Indices
Dow + 99.73  I   Nasdaq + 22.35  I  S&P 500 + 9.15 

Market Wrap
(Briefing):

A broad-based rally amid above average volume closed stocks near session highs and the major averages with their best gains in weeks, as earnings optimism returned to offset some of last Friday's profit compression-induced correction. Since a few earnings disappointments from large cap names have recently taken much of the air out of early 2006 buying momentum, a plethora of better than expected earnings provided bargain-hunting opportunities across the board.

The biggest beneficiary Thursday was Financial, which not only turned positive for 2006 but posted an impressive 1.6% gain. Ongoing expectations of strong M&A activity this year helped send the brokerage index (XBD +2.5%) to a historic high while attractive valuations and the first rise in six weeks for 30-yr mortgage rates helped banks and mortgage lenders shrug off rising bond yields. The 10-yr note (-11/32) finished the day near session lows to yield 4.51% in the wake of strong economic data. Initial claims checked in below the 300K level for a second straight week, suggesting the labor market may be strengthening even more than previously thought, while further signs of economic strength came from a solid 1.3% rise in Dec. durable goods orders.

Taking full advantage of a third straight monthly increase in durables, but more notably benefiting from better than expected earnings from Dow components Caterpillar (CAT 65.06 +2.99) and Honeywell (HON 37.33 +1.27), was the Industrials sector. Strong results from Lockheed Martin (LMT 66.99 +1.98) and Textron (TXT 83.33 +7.38) lent additional sector support and helped validate our Overweight rating on the sector. Technology also turned in a winning performance, as the semiconductor group benefited from strong earnings and guidance from Novellus Systems (NVLS 29.88 +1.96), which played into our Overweight rating on the sector. A surge in data processing, amid reports that First Data (FDC 45.30 +2.30) will spin off its $4 bln Western Union business, and software, following Siebel Systems' (SEBL 10.64 +0.03) jump in Q4 profits also helped offset weakness in hardware and networking.

Health Care was another influential leader to the upside. Becton Dickinson (BDX 64.32 +5.21), after beating analysts' forecasts and raised FY06 guidance, was the sector's best performer (+8.8%) while renewed interest in drug stocks spurred by strong earnings from Bristol-Myers Squibb (BMY 22.50 +0.53) and strengthened by late-day FDA approval of Pfizer's (PFE 25.05 +0.22) cancer drug Sutent provided additional support. Consumer Discretionary also posted a respectable gain, as strength in homebuilding, cable, retail and restaurants offset weakness in autos. The latter group lost ground as another huge quarterly loss from General Motors (GM 22.17 -1.68) overshadowed reports that investor Kirk Kerkorian boosted his stake in GM to 9.9% (from 7.8%). Restaurants were in focus following the spin off of Chipotle Mexican Grill (CMG 44.00 +22.00) by McDonald's (MCD 34.94 -0.22), a suggested holding in our portfolio for active investors.

Utilities, however, turned in the day's worst performance, as rising interest rates made dividend-paying stocks less attractive. Energy also lost ground as ongoing concern about the sector's profit outlook overshadowed a near 1.0% surge in crude oil futures.

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

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Today's Picks - January 27, 2006

1.   NSM - NATIONAL SEMICONDUCTOR

Entry Date	Exit Date	Position	Entry Price	Target Price	Stop Price	Max P/L
01-27-06		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 28.90

2.   LEH - LEHMAN BROS

Entry Date	Exit Date	Position	Entry Price	Target Price	Stop Price	Max P/L
01-27-06		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 139.55

3.   OVTI - OMNIVISION TECHNOLOGIES

Entry Date	Exit Date	Position	Entry Price	Target Price	Stop Price	Max P/L
01-27-06		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 24.68

4.   MDG - MERIDIAN GOLD

Entry Date	Exit Date	Position	Entry Price	Target Price	Stop Price	Max P/L
01-27-06		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 26.54

Previous Trades

ENG - ENGLOBAL CORP

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

VSEA - VARIAN SEMICONDUCTOR

Entry Date	Exit Date	Position	Entry Price	Target Price	Stop Price	Max P/L
01-26-06		Long	53.07	54.58	Below 51.44	up to + 8 cents per share (53.15)

QLGC - QLOGIC CORP

Entry Date	Exit Date	Position	Entry Price	Target Price	Stop Price	Max P/L
01-26-06	01-26-06	Long	40.05	40.45	Closed Below 39.53	up to - 58 cents per share

UAG - UNITED AUTO GROUP

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

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 20.00	up to + 98 cents per share (20.80)

ROH - ROHM & HAAS

Entry Date	Exit Date	Position	Entry Price	Target Price	Stop Price	Max P/L
01-25-06		Long	50.71	Reached (51.15)	Below 50.15	up to + 59 cents per share (51.30)

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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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