4/3/06 4:35 PM

ATR - End of the day

The markets reversed late in the day to close mixed after a strong start. While we seldom embrace euphoric morning strength, the light fades added up and did some damage particularly to small caps. The early tell was breadth and a lagging small cap sector, indicated in an earlier post, which demonstrated a lack of momentum and real buying action.

In addition to broad weakness, it was an especially tough day in Smallcapville as many high momentum small fries lost bids and were subsequently sent behind the woodshed. Coupling the few blow ups, with light volume pullbacks and intra-day reversals, the action has us starting the quarter slightly behind, with our work cut out for us.

While its never easy to see red on the position sheets, we believe the market needs a breather. With a week or so until earnings season, an ideal set up would be to have weakness and pessimism ahead of company reports, setting us up for a strong move into decent numbers.

With higher oil prices, an intra-day reversal, and certain media gurus publishing optimistic columns, the bears have ammo and will be ready for another fight. While we still remain bullish, it will be very important for Shark Investors to be ready to swim for safety. Remain quick, remain nimble and stay flexible.

Have a good evening.

RevShark