With economic data of last week showing signs of a soft landing, the market continued to march higher, albeit in unmeaniful holiday trading.  With trading volume levels returning to normal levels later this week, we should begin to see signs of the market showing its hand.  I continue to believe that the market has come too far, too fast, with little institutional support behind the move in the past couple months. 

With resistance at multi year highs in both the S&P (1326.70) and Dow (11670.19) as well as the 200 day moving average for the Nasdaq (about 2230) on the horizon, it’s important to proceed with caution on the long side.  There is some room to run to the upside before meeting those levels, but once those levels are reached I’ll be playing the market as if that is the end of road.  Essentially, I’m forcing the market to prove me wrong by breaking out to new multi year highs in the Dow and S&P and above the 200 day moving average for the Nasdaq WITH BIG VOLUME.  Only then will I get aggressive on the long side.

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** Model Portfolio Update **

With another week of light trading, there were few transactions in the Model Portfolio.  In fact, just one one new long position was initiated and no positions were closed.  After pulling back last week, the Model Portfolio had another winning week with a nice 1.7% gain.  The year to date performance continues to stay well ahead of the major indices with a 16% gain and 8 of the 10 open positions remain profitable.    Current allocation is about 17% short, 50% long and 33% cash.

** Best/Worst Performers **

– Top 10 Performing Industries For the Week –

1. Catalog & Mail Order                     10.30%
2. General Entertainment                    8.40%
3. Silver                                               7.60%
4. Building Materials Wholesale           7.10%
5. Manufactured Housing                    6.70%
6. Major Airlines                                   6.55%
7. Semicondutor – Memory                   6.40%
8. Internet Service Providers                6.20%
9. Data Storage Devices                      6.05%
10. Diagnostic Substances                  6.05%

– Top 10 Worst Performing Industries For the Week –

1. Oil & Gas Refining & Marketing        -3.05%
2. Shipping                                           -2.80%
3. Oil & Gas Equipment & Services      -2.25%
4. Major Integrated Oil & Gas                -1.90%
5. Independent Oil & Gas                      -1.15%
6. Banks – Southeast                              -.85%
7. Nonmetallic Mineral & Mining               -.70%
8. Marketing Services                             -.35%
9. Pollution & Treatment Controls            -.25%
10. Jewelry Stores                                 -.15%

– Top 5 Best Performing ETFs For the Week –
 
1. HLDRS Internet Infrastructure (IIH)       6.20%
2. HLDRS Internet (HH)                             5.90%
3. Ishares Silver (SLV)                             4.35%
4. Ishares Brazil (EWZ)                            4.15%
5. Chile Fund (CH)                                     4.05%

– Worst 5 Performing ETF’s –

1. Powershares Dynamic Energy (PXE) -3.25%
2. SPDR Select Energy (XLE)                  -2.95%
3. Templeton Russia & E. Europe (TRF)  -2.95%
4. Ishares US Energy (IYE)                     -2.85%
5. Ishares Global Energy (IXC)                -2.30%

**  IPO’s Worth Watching for This Week **

1. New Oriental Education & Technology Group (EDU): a Bejing provider of education programs, services, and products, primarily of English and other foreign language training and testing preparation courses.  The company offers these programs to over 872K students in 25 schools, 111 learning centers and 13 bookstores.  Trading set to start on Thursday

** Upcoming Economic Reports (9/4/06- 9/8/06) **

Monday:        Market Closed
Tuesday:       Retail Sales, Job Cut Announcement
Wednesday:  Productivity & Costs, ISM Non Manufacturing, Beige Book, Petroleum Status,
                       Mortgage Apps
Thursday:      Money Supply, Wholesale Trade, Public Debt, Jobless Claims
Friday:           Consumer Credit