(4-29-04)  The markets  continued lower on increasing volume, he Dow managed to close above the 10250 support level, while the SP and NASDAQ penetrated their respective trend-line support, but closed above the day's lows, making  them support for tomorrow.  Given the current oversold readings of the McClellan Oscillators, we ought to get another bounce within two trading days. However, the real question is this; so what if we get another bounce, we have gotten six from the -200 area since January, but the indices are lower now than they were in January, February, and March! 

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(4-26-04) Special note about the XAU:

We have received a large number of emails regarding  possible entry/support levels for the XAU. The chart below shows the entire bull move in the XAU that started in February of 2001. Notice that the rising channel is still intact, and channel support is currently at 71.78. The XAU hasn't made contact with channel support for 20 consecutive months, which is twice as long as its usual  of 8-10 months. Consequently, although it does NOT mean that it MUST make contact with channel support, the fact that it has gone twice as long without doing so, suggests that it is overdue for a visit. In addition, notice that the 71.78 level, also represents a 61.8% Fibonacci re-tracement  level.  Channel support points, which also happen to be Fibonacci re-tracement levels, tend to act like magnets. Therefore, If the XAU  violated its recent lows -which by the way they also came at a Fibonacci re-tracement level-  then more than likely we ought to expect  a further decline to 77, and below that to 71.78-72.  If the XAU does pull back to 71.78-72, it ought to provide those who have been patient with  a rewarding trading opportunity. (Also please read our comments about gold, in the latest monthly report)

(4-28-04) Follow up note:

Gold stocks got pummeled today, look for a possible  bounce around the 77-78 level, but more than likely, it will ultimately pay a visit to the 71-72 level.

(4-28-04)  The markets could not find the strength to mount even a minor  rally, as the odds were suggesting based on the chart pattern of the previous four trading days. Usually, when the market can't take advantage of a bullish set-up, and it declines instead,  the message is one of weakness and it  implies that the decline may have more to go. Tomorrow, we ought to see a test of support (see table) if it doesn't hold, then  a further decline to the first downside targets should unfold in the coming days.

(4-27-04)  The markets remained in "consolidation mode"  registering minor changes. We do not have much more to add today, to yesterday's comments, other than the  chart pattern  of the past four trading days,  65% of the time is followed by  two, or, three up days  with total gains that do not exceed 2%. Thus, if the market does what the odds suggest, then we can see a minor rally into Friday, with the real action taking place next week. 

(4-26-04) All three major indices challenged resistance, and then they pulled back. From a price only based point of view, the action  was consistent with the type of price behavior that we see during consolidation periods, which precede successful break-outs. However, as we mentioned in the weekly report, the internals are more consistent with  failed consolidations, which precede  break-downs. In our view, either outcome is equally possible, and thus it makes more sense to wait for the "break" to take place, and then establish positions with stops at the break-point.  Going forward, pay attention to the resistance and support levels listed in the table below. If the indices close above resistance, or, they pull back and support holds, then add, or, initiate  longs. If they violate support initiate shorts. 

Special note about the XAU.

We have received a large number of emails regarding  possible entry/support levels for the XAU. The chart below shows the entire bull move in the XAU that started in February of 2001. Notice that the rising channel is still intact, and channel support is currently at 71.78. The XAU hasn't made contact with channel support for 20 consecutive months, which is twice as long as its usual  of 8-10 months. Consequently, although it does NOT mean that it MUST make contact with channel support, the fact that it has gone twice as long without doing so, suggests that it is overdue for a visit. In addition, notice that the 71.78 level, also represents a 61.8% Fibonacci re-tracement  level.  Channel support points, which also happen to be Fibonacci re-tracement levels, tend to act like magnets. Therefore, If the XAU  violated its recent lows -which by the way they also came at a Fibonacci re-tracement level-  then more than likely we ought to expect  a further decline to 77, and below that to 71.78-72.  If the XAU does pull back to 71.78-72, it ought to provide those who have been patient with  a rewarding trading opportunity.

(4-22-04) Today the bulls followed thru with flying colors.  We now ought to expect a test of resistance (see table below) by tomorrow. Something that we need to keep in mind is that the Quantifiers have experienced dramatic  changes in a matter of a few days. When that happens, shortly after the overall market volatility picks up substantially

(4-21-04) Today's action was  a victory for the bulls. Buyers came in at the opening and managed to drive the indices higher, averting a violation of support. As we said yesterday, the signals  coming from the market are conflicting, and it can go either way. A good example of the possibilities can be seen in the Transportation Index (see charts below) All three of our Timing indicators are neutral, underlying the two possibilities. If today's action is to develop into a full scale rally, we need to have follow thru tomorrow. 

