Current Market Comment

Use Bearish Investment Strategy

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It appears that our Strategy Index is in oversold territory. A short term rally might be due. However, we continue to believe there is more downside risk, than upside potential. We also believe that the recent April highs of the (Dow 11,261), (S&P 500 1,220) (and the NASDAQ 2,535) will be the highs for the year. The effect of stimulus is ending. Whereas the first half of 2010 was good for corporations as they cut employment expenses, we believe the downstream effect of this will cause disappointing corporate earnings in the second half of 2010 and into 2011. We expect low growth, low inflation, low interest rates and volatile stock markets to last for another 3 years. The worst calendar period for stocks has been in September and October. We believe this Fall could be worst than most, as Congress enters gridlock before the November elections and corporate earnings projections soften. Use our Bearish Strategy outlined below until the Intermediate Trend changes.

We believe the Intermediate Trend of the market has now turned to Down. That means that instead of buying setbacks, use rallies to sell or buy short ETFs. Continue this strategy until the market either breaks above the April 2010 highs or reaches support as follows: Our downside projection for the Dow (before it reaches support) is 8,900 to 8,225. For the S&P 500 is 966 to 894 and for the NASDAQ is 1,900 to 1,750.

We expect continued volatile markets causing “Buy and Hold” philosophies to be replaced with “Buy Low, Sell High”(Bullish Strategy) or Sell High, Buy Low (Bearish Strategy). We believe proper Selection and market timing are better investment strategies. For many, more flexible ETFs (Exchange Traded Funds), long or short, have replaced mutual funds.