Today's gains paled in comparison to yesterday's gains, however, investors have reason to be just as pleased with the market's performance... That's because the follow through seen today is just the type of action that is necessary to foster the belief that the recent rally is for real... First, it occurred on heavy volume... Second, there was a willingness to buy the dips.... And third, the participation was broad-based... It is factors such as those that will ultimately prompt the shorts to cover their positions and draw the sidelined cash of retail investors back into the fray... Speaking of retail, that was one of the market's best performing groups today as it rallied on the heels of better than expected earnings news from Ann Taylor (ANN +1.59), and Kmart (KM +0.45), as well as an expectation that the economy, and earnings prospects, will be improving in the latter half of the year... A 0.1% increase in the index of Leading Indicators in April helped fuel that positive view as that was only the third increase in the last 12 months... That understanding was an added source of support for the market that ignited an early rally in the market... Better than expected earning from CIENA (CIEN -2.15) and Hewlett-Packard (HWP +3.96), solid gains in overseas markets, and Citigroup's (C -1.10) $12.5 bln acquisition of Bannaci, Mexico's No. 2 banking group, also provided ammunition for the bulls in the early-going... The initial surge, though, created an overbought condition that was greeted with selling activity that left the indices near unchanged shortly before mid-day... The market was quick to rebound, and by 13:30ET, the major indices were all trading at new session highs... The catalyst for the early-afternoon uptick was the Nasdaq's penetration of the 2200 level... Conversely, its inability to hold above 2200 prompted an afternoon retreat... Nevertheless, selling efforts were held in check throughout the session as a solid showing from the retail, biotech, cyclical, and energy-related issues provided some important support... The latter stocks started to run after President Bush delivered an energy plan whose main provisions were increased drilling, conservation, and a call for more reliance on coal, oil and nuclear power... The laggards of note today were many of the groups that have often been considered to be defensive in nature (i.e. food, beverage, HMO, insurance, telephone, and household products)... SOX +2.0%... XOI +0.5%... BTK +6.6%... Nasdaq 100 +1.4%... S&P Midcap 400 +1.5%... Russell 2000 +1.5%... NYSE Adv/Dec 1879/1203... Nasdaq Adv/Dec 2392/1432.



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