07/21/06 Market Update

Stocks:

The market rallied right on schedule. The cycles matrix, Fibonacci and Lucas tables pointed to 7/21/06 as the most likely turning point. This is also a zodiac cusp where the earth moves through a zodiac sign. Yes, I know it’s hokey; but, the market often turns on these sign transitions. I’m not making a judgment, just an observation. However, as I stated in last week’s letter, this rally will last probably only three weeks to a month and then the bear will continue. The Cycles tables show a cluster around August 10th and the 18th. We could see the rally fail as soon as this. But for now, the path looks to be to the upside. Small cap stocks should have the greatest bounce and the Dow Industrials the least volatility.

The S&P 500 could rally as high as the converging trend line and horizontal (magenta & green). If the market gets to and is stopped by this level then I would look to short on this failure. The daily stochastic is just below over-bought levels; but, the weekly oscillator has just turned up. This market should continue up but the volatility should persist as well. I expect to see 100 point plus days in both directions over then next few weeks with a bias towards the up side.

S&P 500 – Daily

Bonds:

The 30-Year U.S. Treasury continued its breakout above the Gann grid line. While the daily oscillator has pushed above its over-bought threshold, the weekly oscillator just started it climb.

We should continue to see bond prices edge upward toward horizontal resistance (red) near 109.5.

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

Gold:

The XAU continues its dance around the declining Gann grid line. Thursday’s rally, however, challenged the rising grid but was turned back. This upward push turned the oscillator up as well. Combined with last week’s price action these may signal an end to the head and shoulders pattern. If stock rally, they may be able to move the XAU stocks up as well. If so, the July 21st low could satisfy a wave 4 low and this market to push to new highs. A break above the 20-day SMA (red) could be considered a reversal and the short position should be reversed to long as well.

XAU – Daily

Back to Members Area Index >>