SHORT TERM: cyclicals continue to rally while techs lag.

Stocks gapped up at the open today on the continuing positive inflationary news: Core PCE up just 0.1% in Dec, and 2.2% in 2006. The rally continued until about 10:00, then the techs turned over and started to pullback. By 11:30, the market bottomed and started higher again. Throughout the rest of the day, the cyclical SPX/DOW/NYA/TRAN/R2K rallied, making additional new highs, while the techs lagged. Bonds were flat, Crude dropped 80 cents after rallying earlier, Gold rallied $5.50 and the Euro was flat. Notice how Gold is not paying much mind to the Euro or Crude. The TRANsports continued their strong rally, and are now less than 0.50% away from all time new highs. This index would again join the DOW/NYA/R2K, which are already in all time new high territory. The SPX reached 1447 today, less than 1% away from our next targeted long term EW pivot point at 1462. At the close: the SPX/DOW rose about 0.50%, and the NDX/NAZ were mixed, with the NDX closing slightly negative. Short term the hourly charts display a negative RSI divergence in the SPX/DOW, but the NDX/NAZ remain in neutral. Mixed signals there. Overall the general market continues to act well, but needs the tech sector making new highs to really accelerate. For now, the SPX upside target remains at 1462. Best to your evening!

MEDIUM TERM: bullish

LONG TERM: bullish.