The pessimism is so thick you could cut it with a knife. If we could put our contrarian hats on for a few minutes, you will quickly come to the conclusion that the stock market does not go when the majority sees something being obvious. In fact, the market is probably at its best when it frustrates the majority of the people playing a particular direction.

Phillip Erlanger, at Erlanger Squeeze Play (www.erlangersqueezeplay.com), reported this today;

"Short interest rose 11.42% on the NASDAQ in its report released after the close yesterday. Overall no sectors saw a drop in short intensity from last month, and short intensity rose in 16 out of 18 sectors. For the month, large jumps occurred in electronic technology, technology services, health services, health technology, utilities, retail, consumer durables, consumer non-durables and producer manufacturing."

e 14 sectors (out of 18) with average short intensity above 45%. Last month there were 11 sect

I have followed insider trading for over 17 years. I wanted to report some of this weeks transactions that look interesting.

BUYS

SOVEREIGN BANCORP (SOV)- 950,000 shares bought by BANCO SANTANDER CENTRAL HISPANO SA (10% Owner)@ $20.56 for $19,536,318. Shares Owned 8,430,100.

SIX FLAGS (SIX)- 500,000 shares bought by Washington Redskins owner SNYDER DANIEL M @ $ 5.92. Shares Owned 11,421,300.

FOSSIL (FOSL)- 70,000 shares bought by Chairman KARTSOTIS TOM@ $16.93. Shares Owned 4,779,596.

We are going to sell 2 of our oil stocks in the IA portfolio. The first is Exxon (XOM $62.09), and the second is Conoco (COP $65.63).

Exxon has clearly been the laggard of the group, and unless I am very wrong, they will never be a buyout target for anyone.

Conoco, has traded in a fairly tight range (buy under $60, sell above $65). During periods of extreme optimism, the stock occasionally pops above $70.

Our cost basis on Exxon is $59.73 (bought 2-8-06), and Conoco $59.73 (bought 2-8-06). I like the idea of using both of these companies as trading vehicles, but only during times of extreme weakness in the sector.

If the fed decides it isn't finished with its tightening cycle, fears of the economy slowing may temporarily curb oil demand. In the U.S., higher prices have a way of doing that on their own.

Lightening up in the oil sector will not hurt our exposure since we still own MRO, CHK, SUN, SLB and VLO.

Many market mavens are expecting the Federal Reserve to raise its benchmark interest rate by 25 basis points. A lot has been made about this being the 17th time the fed has raised rates. I wonder if they would be less dramatic if the fed had raised rates 8 times in half point increments.

In any event, a 50 basis point increase followed by a pause would thicken the plot. I don't think a 50 basis point hike will happen, but it sure would be a lot of fun to watch.

The GDP numbers released this morning revealed that the U.S. economy grew "at an annual rate of 5.6 percent in the first quarter," higher than the 5.3% estimate. The good news in the GDP was the improvement in the trade deficit. In addition, the GDP price deflator rose at a lower annual rate than the government predicted last month.

I guess this news, in combination of hopes of a fed pause, and end of the quarter window dressing is adding to today's gains.

For now, we are waiting to hear from

Let's mix in a little "bull".

Yesterday, the Federal Open Market Committee raised interest rates a quarter of a point to 5.25%. Many were worried that the release of its statement might contain verbiage that several more rate hikes were to come. That didn't happen and the markets celebrated. Great!

After the 2:15 EST announcement, the Dow added an additional +133 points to its midday gains of +83, to close up 217 points on the day. The S&P closed up 26.87 to 1272.87, and the NASDAQ jumped 62 points to 2174.40.

The market is following the scenario that we laid out for you a few days ago. We are happy that the market is cooperating with our projections.

So, what do we think is going to happen next?