from energy companies, which Wednesday included Amerada Hess (AMH 60.56 +0.42) and ConcocPhillips (COP 63.29 -1.19) were offset, but nonetheless underpin our Overweight rating on Energy. Following disappointing fourth quarter results from Exelon (EXC 57.83 -1.03), the Utilities sector (-1.5%) also levied a weighty loss.

Plagued by a plunge in the homebuilding industry, Consumer Discretionary (-0.5%) similarly suffered selling. This morning, the economic calendar featured data that reflected a 5.7% decline in December existing home sales. While Ryland (RYL 70.40 -4.77) and Centex (CTX 70.80 -2.49) both reported strong quarterly earnings, each posted dismal new order numbers that further corroborated a slowdown in the housing market in the face of rising interest rates.

Behind the early buying action was some news on the M&A front. Confirmation that Disney (DIS 25.45 -0.54) will acquire Pixar (PIXR) for $7.4 billion underscored the idea that cash flow remains strong at many companies and will fuel the strong merger trend throughout the year; at the same time, DIS shares declined and weighed upon the Discretionary sector. As a side note, DIS is a stock that we continue to favor and is a member of our suggested portfolio for active investors. The two-month bidding war for Guidant (GDT 75.29 -1.49) ended with Boston Scientific's (BSX 23.55 -0.45) victory, but the news sent those individual stocks, as well as the trumped Johnson & Johnson (JNJ 58.55 -0.81), lower. Conversely, Abbott Labs (ABT 42.25 +2.19), which will acquire some of Guidant's assets as part of the deal, helped limit the Health Care sector's (-0.1%) slide. Abbott also delivered strong earnings results Wednesday, as did HMO WellPoint (WLP 72.85 -0.34).

Leadership was unspirited, and rested almost entirely within the Telecom (+1.6%) and Materials (+0.6%) sectors. Surging Allegheny Technology (ATI 46.93 +2.41) shares, due to its profit report, and Morgan Stanley's increase in 2006-2007 price assumptions on copper, aluminum, zinc, and gold boosted the former. Solid earnings from Bell South (BLS 27.40 +0.48) drove the latter.

Vacillating Technology (+0.1%) and Financial (+0.2%) sectors were in part responsible for the indices' dips in and out of the red. Uneasiness ahead of Qualcomm's (QCOM 46.77 -1.30) report and an earnings-induced drop in Computer Associates (CA 27.74 -1.14) joined extended declines in TXN and AAPL in challenging Tech. The Financial sector, meanwhile, faced a submerged Treasury market and relative weakness across the insurance board. However, both of the market's two most influential sectors managed to regain positive - albeit modestly positive - footing before the bell, at which point the major averages erased much of their late day losses.

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Trade system guidelines (edited):
Only available to Newsletter Subscribers.

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Today's Picks - January 26, 2006

1.   ENG - ENGLOBAL CORP

Entry Date	Exit Date	Position	Entry Price	Target Price	Stop Price	Max P/L
01-26-06		Long	Above 15 high	Sell 1/2 once risk covered	Below LOD at time of setup
	* Please Note: If the stock gaps down at the open not enter the trade unless it trades above 12.79

2.   VSEA - VARIAN SEMICONDUCTOR

Entry Date	Exit Date	Position	Entry Price	Target Price	Stop Price	Max P/L
01-26-06		Long	Above 15 high	Sell 1/2 once risk covered	Below LOD at time of setup
	* Please Note: If the stock gaps down at the open not enter the trade unless it trades above 52.20

3.   QLGC - QLOGIC CORP

Entry Date	Exit Date	Position	Entry Price	Target Price	Stop Price	Max P/L
01-26-06		Long	Above 15 high	Sell 1/2 once risk covered	Below LOD at time of setup
	* Please Note: If the stock gaps down at the open not enter the trade unless it trades above 39.40

4.   UAG - UNITED AUTO GROUP

Entry Date	Exit Date	Position	Entry Price	Target Price	Stop Price	Max P/L
01-26-06		Short	Below 15 low	Cover 1/2 once risk covered	Above HOD at time of setup
	* Please Note: If the stock gaps up at the open do not enter the trade unless it trades below 37.90

Previous Trades

BTU - PEABODY ENERGY

Entry Date	Exit Date	Position	Entry Price	Target Price	Stop Price	Max P/L
01-25-06	01-25-06	Long	93.96	94.54	Closed Below 93.26	up to - 76 cents per share

SBAC - SBA COMMUNICATIONS

Entry Date	Exit Date	Position	Entry Price	Target Price	Stop Price	Max P/L
		Long	Above 15 high	Sell 1/2 once risk covered	Below LOD at time of setup
	* did not setup

GGB - GERDAU S A SPONSORED ADR

Entry Date	Exit Date	Position	Entry Price	Target Price	Stop Price	Max P/L
01-25-06		Long	19.82	Reached (19.92)	Below 19.82	up to + 57 cents per share (20.39)

ROH - ROHM & HAAS

Entry Date	Exit Date	Position	Entry Price	Target Price	Stop Price	Max P/L
01-25-06		Long	50.71	51.15	Below 50.15	up to + 11 cents per share (50.82)

HIG - HARTFORD FINL SVCS

Entry Date	Exit Date	Position	Entry Price	Target Price	Stop Price	Max P/L
		Short	Below 15 low	Cover 1/2 once risk covered	Above HOD at time of setup
	* did not setup

THE - TODCO

Entry Date	Exit Date	Position	Entry Price	Target Price	Stop Price	Max P/L
01-24-06	01-25-06	Long	47.18	48.73	Closed Below 45.51	up to - $1.73 per share
	* 01-24-06 - stock gapped down

CRK - COMSTOCK

Entry Date	Exit Date	Position	Entry Price	Target Price	Stop Price	Max P/L
01-24-06	01-25-06	Long	33.56	Reached (33.80)	Closed Below 33.56	up to + 69 cents per share (34.25)

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EOD = End of day.
LOD = Low of day.
PDC = Previous Day's Close.
S/R = Support/Resistance.
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