(9-30-05) The indices fell early on in the week in anticipation of wide destruction from hurricane Rita. Fortunately it did not happen, consequently, next week the odds favor a "relief" rally which ought to take the indices back up to resistance. If resistance is overcome, we could get  new marginal highs.

(9-16-05) On Friday we  got the "customary" options  expiration rally, and given that most indicators are flirting with the zero line, the odds slightly favor a continuation for another 1-2 days. If during those 1-2 days, the McClellan Oscillators turn positive, the Quantifiers turn positive, and the BSEs, along with the TOs reverse to the upside, then the rally ought to accelerate no later than Wednesday,  and in the case of the SP for example, we can see new recovery highs  in the 1265-1285 zone. However, if during the first couple of days of the week, the McClellan Oscillators, and the Quantifiers reverse back down at the zero line, while the BSEs, and TOs turn negative, then expect  minor gains on Monday, and Tuesday, and then a reversal and an acceleration to the downside by Wednesday.

(9-9-05) The indices have come up to resistance while the Quantifiers have rallied back up to the zero line. The set up  implies that strictly from  a technical point of view, the odds favoring a break-out are almost  even  with the odds favoring a downside reversal. The  VXO (see chart below) is hinting that we need to be more concerned  about  a downside reversal, due to the identical set-up between now, and early April (see chart below) which resulted in a 5% decline.  Next week we have options expiration, and usually,  options expiration weeks tend to have  a positive bias. In addition, the price pattern associated with a positive options expiration week, is characterized by weakness on Monday, and Tuesday, followed by strength Wed. thru Friday. Therefore, early on  we will be looking for confirmation  that the week will turn out to be a typical options expiration one. If we we have weakness on Monday, and Tuesday but price is contained above support,  we will expect the rally to resume by Wednesday and last until Friday. On the other hand, if the indices rally on Monday, and Tuesday, it would imply that we are dealing with a "atypical" options expiration week, and thus, we will re-evaluate as we go, based on the technical readings that are associated with the rally.

(9-2-05) The indices followed their historical pattern declining into Tuesday, and then rallying to end the week with gains, despite some  minor losses on Friday. From a technical point of view, we got a total  "mixed bag."  Most indicators are either a handful of points below, or, above their respective zero lines implying that the odds favoring either higher, or, lower prices are almost even, and thus, we can't dismiss either outcome.

Based on the patterns exhibited by price, and by the technical indicators, the two most probable scenarios are illustrated in the two graphs below. Keep in mind that the odds favoring either  scenario are roughly even, therefore, we need to pay attention to daily resistance at 1230, and daily support at 1210.  If the SP is below 1210 by mid-week, then more than likely scenario#1 will end up playing out. Conversely, if the SP is above 1230  by mid-week, then more than likely scenario#2 will end up playing out

(8-26-05) All major indices managed to close below support for the week, while most technical indicators  remained deeply in negative territory. Consequently,  the odds favor that the indices will make contact with the first  downside targets listed on our table, which are only 1.25%-2% below current levels. The  question is; will they stop there? More than likely, yes. Unless the market is about to collapse, the first downside targets ought to provide -at least-  a temporary respite for the very simple reason that as it stands right now, the Volume McClellan Oscillators for the NDX, and the OEX are very close to the -100 level   indicating a deeply oversold condition, which  usually acts as the  "starter fluid" for a rally. In addition,  the market has a historical tendency to rally during the week that precedes   Labor Day, therefore, although market participants must be cognizant of the negative technical picture, they also have to be on alert for a rally, especially  if they  have profits to protect from existing short positions. If the market follows its  historical pattern, then the most likely scenario would  be a  continuation of the decline into Tuesday, and then a reversal and a rally into the end of the week.  In the absence of any exogenous event that would justify a sell-off- the real news would be if we get the opposite type of action, such as a rally during the first part of the week, and a sell-off going into the Labor Day weekend, because it would indicate a change in "character" induced by a change in investors' psychology.  In bear markets, investors  are more risk averse -than in bull markets- thus they  have  the tendency to buy early in the week, and they book their profits at the end of the week, because they do not feel comfortable holding positions over the weekend, especially  during a long holiday weekend. The opposite holds true -in general- during bull markets. Consequently,  if we get a sell-off going into the holiday weekend, the message to be derived from such action would be that market participants are becoming more risk averse, and less enamored with  the equity markets.

