Market Comment 06 07 2011

The S&P 500 breached the 1295 support zone today. The market is now in oversold territory. Furthermore, negative sentiment is reaching an extreme. In the past these elements when combined acted as catalyst for producing either a bounce or a trend reversal.

The previous bounce turned out to be a bull trap. It popped up briefly, drawing in buyers, only to quickly reverse course again.

The nature of the coming bounce should be very telling. We will remain defensive until we gain more clarity.

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