08/18/06 Market Update

Stocks:

The market made some important breakouts this week. Probably the best is the OTC Composites break above its declining tops trend line. This move completes its May – July down trend. The 14-day oscillator is over–bought; but, the MESA oscillator has just turned up and is a superior trend indicator at the start of new trends.

OTC Composite

The S&P 500 managed a small breakout above its parallel rising tops line with its MESA oscillator just turning up as well.

S&P 500

The S&P 500 cycles table indicated Friday the 11th as the expected low for the 27-trading day, the 39-trading day and the 54-trading day cycles. This creates a powerful cluster and the market has acted accordingly with a powerful advance. We should be witnessing more than a minor corrective up move. The rally should last through the end of the month, possible until mid-September.

	S&P 500
Date	Cycles
8/19/2006

NYSE				Proj High @
Cycle Length	d/w/m	Last date	Expected date	0.5
27 T-Days	27	8/11/2006	09/18/06	08/30/06
39 T-day	41	8/11/2006	10/07/06	08/30/06
54 T-day	53	8/11/2006	10/25/06	9/17/2006

Bonds:

The 30-Year U.S. Treasury Bonds prices also broke to new move highs. This market managed to close above its 109.5 mark I wrote as the expected and ultimately the stopping point for the July up move. If held, this breakout allows interest rates room to decline and bond prices to run higher. The next resistance horizontal does not come in until 111.5. That could put interest rates back down in the 4.5 zone. If last week’s breakout holds, we might see a much greater slow down than previously expected.

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

Gold:

The XAU continued down for the week as I suggested it would. Now, it has alleviated some of its over-bought condition and the price has dropped to it minor support of the rising wedge. This recent decline may be over as the gold stocks make another attempt to penetrate the horizontal resistance. I don’t know if there is enough energy to break the 150 line on this up move; but, we will probable see price head to this level starting Monday.

XAU – Daily

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