05/26/06 Market Update

Stocks:

The market decline touched and held the rising intermediate support for the OTC Composite as well as other such index supports. The Cycles Tables indicate several cycles converging with the intra-day low on 5/24/06. We should see a significant rally over the next few weeks as the daily and weekly oscillators climb out of the over-sold basement. Moreover, the Guerrilla Fund Market Environment Index turned positive on Friday’s close. This indicates that within inter-market relationships and non-price statistics the atmosphere favors higher stock prices.

OTC Composite -- Daily

While the rally should be significant, it should not go to new highs with the expectation of maybe the Dow Industrials. The Head and Shoulder structure most likely marked the top for this move. Additionally, the longer term cycles still point down into the September- October time frame.

Bonds:

Bonds continue to battle with both the Gann grid lines and the asymmetrical triangle. An upward breakout from this pattern would be an intermediate implication for rates but a failure would not confirm the continued down ward move. For that, I would need to see the 5/12/06 low exceeded. Neutrality may be the best position until there is break either way.

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

Gold:

The 18-Trading Day Cycle and the successful daily and weekly test of the rising trend-line suggest continued upward potential for the XAU. From the chart below, see that both the price and oscillator held the rising trend lines.

XAU – Weekly

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