03/10/06 Market Update

Stocks:

The NYSE displays an ever increasing up trending market in the weekly chart below. It also displays an ever tightening wedge created by the (gold) rising tops line and the (blue) rising support line. Once this line is broken to the down side, which I believe is eminent, prices should quickly drop to the converging previous top horizontal and 39-week moving average around the 7665 level. Will this hold and turn the rally back up as in the past? This time, I don’t think so.

NYSE Composite Daily

Divergence!!! Below, the NYSE (black) OTC Composite (red) and the NDX 100 (blue) clearly have different ideas of the health of the market. This divergence between markets is a foreshadowing of the divergence the next up move should create internally within each index.

NYSE (black), OTC Composite (red) & NDX 100 (blue) -- Daily

We are also now at the extreme topping point of the 4-Year Cycle due to bottom in the September 2006 time frame. Because of the lateness of this top I suspect the bottom to be pushed out as well; this is not uncommon with the modern election cycle.

S&P 500 + 47-Month Cycle-- Weekly

Bonds:

On a daily, weekly and monthly basis the bonds are now at over-sold levels. The monthly oscillator still has room to decline and as I wrote in last weeks update, the cycles converge near March 23, 2006. I think we will see a positive divergence with the price continuing lower but the indicators making higher lows over the next two weeks. We should see just the opposite as in the stocks; but with growth expectancy for the bonds. We are not there yet, however, so the sidelines are still the place to be.

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

Gold:

The XAU is plummeting as expected. On the chart below you can see that the symmetry is amazing. If this pattern holds into the next cycle low due in early April, then the Gann grid suggests that prices could easily shave down into the 112 area before the decline is complete.

XAU -- Daily

We are now over-sold enough to see a relief correction rally over then next week. Ride this rally if you can; but, the trend is still to the down side. This means short term player only.

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