(4-20-04) The indices got roughed up after investors concluded that short-term interest rates will be rising sooner than they had expected. Total  Volume increased, while the  internals such as,  up/down issues and cumulative volume,  were outright abysmal.  If one wants to  find something  positive in today's action, then we can point out to the fact that the major indices, either they didn't violate support, or, if they did, they did so by a handful of points. Tomorrow ought to be the market's last chance to make up its mind , either support will hold, or, it won't! The Thrust Oscillators  -with their minor reversals-  illustrate  quite clearly the two possibilities looming ahead. Either they'll accelerate their decline (scenario A) or, they will form a double bottom, and they will turn up forcefully (scenario B) We should know by tomorrow.

(4-15-04) All indices continued to stay above support, but the sharp decline in the Quantifiers is a troublesome development. It is very rare that we see a  12 point decline in the Quantifiers while the indices hover around support, and such action -according to our records going back 20  years- has  eventually resulted in violation of support, if not immediately, a few days later. It should be noted that  two  out of  the six  times that a similar development took place the last 20 years, were  on 10-8-87, and on 8-26-98. In both cases what followed afterwards was rather traumatic for equity investors.  Consequently,  caution here is warranted, if support is violated -on a closing basis- we would expect the indices to decline to the first downside targets in a hurry. 

(4-14-04) The indices  bounced from support, while the Quantifiers remained positive. Given the deeply oversold state of the markets we ought to expect continuation of today's bounce. However, the fact that the Quantifiers have remained positive so far, has bullish implications -at least for the short term. It means that if tomorrow we get continuation longs ought to be initiated, or, added to, with stops under today's lows.

(4-13-04) The indices were repelled once again,  they reversed and took out last week's lows. Given the continuous decline in the McClellan Oscillators, Thrust Oscillators, and Buy/Sell Equilibrium Indexes, we ought to expect a further decline to test support. If support doesn't hold, then we ought to expect a further decline to  the first downside targets (see table below) However, if support does hold, then the bullish case is still alive, and the dip ought to be bought.

ALSO PLEASE READ:  EXTRA FOR 4-13-04

 (4-12-04)  The indices rallied modestly, but they still remained below last week's highs. As we mentioned in the weekly report, we view last week's lows and highs as the "line in the sand." A close above last week's highs would suggest further advance, while a close below last week's lows would suggest a further decline. The question is whether the action of the past 5 trading days will turn out to be  a consolidation, or, a top. The seasonality is quite positive, but looking at the SPX/VIX ratio we got to be skeptical about the markets' ability to mount another leg to the upside lasting several weeks. Since 1990, the ratio has been above current levels only once, in August of 2000. This year so far, the 80 level  has repelled the SP500 twice,  consequently the odds do not favor a sustainable advance from current levels.

(4-7-04) The indices violated  channel support thru-out the day, setting off a false alarm signal! During the last 15 minutes they recovered sharply, and in after hours trading both the SP, and NASDAQ gained ground adding 4 and 10 points respectively. If the gains hold over night and the indices rally from the start tomorrow, then in all likelihood the pullback of the last two days, is all the pullback we'll see for now, which means scenario#3 is playing out (see weekly report) For tomorrow we need to pay attention to today's highs and lows, if the indices trade above today's highs then technically,  the steep rising channels that have defined  the price action since the March lows, are still valid, and  we ought to expect test of channel resistance. The only  caveat is  if the indices gap up in the morning. If they do, the chance of a rally failure later in the day  is real, even if the indices trade above today's highs. Also keep in mind that there are traders who would want  lock in profits and  go home for the long weekend flat, which means we got to worry about selling coming in late in the day. 

(4-6-04) The indices pulled back, as we had indicated yesterday, but held firmly above support. The key thing to watch for, over the next couple of days is whether the pullback continues while the indicators remain above their respective zero lines. If they do, the pullback ought to be bought. If the markets continue higher, without any further pullback, then scenario#3 which we mentioned in the weekly report, is  playing out.

(4-1-04) The indices  marched on and tested resistance while all of the indicators got almost fully overbought. Tomorrow's  employment report should provide the catalyst for either a retreat -which is our expectation- or a break-out. If we get a pause, given that all indicators have turned positive, as long as they remain positive during any pullback, the pullback ought to be bought.