Three weeks ago, in my weekly analysis for week ending 3-9-05, I gave the two scenarios shown on the graphs for  NASDAQ, and the SP. So far the forecast has been accurate, so, the chances for the remaining also to be accurate are rather high.  I believe we now are at point (1), may see a small bounce up to point (2), and then a resumption of the decline back to point (3), OR, the market may just keep on going straight down, despite its current oversold condition.  This week's selections have two stocks that will benefit from a bounce (SYNA, ONXX) and two that will tank with the market if it continues lower without a bounce (LSS, and CY) 

Given the market's overall elevated risk level, we have kept the size of the positions rather small, and in two cases (ONXX, CY) the trades are hedged. Since last weekend, I have alerted you of the possibility for a substantial trade involving the XAU, I am still planning on it, for more details please read my comments below.

Back on 3-10-05, I expressed the opinion that the XAU was in a declining channel, and although it had gone straight up from its bottom in February, it would reverse at channel resistance and it would go back down to channel support. At the time we had the March 100 puts, and I decided to keep them because I was expecting the decline to erupt almost immediately.  As it turned out, the furious decline started on Monday, right after the March options expiration on Friday! Last weekend, after doing my weekly analysis, I concluded that the XAU was going to be on the move and that is why we sent out the alert that we might open a position prior to the upcoming HOTS issue.

I  was expecting first a  decline to the  50 day m.a., a 1-2 day failed bounce up to resistance, and then a collapse. So, I was planning to buy  puts on the reversal to the downside. However, the XAU gapped down and went straight thru its 20 dma, its 50 dma, and all three fib retracement levels (see different color lines) without the slightest hesitation, which makes it very difficult to establish a position. Based on my measurements of the magnitude of the downside momentum thrust, I believe that going forward, the two most probable scenarios are the following;  a) the decline continues un-interrupted all the way down to channel support around 85-84, or b) we get a bounce between 89.90 and 91.90 up to 93.75-94.75, and then another leg down to 85-84. Thus, my plan is to open a small long position between 89.90 and 91.90, and then switch to a large short position if the bounce stalls below 95.