Securities Research Services

Monday, July 24, 2006

Overbougth Levels Could Spark a Rally

Sentiment levels are nearing all-time-high bearish levels. This should keep a floor in the market at current levels. It is also interesting to note that oversold levels and the weekly trading patterns in the QQQQ are now nearly identical to the week of August 9, 2004. If indeed we have a bottom in place, a rally out of this hole could potentially be quite significant. The tell will be how strong the bounce is. If the market fails to bounce and/or it bounces weakly, we may be looking at more downside. If we can get a good broad market rally on good breadth this week or next week, then we may be in for a very nice recovery. To be sure, it is too late to short in all but a few sectors.

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