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0920 EDT Wednesday April 19 2006

Good Morning: The S&P 400 Mid-Cap Index has not failed us since it first made post 911 new all time record highs in the fall of 2003 and it did not fail us again yesterday, as it leapt higher in the morning and once again closed at a new all time record yesterday afternoon along with the IJS S&P 600, Russell 2000, Value Line and not surprisingly the Banking Index BKX, which stands to gain from a fed pause or ease and in this tightening round has been setting new records unconventionally throughout the entire tightening period. This tends to bode very well for stocks, as we have recounted on numerous occasions and along with yesterday's stock records, Copper, Lead and Platinum and Amex Gold Index HUI did not disappoint, as they continue to confirm the strength of the Global economy as Crude Oil disappointed consumers addicted to same by soaring to new records for the same reasons as well as the impending shortages that are too driving all metals extremely sharply higher.

We've been saying since late March that if Gold, Silver and Copper morphed into April on a record high note, that it could be very bullish indeed with the prospect of continuing through to the Summer, much like what occurred in 1993 and 1987. So far that seems to be most definitely happening and while some unexpected pullbacks could occur at any time, the trend has become so unprecedentedly strong that the likelihood of it continuing for some time is compelling. Readers will know that as far back as August and September last year, we began to observe the first signs of seismic activity in the metals and by the fall, volcanic activity was starting to become evident and back then we pointed this out and compared it with other volcanic activity, such as the January 16, 1991 in stocks and more recently April 2003 when we began to call for new all time record highs in several of the broadest stock indices mentioned above to occur by the fall or end of '03 and that is what occurred and has been methodically driving stocks higher ever since. Readers may recall that we did not flip out and turn bearish following the sharp move down on April 07, when the market dramatically reversed on the good news of the latest jobs number and closed sharply lower. We pointed out in the following week's commentary that even though this was a sharper correction than any of the previous lowpoints that reclimbed to set new multi-year highs or record highs, we wanted to see how the S&P would behave and it then became clear to us that there was again an apparent lack of follow-through to the downside and that it simply tested the low end trendline of what has been all year a powerful upward running correction formation in the S&P. And 9 times out of 10, this is a formation that tends to resolve itself by a blowoff beyond the high end range, the timing of which can often be difficult and perplexing to predict. Yesterday's action demonstrates the power of such a technical structure and while it's important at this time to be vigilant to the possibility of both bear traps of the past week and also potential bull traps a la yesterday, unless these market indices break down very sharply and completely reverse their actions, one would have to stay in the bull camp and we re-iterate, that if we can maintain this trend or firmness going into May or at least get there without too much of another skirmish, we could be in for one of the most spectacular Summer Rallies in some time, with the obvious potential for some interruptions on the way to maintain that Wall of Worry mentality that helped drive stocks higher yesterday.

It should be borne in mind that in spite of yesterday's rally against all odds of new record high Oil prices the same day, stocks are still exceedingly vulnerable to some sort of short term oil spike that could temporarily de-rail the trend once more. On the other hand, if Oil spikes up and then reverses, that could give stocks a reason to rally to broader multi-year record highs again in the larger of major indices.

Trade Well
From the Desk of Savant

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