6/16/06 Market Update

Stocks:

The first correction is always the most violent. The market witnessed this volatility last week. I warned about the expected advance and it happened. However, this is a correction in a Bear, yes I said it, market. We could easily see stocks advance next week as well; but this is not a continuation of the bull market. It is the last chance for the longs to exit and great shorts to be positioned. Take advantage of it and sell into this rally.

The oscillator has just poked its head above the over-sold level. It may or may not reach the over-bought level but likely turn back at the declining tops resistance line (top indicator, blue line). Price wise there are three likely resistance levels. On the near term is the declining 20-Day SMA (red sub-graph). This may stall but not stop the advance. The rising intermediate trend line is next (magenta lower left to upper right). And the line in the sand is the (red dashed) Fibonacci retracement line at 2230. I would be surprised if the market can advance above this level.

OTC Composite – Daily

Bonds:

The bond prices crumbled at resistance and retreated across the Gann grid dropping to the rising support. Expect volatility as the price oscillates between the rising and declining Gann grid lines next week.

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

Gold:

The XAU had a spectacular bounce this week as it moved back above the 125 support/resistance line. This market is over-sold and should bounce; but this too is a correction to the decline, not a new bull move. This is the peak to short. Price should move back above the 20-day SMA towards the rising Gann grid line. This move may last a week or two but not much more.

XAU – Daily

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