(8-12-05) For the second consecutive week,  inconclusive  gyrations and lack of conviction ruled the financial landscape with both bears, and bulls unable to put together two consecutive days of either lower prices, or, higher prices. However, the balance of power is beginning to favor the bulls for the very simple reason that after two weeks of going nowhere neither the SP, nor, NASDAQ have violated support at 1220, and at 2140 respectively, and all the indicator patterns continue to suggest that a  turn-around can't be ruled out. The chart directly below illustrates the point  in a rather simplistic and straight forward manner. It shows  the SP500 with its 10 and 20 DMAs, and a pattern which takes place quite frequently during up-trends; the 10 DMA gently pulls back and makes contact with the 20 DMA while the daily price falls slightly below the 20 DMA. When this pattern occurs, if the up-trend is to continue then within 1-2 days after the 10 DMA makes contact with the 20 DMA an upside reversal takes place and we get 2-4 consecutive days of higher prices. On the other hand, if a break-down is about to occur, then it also happens within 1-2 trading days. Three out of five times the pattern has a bullish outcome, therefore, until we actually get a close below support we can't  justify being "all beared up."  In our assessment, the current technical condition is actually neutral and thus for the time being  the "news of the day" will  continue to have the most  leverage over equity prices. For example, if oil drops to $60, that can be good for a 15-20 point rally in the SP, and if  oil goes up to $70, that may be good for a 15-20 point drop in the SP. In this kind of trend-less environment the best position is to a) stay  away from the major indices until a trend is re-established,  and b) trade those sectors that are trending such as gold, and oil stocks. In the coming week we expect the major indices to test support once again. If it holds, then we'll get another rally towards the 1245-1250 level in the SP, and if it doesn't, expect a decline to the 1205-1200 zone. We continue to hold the assumption that we are dealing with scenario#2, for the simple reason that price so far has behaved in a very similar fashion, and support has held.

(8-5-05) The picture has turned a bit more bearish since last week, and it appears that scenario#2 may be underway. However, neither the SP, nor, NASDAQ have violated support at 1220, and at 2140 respectively, and all the indicator patterns suggest that a  turn-around can't be ruled out. Consequently,  we ought to have a bearish bias, but we can't get all "beared up" as of yet. Keep stops under  the support levels listed below, or, move into cash.

(7-29-05) All the indicators have formed patterns that are identical  to the ones we observed in early and mid-June which resulted in the current rally. Therefore, it is quite possible  that we will get a similar bullish outcome the second time around. However, these types of patterns tend to be a bit reliable the first time they occur, because the second time everybody is aware of them expecting the same results, and that is when the markets get "cute" and  decide to fool the majority by doing exactly the opposite thing!  In any case, given where we are at this point we must seriously consider both outcomes. Either the market is consolidating in a bullish manner like it did previously, or, it is building a top of significance and instead of a bullish resolution we'll get a break-down. If the SP can stay above 1230-1220 over the next 5 trading days, the odds  favoring a bullish resolution that will take the SP up to the 1280-1290 zone, will increase dramatically (see scenario#1 directly below) On the other hand, if the SP closes below 1220 for two consecutive days sometime over the next 5-7 trading days, the  odds  favoring a bearish resolution that will take the SP down to the 1200 zone, will increase dramatically (see scenario#2 directly below) Furthermore, a close below 1200 can result in a full scale retreat back down to channel support in the 1170-1165 zone (see scenario#3 directly below)

(7-22-05) We got half of the indicators implying that a pullback is to be expected next week, while the other half are implying that further price strength ought to be expected, when you put it all together it means that we ought to expect a choppy and difficult market to trade going forward. This type of market conditions precede market tops of significance, but we do not believe that such top is completed, it has a bit more to go. Never-the-less, we do believe that we ought to expect a pullback sometime this week, and depending upon how deep the pullback turns out to be, we will draw further conclusions with regards to how far we are into the topping process. 

(7-15-05) The McClellan Oscillators are at the zero line, the Volatility ratios are at new highs, the Quantifiers have turned down, and the rest of the indicators have diverged negatively, therefore, the odds are better than even that over the next 2-5 trading days we will get a pullback, but given the magnitude of  the initial thrust of the  move we also ought to expect support to hold.