Securities Research Services

Tuesday, June 19, 2007

Expecting the Unexpected

The tech sector is poised to extend its recent break out to new highs. However, the broad market is diverging. Yesterday,'s Dynamic Trading System issued a sell signal and the VIX shows that fear that we saw in the market last week has dissipated and that complacency levels have returned. The mixed message the market is sending here raises risk, which has already been very high.

The immediate term path of least resistance in this situation seems to be the downside. At the very least, the market is much more vulnerable for a sharp correction than it is for a sharp upturn. Until the market does something though, it is best to just manage open positions and even perhaps lighten up on some of your positions.

One potential here would be to see the market pull back near recent lows setting up another dip buying opportunity for perhaps a significant run higher. If the QQQQ can break out and close above $48, however, we may instead see the market being pulled higher instead of tech being pulled down. Again, the message is very mixed here.

In any case, today is turnaround Tuesday, so expect the unexpected.

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