Macro Review -

Dollar: Looking for further recovery in the dollar --- especially at these oversold levels. Clearly, since last week, the dollar continues its weakness and remains a headline material. There are few US companies, mainly large cap which benefit on weakness of USD. The weak dollar policy has been implemented since 2002 and nearing a trend shift.

Gold: Facing resistance closer to May 2006 highs. Also, the gap between gold vs. dollar is widening. (Stronger gold / weaker dollar). This serves as an additional positive catalyst for dollar recovery.

Yields: US 10 yr- Further consolidation between a tight range of 4.40 -4.80. A waning momentum since mid July 2006 – as markets anticipated future rate hikes.

Crude: At this point, $68 remains a key resistance level. OIH strength is noteworthy as it approaches May 12 highs of 169.75. Surprisingly, following a sluggish start to the year, crude/energy related stocks continue to move higher.

Econ: Inflation, is not only in the US but globally continues to rise. The issue at hand is if markets are recognizing or looking past the issue. I continue to believe, outside of inflation, rates and liquidity risk as a threat to equity markets in the near-term. Overall, discussion of slowing economy and potential recession is on the table. Again, another lesson illustrating disconnect between the economy vs. stock market.

Markets:

Bottoms-up approach is a wiser move here given a broad market rise, as earnings season settles. Regardless, it’s hard to deny the strength of the broad markets. Positive signals seen across various sectors. I would take time to rotate into technology and healthcare groups as cycle favorites. Euphoric market highs continue but watching closely for panic selling in the near-term.

Groups:

Biotech: Attractive theme. Check out BBH index as a group indicator. AMGN- despite we start of the year caused on an overall drag to the index. At the same time, the group underperformed since October 2006.

Long Ideas:

ABI – offers entry point opportunity at current levels.

TECH- working, DNA- stabilization around the $80-82 range and AMGN-back to $63 level at previous support levels.