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2006-05-22 :: Monday's plan

The markets in Asia and Europe were down overnight. This has put additional pressure on the US market, giving us a huge oversold position. I have attached a pdf of the VIX-Volatility Index for your review. When you look a the chart, you can see that we have spike higher than any reading over the last year. A spike higher is an indicator of a coming rally; the higher the spike, the bigger the potential rally.

If you look at the spike in October, it occurred during the October selloff and it preceeded the big rally that occurred through mid/late January. We then had the January selloff and the index spiked up, preceeding the rally that occurred through mid-May. Neither of these spikes is nearly as big as the spike we see now. The last time we had a spike this big was after the 911 attacks when the market soldoff in a huge manner.

My plan today is to start to execute the strategy discussed in last night’s blog entry. We will be trying to reposition the portfolio for the next move up before it happens. Gut feeling from looking at the technical indicators is that we should see it begin later this week, but that is just an assessment based upon my years in the business.

Hang in there as we navigate this bumpy course!

Mark