Securities Research Services

Thursday, July 20, 2006

Yesterday's Bounce Likely to be Short Lived

Yesterday was likely the only day that it was safe to enter for an oversold bounce. The trend is still down and the market leaders, QQQQ and SMH were both essentially just pulled along in yesterday's rally; as opposed to leading the way, which is what the market leaders should be doing if this recovery were legitimate. Ideally we will see the QQQQ come back up to just above $37 before it finds resistance again. It has room to vacillate for a few days before running into the downtrend resistance line, as you can see in the chart below. With options expiration on Saturday, that is exactly what we would expect the market to do; vacillate with a slight upward bias. It is best not to get overly aggressive in front of options expiration. Price movements will be less meaningful over the next two days. Settle in with your open positions and wait for stocks to bump back into resistance for a good set up.

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