10/22/06 Market Update

Stocks:

No real movement for the week. The indexes ended a few ticks up or a few tics down from last Friday’s close. The S&P 500 remained above its rising Gann 1 X 1 grid line and still bouncing upward along its meridian trend line. I think this will be the case for the next week or until we exhaust this buying move, which is already exhausted. But last week’s sentiment numbers indicated that the public is excited about Dow 12,000 and moving money back in to the market. You know what that means. Yes, the top is close. When the decline begins it should start with a swift violence that will create potential panic. I not talking about a crash; but I am talking about ten percent or more within a very short period of time, five to six weeks.

S&P 500 – Daily

Again, the cycle table indicate that 10/24/06 through 11/28/06 is the opportune time for a market top. That is, a top in the 9-month cycle which is the only major cycle still on an upswing.

Bonds:

Like stocks, interest rates treaded water for the week. This holding period will probably last through next week’s Federal Reserve meeting with a slight upward bias for bond prices. The market is indicating that the Fed. will continue to hold rates steady with a lot of bearish talk. The rates on the 10-Year and 30-Year bonds look ready to come down. In last week’s update I discussed the 30-Year bonds prices breaking through its bullish support with an expected target in the 110.5 range. They have crawled along this level while reducing the over-bought condition. I expect to see a lift for the bonds over the next few weeks to test the underside of the rising trend line.

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

Gold:

The XAU meandered with the stocks. The Gann grid line contained the price action for the week on the daily and weekly charts. The price flirted above the grid line in mid-week and indications suggest that it will be broken to the up side. Once the Gann lines are surpassed, the market should surge higher.

XAU – Daily

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