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A Market Perspective

09/29/2006 12:00 am EST


John Bollinger

President and Founder, Bollinger Capital Management

John Bollinger takes a macro-view of stock market patterns as well as investigating sectors that he finds attractive for near-term investing. In this analysis, he finds reasons for hope for a better market and economy.

"The most interesting thing about the US stock market is that it is not going down. We think there is a good chance that the 'fall lows' everyone is expecting may have been put in place by the May/June correction. Probably more than most we respect seasonal patterns, but we also understand that those patterns serve specific purposes and in this case the purpose may have been served already. That purpose? Unsettling investors; nothing more, nothing less. Perhaps purpose is the wrong word to use; maybe function is a better term. Purpose suggests volition; as if the markets were intentionally doing something, or as if there were a successful conspiracy to manipulate the markets.

"I don't mean to suggest either. Instead I infer to a psychological function, the interplay of greed and fear that makes all market structure what it is. Periods of adversity set the stage for periods of prosperity and vice versa. In the current environment the bearish purpose was admirably fulfilled in the early summer. Now the widely held expectation is for a fall debacle ushering in the usual period in which to own stocks, from the fall lows through the early- to mid-summer peak. We wonder if the expectation will be met or if we will skip the fall ceremonies and get straight to the rally period.

"So we are sitting on a reduced US stock allocation as insurance against the sloppy technical condition of the markets and the usual fall disruptions. However, we are considering expanding the allocations and are watching market conditions closely as they evolve. An increase in the allocation for US stocks and perhaps one for international stocks is pending.

"The most interesting aspect of the GroupPower structure is the strong performance of Technology which has lifted the sector to the top of the list. There is a very good chance that Technology is part of the leadership emerging as the rotation completes. This is especially interesting as the market as a whole tends to do well when technology is in the lead. Another interesting aspect of the sector list is the high ranking of economically sensitive sectors such as Transportation and Consumer Cyclicals, which suggests that the economy may not be as badly off as the pundits wish it were. We remain long two Ice Breaker QQQQ positions with a stop that has risen to 38.28."

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