06/09/06 Market Update

Stocks:

It appears that the week of 666 (060606) wasn’t very lucky for the markets. Against an oversold short-term oscillator, the market continued to drop. The market price remains in the same condition approaching next week as it did last week, but with these distinct differences. The price now rests on the shorter (blue) parallel upward sloping trend line and the oscillator readings are diverging at higher lows. The NYSE New Lows are also slightly higher on this low than the last; as the same for the McClellan Summation index. Furthermore, the red vertical lines represent the 54-Trading Day cycle with the right most line the optimum turning point. Giving a one to two day window, the market is at that turning point now.

S&P 500 – Daily

If the market rallies and it should, the up move could carry the S&P back up to the old rising support line (magen

ta), now resistance and stop at 1300. This decline is not over however. I doubt that it will end without first touching, and slightly penetrating the lower rising trend line (red) that has defined the lower boundary of this advance since August of ’04.

This line too will ultimately be broken; but, the McClellan Summation does not have the series of divergent lower lows that are typically displayed as the market moves into it 4-Year cycle low. This suggests that we most likely will see one or two pushes up before this trend is broken.

Bonds:

The 30-Year Treasury continues to trudge along. Last week’s price action completely encompassed the rising Gann grid span. The short term oscillators are now over-bought; but, the weekly stochastic and RSI clearly have room on the upside.

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

This market should make its way back toward the horizontal resistance (109.5) before any major correction takes place. For now the oscillators may have to stay over-bought.

Gold:

The XAU continued to suffer the consequences of a parabolic rise. Now, however, the price has double bottomed with the 03/09/06 low. The strength of this support is questionable in that it only consists of the one point. But, a broader brush stroke picks up the consolidation or price oscillation point from ’93 through ’95. As noted in previous issues the market loves symmetry and this could prove to be the new oscillation price point as the market works through the forces of deflation and inflation.

XAU – Daily

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