08/04/06 Market Update

Stocks:

The indexes posted positive for the week, but barely. The daily and weekly oscillators are at odds, with the shorter term over-bought and the longer over-sold. Last week’s minor rally challenged the declining tops line (blue) on Friday but could not hold above. I expect next week to show a negative bias while the two oscillators come into agreement. The decline must stay above the 2020 mark on the OTC Composite for the rally to stay in tack. If an upward push is made early enough in the week, Monday or Tuesday, then penetration with a retest might be possible and still allow the oscillators to come together.

OTC Composite -- Daily

Bonds:

The 30-Year U.S. Treasury bond prices achieved their price objective for this move. I have written about this expected goal over the last three weeks. With the price objective now accomplished and with the bond oscillator in over-bought territory, this market should take a rest with prices retreating towards the rising trend line and the rising Gann grid line, at 108.5 on Friday’s close. I wouldn’t be surprised if the bond traders abruptly drop to this level on one or two sessions.

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

This new peak marks a higher high for bonds and now a series of higher lows and high or the definition of a bull run. This indicates a bullish trend for the intermediate time frame until or unless the 107.5 level is violated downward. This suggests a buy on dips strategy until a top is proven.

Gold:

The up-move in the XAU turned back last week at the horizontal resistance line. The stochastic oscillator posted a lower low at this double top. This is not how a bullish rally normally acts. This indicates a weaker market for next week with a downside target at the 20-day simple moving average value of 142 and change. The price could ultimately gravitate towards the declining Gann grid line, now at 135 and declining about .30 points per day.

This market may be range bound for the next week or so. However, any penetration of the neck line (125) puts the Head and Shoulder pattern back into play.

XAU -- Daily

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