When one of the country’s more highly regarded investment strategists dramatically alters his market stance, Wall Street could be getting a serious warning that might be foolish and ill-advised to ignore. It’s like one of those warning signs you often see on a speedy highway that reads: Slow down, danger ahead! And sure enough, a sharp curve or a much narrower road lies just around the bend.

This conspicuous change in market view, essentially one pro’s SOS, reflects a shift in the thinking of Fred Dickson, chief investment strategist of D.A. Davidson, a leading northwestern regional brokerage chain headquartered in Great Falls, Mont.

Though Montana is a long way from Wall Street, Mr. Dickson, neither an alarmist nor a perennial bull, and a former strategist at Goldman Sachs, boasts a sizable institutional following due to his market acumen and what one ex-Goldman official describes as his common-sense approach to investing and his willingness to change directions when change is called for.

At the end of last year, Mr. Dickson was exuberant about the market’s prospects in 2005, predicting a 15% rise in stock prices. No more! He’s now urging clients to raise cash reserves, to lock in profits on stocks that have had extended runs over the last three years, such as Google, Yahoo, and Starbucks, and to avoid bottom-fishing for names that look cheap.

Mr. Dickson, by the way is not a raging bear, observing that “we’re not seeing the excesses and the bubble environment we saw in 2000 and 2001.” However, there are sufficient concerns, he tells me, that lead him to conclude that the Dow – which closed yesterday at 10,070.37 – will shortly drop below 10,000 and fall to 9,500 by July.

Mr. Dickson likens the current state of the market to driving a car, notably disengaging a cruise control set for 65 miles an hour. “We’re slowing down, but the new cruise control speed is uncertain,” he said, “because the cop on the beat [Alan Greenspan & Company] hasn’t told us yet what it’s going to be.”

Speaking of the Federal Reserve, Mr. Dickson, like many of his fellow pros, expects the Fed’s next meeting of its Federal Open Market Committee (May 3) to produce a rise of 25 basis points in the Federal Funds rate to 3%, marking the eighth consecutive rate hike since June. But more ominous as far as the stock market is concerned, he expects the Fed to maintain the language that suggests it will initiate additional rate increases, signaling loud and clear that its restrictive monetary policy remains in force. He thinks this action suggests that inflation remains a Fed worry, especially with oil hovering around $50 a barrel. As such, he believes the earliest the market can expect any good news from the Fed is at its June 29 FOMC meeting.

Mr. Dickson is also disturbed by deteriorating news on the earnings front, pointing to such companies as IBM and General Motors, which leads him to conclude that “the market is too optimistic about June and September quarter earnings.” He notes, for example, that a quarter ago, there were 10 positive earnings surprises for each negative surprise. Now, though, the ratio has dropped to four to one. Further, he observes, a lot more companies are lowering their sales and earnings guidance for the next quarter, as well as for the full year.

Technical deterioration in the marketplace is another of his major worries. “We’re seeing more and more stocks selling off and entering a technical downtrend,” he said. He notes, for example that last week – one in which stock prices rose, aided by a one-day rocketing gain in the Dow of 206 points – the number of companies that broke into a price downtrend accelerated. Likewise, he points out, the number of stocks in short-term uptrends continues to shrink. Mr. Dickson also notes that of the 1,900 stocks tracked by D.A. Davidson, the number in positive uptrends has shrunk to only 13%, down from 26% two weeks ago.

These findings, he tells me, strongly suggests that any near-term corrections could be significantly greater than the usual 3% to 5% pullbacks associated with an ongoing bull market.

Accordingly, Mr. Dickson argues that any new money committed to the market should be very defensive in nature. In this context, his focus, he said, would be on health care (Stryker Corporation and Genentech); food and beverages (PepsiCo and Dean Foods) and natural gas (Chesapeake Energy and Burlington Resources).

On the other hand, he said he would shun financial services as a result of rising interest rates and consumer cyclicals, namely autos and retail, because of dramatically slowing growth in consumer spending due to higher rates and currently high levels of consumer debt.