04/21/06 Market Update

Stocks:

The market rallied to or through it rising tops line depending on which index is considered. The S&P 500 reached and crossed above and closed above its rising tops line (blue). This line has defined the rising slope and limits of each previous rally. It has turned back prices at least 10 times since created in February 2004. Prices often dance around the line but have never significantly exceeded it. Friday’s close is also just below the 5/21/01 top (horizontal green).

S&P 500 -- Daily

Penetration through these two resistance levels would represent a major accomplishment and would set up a new support if they could be overcome. In the markets current overbought state, I’m not sure that it will manage a punch through this time around. I look for prices to back off at least to the rising bottom support and if this holds then a new assault may be attempted.

Bonds:

The Wave 5 downward price objective has been reached for the 30-Year U.S. Treasury and the bonds appear to be implementing a bottom. The oscillator crossed above the over-sold threshold on Friday’s close. A change in trend is in or not far off.

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

Gold:

The XAU is flirting with support of the rising bottoms trend line (rising red) while in an over-bought condition. A look at the chart shows the significance of this line over the last seven months. It could easily turn prices back up; but, if it is penetrated to the down side then prices should drop at lest to the declining Gann grid line now approaching the 140 mark. Watch out below!

XAU -- Daily

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