Market Update

Market Close, July 11, 2006

Well, we are back to a crossroads again.

After a strong pullback from mid-May to mid-June, we started a tradable rally right after the Fed raised rates, for what we are sure was the last time.

Then, some disturbing news on hourly wage rates spooked the market along with the North Korean missle crisis caused a pull back. Then today, we opened the markets slightly higher then fall back, got news of the bombings in India and promptly tanked.

As luck would have it, though, late in the day we got the release that KLA Tencor, a company involved in chip equipment manufacturing, had beat its sales estimates. So, of course we rallied the market sharply and closed with strong finish.

The S&P 500 provided an intra-day buy signal and the McClellan Oscillator rose back to a bullish reading.

What we need now is an S&P 500 close above 1280, which is above the July swing high and would also cancel the sell signal we got last Friday. This would provide a break-out and continuation, and drive the S&P above the 90 day moving average.

If we don't get the close, then we could be in for a trap back to the downside. We are range bound, so any real plunge would have to be based on geo-political developments.

Our suggestion has been to stay conservative with cash, short term government securities, and utilities. If the S&P 500 closes above the 1280 mark, we might recommend moving some funds into the growth area, particulary those funds with metals and oil and oil service companies as a high percentage of their holdings.

Good Trading,

Joe