This report is as of February 15, 2006

"You try to be greedy when others are fearful, and fearful when others are greedy" - Warren Buffet

Traders described today's rally as a "tiptoe" up move following the new Fed Chief's Congressional Testimony. Bernanke warned that rate hikes might be needed to fend inflation, but noted that the economy was showing strength.

The Dow quickly rallied to retest the previous high of 11085, but reversed sharply. As the session progressed, the March Dow inched its way higher, suggesting that the bulls aren't ready to give up despite the bearish technical set up.

Unlike the other major indices, the Dow is up against considerable resistance. If 11085 is broken, 11140 appears to be the next target. However, I tend to believe that the upside might be limited here. The Nasdaq has been beaten down over the last several weeks, but looks to be ready for a rally.

February is the weak link in the "Best Six Months" according to the Stock Traders Almanac. Remember, the S&P has been up 12 of the last 14 trading sessions that immediately precede President's day.

Dow Recommendations
Swing Trade - Long from 10904, to those receiving email updates we recommend to liquidate this afternoon at approximately 11025. That would have been a profit of about $1,210.

Position traders - We are short a March 104 put and a 110 call, we collected about $800, a little nervous on the call side our reverse break even is at 11080!

Option traders - Long the March 108 call and short 110 calls. We paid about $250 for the spread. Our risk is theoretically unlimited above 11,200 and limited to $250 on the downside. Call me if you have questions. This morning we started putting on bearish ratio spreads. We bought the March 110 put and sell 2 108 puts, we were filled at even money...FREE TRADE!