SHORT TERM: stocks gap up on the open continuing the rally.

Overnight the Asian markets were mostly higher and Europe came in over 1% higher as well. As a result our stock index futures traded higher. At 8:30 the Commerce dept. reported Dec. CORE PCE inflation rose only 0.1%, and 2.2% for 2006. Another tame inflation report sent the stock index futures rising, and at the open stocks gapped higher, as the SPX/DOW/NYA/R2K all made new bull market highs. At 10:00 the Institute for Supply mgmt. reported JAN. ISM slipped below 50% to 49.3%, which indicates a contraction in manufacturing. This is the third time in four months that the reading has been below 50%. The manufacturing sector remains soft. Stocks took this news as an opportunity to pullback some. Bonds are trading a few ticks higher, Crude 20 cents lower, Gold continues its uptrend up $5.50, and the Euro is flat. Short term stocks are a bit overbought here after this weeks rally, and a small pullback should be expected soon. Overall the general market continues to look good, as the cyclicals remain strong. The techs are still lagging, especially the two leaders Apple and Google. When Apple reported blockbuster earnings two weeks ago, the profit takers dropped the stock lower, where it still remains. Google reported stronger than expected earnings last night, and the profit takers are at work here too, as the stock has traded between $484 and $518 since the announcement. These two tech leaders need to start leading again for the NDX to make new highs. It is unlikely that the NDX can get too far without them. All the major indices remain in uptrends, with the exception of the SOX (semiconductor) index. Expecting the uptrend to continue. Best to your trading!

MEDIUM TERM: bullish

LONG TERM: bullish.