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WEEKLY CHARTS

DJIA: After a re-test support of the 10000-9950 zone, look for another attempt to take out resistance at 10380.

It has been rejected at resistance 4 out of the last 4 weeks. Consequently, the odds favor that it will go back down to support at 3200.

SP500: If it can overcome resistance at 1180, the next upside target ought to be in the 1190-1200 area. If the 1180 level can't be overcome, look for another visit to 1140-1135.

NASDAQ: Channel resistance is at 2030, and the trend has been in place for 5 months. If the trend remains intact, then we ought to expect another downside reversal and a decline to channel support. Of course, if the down trend is broken, then it changes everything; happy days are back again for bull market enthusiasts, just when you thought you would never hear again about mama.com!

HUI: Look for support at 160, and perhaps 150.

Oil: As long as the $47.5 level holds, the uptrend is still intact.

Notice the similarity in the pattern between now and late January/mid-February. it is hard to imagine anything really bullish coming out of this set-up other than another test of resistance.

Notice the similarity in the pattern between now and late January/mid-February. It is hard to imagine anything really bullish coming out of this set-up other than another test of resistance.

The trend is UP for NASDAQ.

The trend is NEUTRAL for the SP.

Conclusion

Last week (5-6-05) we said: "During last week, the technical condition of the market improved rapidly, which is clearly illustrated by the sharp rise in the Quantifiers. At the same time all the indices reached resistance, and the Quantifiers reached the zero line. In bull phases at similar junctions, the indices are able to break above resistance, and the Quantifiers turn positive. In bear phases, the indices fall apart at resistance, and the Quantifiers are rejected at the zero line. Therefore, for next week we can expect either a break-out as shown in scenario #1, or a rejection at resistance and a downside reversal, as shown in scenario #2. Thus, a close above resistance, the action would imply that scenario #1 is in play; on the other hand, if the indices hang around resistance for 2-3 trading days, and then they begin to move lower, the action would imply that scenario #2 is in play.

(Current) Last week the SP reversed at resistance, however, NASDAQ continued on, and it is about to test resistance this week. In the meantime, we have indicators close to the zero line, while getting conflicting signals from others. For example, we got a buy, a neutral, and a sell signal, all for NASDAQ, depending upon which timing tool you're looking at! Obviously, you want to take a position when there is a little more agreement among indicators, and now is not the time. Usually, we get such a divergence in signals and readings when there is an important change taking place under the surface. The markets have been declining for six months, so either the decline is going to accelerate, or we are witnessing the early signs of a trend reversal, from down to up.

The overall technical picture is more weak than it is strong, and fundamentally the market is already fully valued, so we don't have a whole lot to be bullish about. At the same time with support holding, we can't be too bearish, either! For next week, we need to pay attention to the SP; NASDAQ won't go very far if the SP breaks down! Ideally, for the bulls to have a chance, the SP ought not to close below 1145, although 1135 could also do the job. If the SP closes below 1145, it would imply that the odds favor trouble ahead. A subsequent close below 1135 would provide confirmation that there is more trouble on the way, and we should expect the 1100 level to be tested before any meaningful rally takes place.

In our view, the most exciting opportunity is in the gold complex. Take a look at the XAU chart below. At this point, everything points to the 74-75 level as the most likely downside target, especially if it rallies from its current level up to 81.5-82, and then it reverses to the downside, or it keeps going straight down the first 1-3 trading days of the week until it reaches the 74-75 zone. In that case, we will buy the June 75 calls, and on a reversal and a close above 76, we will add the June 80 calls, and we will buy NEM, AEM and GLG.

Ike Iossif

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