03/03/06 Market Update

Stocks:

The Market Indexes continue to labor under overhead resistance. The S&P 500, below is wedged between it rising triangle bottom and the January ’06 high while now in over-bought oscillator territory. It appears as if this scenario will play out to the down side.

S&P 500 -- Daily

The Russell 2000 was able to make a new high on this run; however, its oscillator is even weaker. This index has been the leader on the upswing and most likely will tumble the fastest on the way down. We have now closed our positions in the small cap stocks and will most likely wait on the side lines until this triangle resolves itself one way or another.

Russell 2000 -- Daily

From a cycle prospective, the Cycles Table displays an awful lot of red going into the remainder of the month. With potential turning points for next week and for the 17th through the 22nd of March. While these cycles normally point from low to low, given the current lofty levels, we may see an inversion of this cluster creating the 4-year cycle high.

S&P 500 Cycles Table

	S&P 500
Date	Cycles
3/5/2006

NYSE				Proj High @
Cycle Length	d/w/m	Last date	Expected date	0.5
27 T-Days	27	2/7/2006	03/17/06	02/26/06
39 T-day	41	2/14/2006	04/12/06	03/05/06
54 T-day	53	12/30/2005	03/15/06	2/5/2006
8.9weeks #1	68	12/30/2005	03/06/06	2/1/2006
13 weeks	83	12/30/2005	03/22/06	2/9/2006
108 Calendar Day	110	2/14/2006	06/03/06	4/9/2006
19 weeks (1) 95TDs	21	10/13/2005	03/07/06	12/24/2005
9 months (.5) 39weeks	38	10/13/2005	07/04/06	2/22/2006
9 months (.5) 39weeks	38	12/30/2005	9/21/2006	5/11/2006
55 weeks	56	7/7/2005	08/03/06	1/19/2006
55 weeks Alt2	53	10/13/2005	10/21/06	4/17/2006
78 weeks (18 month)	77	2/7/2006	08/06/07	11/6/2006
24 Month	23	2/7/2006	01/01/08	1/19/2007
41 month	41	10/25/2004	01/09/08	6/2/2006
48 month	49	10/10/2002	09/04/06	9/21/2004

Bonds:

Friday’s price action on the 30-Year U.S. Treasury bond was unable to hold the bottom of the horizontal trading range that has confined this market over the last few months and really over the last half year. From the chart below you can see that there is a symmetry on each side of the December – January breakout. If the symmetry persists, then we should see another 10 or so trading days before this pattern completes. This would also closely line up with the next expected cycles turning point on March 20th.

30-Year U.S. Treasury Bond Price -- Daily

Gold:

The XAU is still poised for a short-term upward punch. February 28th low created a positive divergence verses the RSI (middle green indicator). The stochastic oscillator also remained above its Feb. 15 low, although at only one hundredth of tick, I more appt to say that it matched it.

XAU – Daily

A zoom of the price only, below, shows Friday’s close remains below the (red) intermediate lows trend line. So while all the short term indications give the notion that prices are most likely heading up again, these little signs tell me that even when they rise it will be in the form of a last gasp and the real move coming will be to the down side.

XAU price only -- Daily

So ride this if you are nimble and able to watch daily. If not, pass on this move and ready your self for the coming drop. Profunds has a new inverse Dow Gold fund called the Profunds Short Precious Metals fund, (SPPIX). See if it is available through your brokerage. It is a no-load fund like all Profunds and being a Profunds its internal fees are hefty but this is a fund for short term holdings and if used correctly it will be more than rewarding.

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