09/01/06 Market Update

Stocks:

The indices moved to new 3-month highs this week; but, stills are contained within the corrective wave 4 pattern. The NDX could advance to 1640 and still be within the corrective pattern of the down move.

Nasdaq 100 -- Daily

The NYSE Composite and the NDX 100 both show signs of an expected reversal with both the 27-day and MESA oscillators rolling over.

NYSE Composite – Daily

The McClellan oscillator is also approaching previous turn back levels. It will be interesting to see if the Advance/Declines can over shoot previous levels and on the decline if they penetrate the rising support.

McClellan Oscillator – Daily

Bonds:

The treasury bonds continued their upward march albeit at a snails pace. Still up is up. Last week’s intra-day decline came down and kissed the rising trend line support as we wrote about in the 8/25/06 Market Update. “We should see at least a regression to the trend line.”

The weekly chart below shows the oscillator at 98.5 with little space above it to continue the advance. The short term bond have greater upside potential than the 30-Year at this time.

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

Gold:

The XAU again found support at the rising trend line and again advances towards over-head horizontal resistance. With the triangle tightening, will this be the break-out or ultimate failure of the pattern. On this approach the oscillator is under 80 and still has upward room but displays a series of declining tops. Whatever course occurs next week, if either a break up or down the pattern itself has lasted about 60 days and convention suggest that the continuance from the break should last about the same.

XAU – Daily

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