06/02/06 Market Update

Stocks:

What a difference a month makes. We closed our inverse position on 5/30/06 as May saw an erase of the markets year to date gains. The breakdown across the board for stocks pulled the averages down to their intermediate rising trend lines. The OTC Composite below dropped to within a kiss of its rising trend line (magenta).

OTC Composite -- Daily

The 14-Day velocity turned up with the weeks price rise and shows room to grow. We could easily see the price challenge and oscillate for a while between the horizontal and rising trend line just above. A break above the rising trend line could inspire a move to match the high but this is not the most likely scenario. The Fibonacci Prediction Points warn that June 12th -14th as a possible turning point. This would be in line with an ABC Cycle date and 27-Trading Day Cycle high. If so, the market should climb into this area making next week be more up side action than down.

Bonds:

Did it actually happen? The breakout I have been expecting and wrote about last week, finally came through. Yeah, broken clock…, I know. Never the less, the price did not only break above the declining trend line, but also managed a higher high above the 5/22/06 resistance point from a few weeks ago.

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

In Zig Zag fashion, I expect this rise to continue over the next few weeks. Buying on pull back above the short term rising trend line (thin blue) should prove profitable.

Gold:

Oversold on a daily, but not weekly basis, I suspect that the XAU has some more sideways consolidation before any meaningful move can transpire. Last week’s non movement allowed the oscillator to break to a lower low. While the short term move pushed by daily oversold levels may be up, I believe these gain will be quickly relinquished the intermediate downtrend.

XAU – Weekly

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