Dow - 3.76    I  Nasdaq + 13.15    I  S&P 500 + 0.59    

Market Wrap
(Briefing):

The major averages closed mixed Monday, as the day's action was more reminiscent of portfolio rebalancing than anything else. To wit, even though the Nasdaq is outpacing gains on the Dow and S&P 500 this month, as it did again Monday, the tech-heavy Composite still trails the blue chip indices' year-to-date performances.

Thus, playing true to trend, with October being a common month to scoop up beaten-down tech names, Technology turned in the day's best performance. In fact, an upgrade from Merrill Lynch on one of the sector's worst performers -- Yahoo! (YHOO 25.95 +0.61) -- helped get the ball rolling during what was shaping up to be another day of broad-based consolidation. As of Friday's close, Yahoo! was down 35% year to date and hit a 52-week low on October 20, presenting an opportunity for bargain hunters looking to capitalize on underappreciated stocks positioned to benefit from a seasonally strong holiday season.

An analyst upgrade on KLA-Tencor (KLAC 49.39 +1.20) renewed enthusiasm for depressed semiconductor stocks and also helped to offset a 3.0% decline in Verizon Communications (VZ 37.67 -1.17), the Dow's worst performing component Monday. Verizon topped Wall Street forecasts; but, the company saying that spending on fiber initiatives may hurt the bottom line prompted investors to consolidate some of the stock's 35% year-to-date advance and rotate money out of this year's best performing sector -- Telecom -- and into this year's worst performer -- Tech.

Another sector experiencing a similar extraction of investment dollars was Energy, this year's second best performing sector, as oil prices plummeted. Crude for December delivery fell nearly 4% to $58.36/bbl amid expectations that inventories remain well supplied, especially with warmer than expected weather conditions reducing demand for distillates like heating oil.

Meanwhile, Wal-Mart (WMT 49.48 -1.25) warned that October same-store sales are expected to be up just 0.5% -- the weakest gain in almost six years and well below original forecasts calling for 2.0-4.0% growth. That left some questioning the health of the consumer heading into the all-important holiday season. However, the growing realization that Wal-Mart's woes appear to be more of a company-specific issue than an economy-wide concern left the rest of the retail group free to take advantage of oil's decline and diminishing prospects of the commodity's potential inflationary characteristics.

With regard to inflation, the Commerce Dept. before the market opened showed that the core-PCE deflator rose 0.2% in September, matching economists' forecasts to leave the year/year rate at 2.4%. While that is still a bit higher than policy makers would like, the Fed's favored inflation gauge now below the 11-year high of 2.5% registered a month earlier helped to curb concerns of an uptrend. Overall, though, it was actually a neutral factor for the financial markets.

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Trade system guidelines only available to newsletter subscribers

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Today's Picks - October 31, 2006

1.   CAL - CONTINENTAL AIRLS

Entry Date	Exit Date	Position	Entry Price	Target Price	Stop Price	Max P/L
10-31-06		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 do not enter the trade unless it trades above 37.90

2.   SMSI - SMITH MICRO SOFTWARE

Entry Date	Exit Date	Position	Entry Price	Target Price	Stop Price	Max P/L
10-31-06		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 do not enter the trade unless it trades above 18.60

3.   RIMM - RESEARCH IN MOTION

Entry Date	Exit Date	Position	Entry Price	Target Price	Stop Price	Max P/L
10-31-06		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 do not enter the trade unless it trades above 118.50

Previous Trades

FD - FEDERATED DEPT STORES

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

ISRG - INTUITIVE SURGICAL

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

PHI - PHILIPPINE LONG DISTANCE TEL

Entry Date	Exit Date	Position	Entry Price	Target Price	Stop Price	Max P/L
10-30-06		Long	47.26	47.75	Below 46.65	up to + 33 cents per share (47.59)
	* 10-30-06 - stock gapped down at the open.

AEM - AGNICO EAGLE MINES

Entry Date	Exit Date	Position	Entry Price	Target Price	Stop Price	Max P/L
10-26-06		Long	35.60	Reached (36.38)	Below 35.98	up to + $1.37 per share (36.97)

ICE - INTERCONTINENTAL EXCHANGE

Entry Date	Exit Date	Position	Entry Price	Target Price	Stop Price	Max P/L
10-17-06		Long	82.66	Reached (84.00)	Closed below 83.76	up to + $3.97 per share (86.63)
	* 10-30-06 - The stock gapped down at the open forcing us to place an emergency stop just below the first 15min low of 83.76. This emergency stop was hit closing the trade.