12/10/06 Market Update

Stocks:

The Value Line Geometric pushed to new yearly highs on Monday and successfully retested the breakout on Friday. If it were not for the extreme over-extended state of the market this would be very bullish news. However, the market is over-extended now on the daily, weekly and monthly levels and this push may be the last gasp of upward movement left. The market is still in range to be considered a double top.

Value Line Geometric -- Daily

The monthly oscillator below (red upper graph) has yet to turn down as its daily and weekly counterparts; but, it too is near the upper end of its normal oscillation and indicative of, at least, a temporary trend reversal. There is room for this market to continue; but, the risk is great. It’s time for profit taking over greed.

Value Line Geometric -- Monthly

Bonds:

The 30-Year U.S. Treasury bond price continued to back off from its highs. The oscillators and price have broken down through support. There is relatively significant support still at the 113 price level (red horizontal). We could see a consolidation start from this level, but the indicators suggest more downward pressure. More evidence is needed before short position can be established. Additionally, if the stocks rollover as expected, then bond may find support from their safe have status.

I have reduced our bond exposure over the last two weeks from 60 to 40 and now only 20 percent. The NFA government bond system is still on a buy signal and we will stay with the 20 percent until a new sell or an interim buy signal is issued.

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

Gold:

The XAU reversed down from it recent rally, stair stepped down through the week. Friday’s close price, however, remained above the upper channel horizontal support line and the old declining tops resistance line, now support. Last week’s action successfully filled the price gap and monthly oscillator remains on the up tic. This could be the next upward turning point for the XAU. A caution though, an up day on Monday does not constitute confirmation. Confirmation necessitates a break above 150. The decline has oscillated between the upper, 150 and lower, 143; moreover, the index could easily drop to the 137 -136 zone retesting the declining tops breakout. Patience is the way of the wise. Let’s let the market prove its intentions.

XAU – Daily

Like the government bonds, I have reduced the gold position by half. Unfortunately, I did it on a stair step down rather than up day. If this market turns now, I will be whipsawed; but, I’ll live with the decision to protect the 16 percent profit we’ve accumulated over the last month. We’ll keep the powder dry and take our best shots as they come.

Back to Members Area Index >>