11/05/06 Market Update

Stocks:

The market peaked right on schedule. In the updates over the last few weeks, I have written about the time window of 10/26/06 as the optimal peaking point for the last of the 9-month cycles making up this 4-Year cycle subset. The 26th was also the optimum projection point for the rising trend line and overhead resistance conjunction. The market has reacted favorably with six straight down days.

The election will, of course, add volatility and the will dictate the short term cycles. What’s in balance is whether the companies that control congress now with stay in favor and continue to grow. Or if the companies that back the Democrats will win and we will see a shift in money from the old group to the new group. I’m not being sarcastic. It is a measurable phenomenon at each election. Yes, is a sad statement of our political system, but corporate america has blatantly controlled congress, both parties, over the last twenty year or so. The only way to slow it is true public financing of election campaigns and this does not seem to have an inspirational movement behind it. It’s not likely to either as the powers that be, both parties, are reluctant to bring it up and spoil the buffet.

The weekly S&P 500 chart below, shows the price resting above the rising tops line (blue) with both the stochastic oscillator and the RSI turning down from over-bought levels. This does not bode well for the market on the intermediate term.

On the short term, the good news is that last week’s decline stopped above the rising tops line and the RSI (blue triangle) was able to put in a higher high along with the S&P’s new mark. From this, I conclude, that we could see one more rally before the decline takes over in earnest. But this rally would be high risk and short lived due to the down turn of the longer cycles.

S&P 500 -- Weekly

Bonds:

The treasury rate took an abrupt about face on Friday, surging up almost on point. The 30-Year U.S Treasury Bond Price jolted down the same. The daily chart below show the double top resistance met by the price and the over bought condition of the oscillators. This is likely to be a significant reversal with the first support sill below at the 110 level and not until Tuesday or Wednesday.

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

The ultimate levels of the next low will tell us about the direction of interest rates for the intermediate term. We must wait and see if it is a higher or lower low verses the 10/23/06 low to define the bear or bull move.

Gold:

The XAU is also at resistance levels. The price action last week covered the entire Gann grid distance on the weekly chart. On the daily, the price bounce off the declining Gann grid line and remains wedged between a narrowing triangle. As I wrote last week, we should expect to see more volatility between the current Gann matrix angles. The oscillators are at over-bought levels and the likely course is down for the next week.

XAU – Daily

Back to Members Area Index >>