02/24/06 Market Update

Stocks:

It was an interesting week for the averages. The for the most part, after Monday’s decline they managed to fight their way to positive territory for the week. In spite of the upward victory, the indexes remain at or slightly below resistance levels. Where as the NDX, below, is above it declining tops line(blue), it is still below its intermediate horizontal (red).

NDX -- Daily

The OTC Composite is price is right at its declining tops resistance.

OTC Composite -- Daily

Probably the least volatile performer in last week’s action the Russell 2000 has a new high; but still has overhead resistance, all be it rising, from its up ward sloping tops line. The more important note here is the cycles oscillator within the cyan rectangle it now in over-bought territory.

Russell 2000 -- Daily

The weekly Cycles oscillator is but a week’s upward movement away for over-bought readings as well.

Russell 2000 -- Weekly

It appears that even if the market can continue up, as expected for the Russell and unlikely for the NDX, it will quickly run into resistance and daily, weekly and monthly levels. The market is approaching a turning point and either some new catalyst needs to arrive or prices are about to drop.

Bonds:

The leverage in the 1.25 beta Rydex U.S. Government fund accentuates the market moves. Below we can see short term and Cycle Composite oscillators rolling over. It is most likely bond prices are heading down as interest rate yields resume their climb. If stock were looking for rates to be their saving catalyst, they will probably have to wait awhile longer.

Rydex U.S. Government Fund -- Daily

Gold:

While the XAU managed a positive week, it struggled to do it. The underline support (red rising trend line) held through Thursday’s decline. The bright side of the decline was filling the opening gap created on the 17th. Friday’s rise, as was Wednesday’s, was still confined by the declining Gann grid line. But, now that the gap has been filled, we will see if the XAU can break above the declining Gann grid. March 2nd is the cross date on the grid. We should know the path by then.

XAU -- Daily

Even if the XAU can rally, the weekly and monthly oscillators are over-bought and have already rolled over. The XAU is heading for a serious decline all trades, including the current one, from here forward are high risk. While we are in this market, we will look to exit shortly. This market is poised for one of its biggest drops in history.

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