10/05/05 Special Update

Stocks Breakdown!

In last weekend’s update, I wrote that the breakout direction from the triangle patterns that had formed on the major indices would indicate whether the 19-Week Cycle would point to a low and start a new rally or invert pointing to a top and rather than speculating it was best to wait for this breakout as confirmation. Today all of the major indices, with the expectation of the NDX 100 broke out of their triangle to the downside.

Each chart below has two rising trend lines, one from closing low to closing low and the other from intra-day low to intra-day low. All indices have broke down on a close to close trend line basis and all but the NDX 100 as stated above have broken down on a intra-day low to intra-day low trend line value. Furthermore, the S&P 500 has broken below its 189 day simple moving average (shown) and 200 day simple moving average.

OTC Composite S&P 500

Value Line Geometric NDX 100

NYSE Composite Russell 2000

Tomorrow’s price action may bring a snap back in price towards the resistance at the trend lines. This should be used to close any long position. The price oscillators, especially the weekly oscillator, are newly coming down from over-bought territory. Inverse fund position can be established by the active more aggressive traders. It is great to make money as the market declines but, remember, the real object is not to loose money in a high risk market.

Good luck and good trading,

Garry Graham, CMT, CFP

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