Securities Research Services

Wednesday, October 11, 2006

Keeping the Big Picture in Mind as the Market Climbs

We wish to keep today's report simple. We want to point out just a couple of points, that we think are important to keep in mind at this market juncture. First: the market remains in an uptrend until it's not. Until we have confirmation that the trend has broken, do not short dips or get scared and exit at dips. In other words, the long side is where the path of least resistance remains. The potential for a reversal is high, but the trend could possibly last until elections on November 7. Second: upside potential is small and downside potential is huge. Do not get carried away with the crowds buying breakouts at these levels. Breakout buyers at this stage are likely to end up as bag holders. On the chart below we have outlined where the QQQQ is at. As you can see, upside potential is muted, while downside risk is large.

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