11/12/06 Market Update

Stocks:

“The lights are off, the butter getting hard and the Jell-O is a jiggling.” This is one of the great wrap up lines of the infamous Chick Hern, the long time Los Angeles Lakers announcer, now passed. He would slightly change the words now and then, but the meaning was always the same. The doors closing on this game and while there might be a point or two scored, out come was inevitable. The door is closing for this market too and while there may be a point or two scored, the outcome is inevitable. The Dow Industrial and the S&P 500 have apparently completed their five wave up moves. The Russell 2000 and OTC Composite may have one more (more of the current) push up; but, we are late in the 4th quarter for this rally “… and the Jell-O is a jiggling.”

S&P 500 Waves – Daily

The Russell 2000 wave structure allows for a minor wave 4 correction and a higher wave 5 high. The RSI (ellipse) and stochastic oscillators (rectangle) are creating a lower high divergence patter indicating a waning rally. If the market continues on its upward trend pattern then the slope of the rally should converge with the upper boundary of the rising trend line (red) on November 17th and should give substantial resistance perhaps ending the rally.

Russell 2000 – Daily

Bonds:

The 30-Year Bonds backed off the red horizontal resistance line on Friday’s close. The price action pierced the line intra-day but could not hold. This is the fourth time the line has been assaulted. Gann’s rule of 4 predicts this time will be successful. On this attempt, unlike the previous attempts, the oscillators have room to move upward. This also means, however, that there is a negative divergence as the price has approached the upper boundary as in the past; but, the oscillators are not confirming the move. We will hold for the penetration, but be ready to sell with any failure.

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

Gold:

All I promised in last week’s update was volatility for the XAU and it was delivered in spades. Thursday’s 4.35 % up move pushed the price a hairs breath above the declining tops line and Friday’s 2.41% drop showed just how strong this tops line resistance can be.

The daily chart still looks over-bought; but, the weekly chart shows promise of higher prices. The volatility will grind sideways until the daily over-bought levels come down, then the weekly up-ward trend can resume.

XAU -- Daily

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