Stocks took a hard hit on the opening yesterday, following better earnings, but a disappointing outlook from the technology bellwether Cisco Systems, Inc. (NASDAQ: CSCO) and a strong U.S. dollar. And even though the broad market recovered about half of the losses before the close, technology stocks were down for the entire session.

The dollar has now advanced for five straight sessions as investors still flock to it in times of crisis. And the crisis this week is not a new one, but a return to the problem countries collectively known as the PIGS (Portugal, Ireland, Greece, and Spain). The Wall Street Journal pointed out that the latest worry came about as the costs to insure against default on the debt of Portugal, Ireland and Spain hit record highs.

Energy, precious metals and materials stocks rose yesterday, while financials, technology and telecom stocks did poorly. The Dow’s decline was focused primarily on three of its members: The Boeing Company (NYSE: BA), Hewlett-Packard Company (NYSE: HPQ) and Cisco. CSCO fell 16.4%, BA was off 2.6%, and HPQ lost 2.4%. And just before the close, another Dow member, The Walt Disney Company (NYSE: DIS), missed its earnings forecast and was down 1.2%.

In corporate news, Citigroup Inc. (NYSE: C) cut investment ratings on Jabil Circuit, Inc. (NYSE: JBL), off 4.6%, and Flextronics International Ltd. (NASDAQ: FLEX), down 1.3%. Viacom, Inc.’s (NYSE: VIA) earnings and revenues beat forecasts, and the stock rose 3.1%.

The euro fell to $1.366, down from $1.3787.

At the close, the Dow Jones Industrial Average fell 74 points to 11,283, the S&P 500 was off 5 points at 1,214, and the Nasdaq lost 23 points at 2,556. The NYSE traded 952 million shares, and the Nasdaq exchanged 689 million shares. On both exchanges decliners led advancers by almost 2-to-1.

Crude oil for December delivery was unchanged at $87.81 a barrel. The Energy Select Sector SPDR (NYSE: XLE) closed at $63.88, up 69 cents. December gold rose $4 to $1,403.30 an ounce, while the PHLX Gold/Silver Sector Index (NASDAQ: XAU) gained 2.43 points to 222.03.

What the Markets Are Saying

The AAII Sentiment numbers were released today and showed a huge bullish jump of 9.3% to 57.6%. This is the highest bullish sentiment number since January 2007. And with Wednesday’s Investor Intelligence (II) Advisors Sentiment Survey at the highest levels since April of this year, and stocks at annual highs, it is time to go on the defensive for the short term.

Even though the sentiment numbers and our own internal indicators are very overbought, the charts of the major indices are still strong. Yesterday’s late rally pulled the intraday lows out of the zones identified as immediate support. Nevertheless, sentiment readings like those from AAII and II are clear warnings that something more serious may be coming.

By now our readers should have disposed of their non-performers and taken big profits in stocks bought earlier in the year. And both long-termers and intermediate buyers should hold cash as we wait for a better buying opportunity. Traders may want to take a position in aggressive bearish strategies, especially if we get a rebound today. But don’t enter anything at the market; wait for a rally to a resistance line before jumping on board any shorts.

Our precious metals positions that we’ve covered throughout the year are doing well and even advanced in the face of a stronger dollar yesterday. But this too is a very volatile group, and if you are thinking of buying at this level, wait for a pullback rather than chasing these stocks to new highs.

“All things come to those who wait,” and now is the time to wait.

For one stock you won’t have to wait much longer to buy, see the Trade of the Day.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

To see what economic reports are due out this week, click here.

If you have questions or comments for Sam Collins, please e-mail him at samailc@cox.net.