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WEEKLY CHARTS

DJIA: If the 10500-10380 zone can't provide support, it will go back down to 10000. However, if support continues to hold, the odds favor that it will go back up to re-test resistance at its most recent highs. (When price can't take out support, it re-tests resistance, and, vice-versa.)

DJTI: If the 3500-3450 zone can't provide support, it will go back down to 3300. However, if support continues to hold, the odds favor that it will go back up to re-test resistance at its most recent highs.

SP500: If the 1168-1165 zone can't provide support, it will go back down to 1150. However, if support continues to hold, the odds favor that it will go back up to re-test resistance at its most recent highs. (When price can't take out support, it re-tests resistance, and, vice-versa.)

NASDAQ: If the 2070-2050 zone can't provide support, it will go back down to 2000. However, if support continues to hold, the odds favor that it will go back up to re-test resistance at its most recent highs.

HUI: Support held, so now we need confirmation of trend change, which will happen with a close above 220. Nimble buyers can initiate a 5%-10% long position in gold stocks, using the 200 support level for the HUI as an exit from the position.

US Dollar: It has more room to rally. If it can get above 85, the next upside target is 87-87.5.

Oil: It is about to test resistance at $50.00; if it can overcome it, the next upside target ought to be $55-$57.

Conclusion

The most notable development from last week's action was that many technical indicators failed at the zero line, and price fell as well, providing confirmation that at least on the short-term the greater risk was on the downside. The question going forward is whether the change in the character of the market that we have witnessed is one of short duration, and in fact it may be near its end, OR it is of intermediate term duration and thus, it is in its early stages with nastier things to come! Technically speaking, we do not yet have the evidence to objectively answer the question. If the decline is near its end, we would expect the indices to hold at support, at worst to fall no lower than the first downside targets, while the technical indicators which failed at the zero line do NOT accelerate to the downside. If the decline is in its early stages, we would expect the indices to break support and continue to close below the first downside targets, while the technical indicators which failed at the zero line do accelerate to the downside as well.

Scenarios #1 and #2 represent the price action that more likely would take place if the decline was in its early stages. On the other hand, scenario #3 represents the price action that more likely would take place if the decline was in its late stages. Use them along with the support levels shown on the table to determine which case will be unfolding over the next 5-10 trading days.

For the past three weeks we suggested to stay in cash or in hedged positions. Going forward, we see no reason to change that.

Ike Iossif

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