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WEEKLY CHARTS

DJIA: As long as the 10380 continues to hold, and so far it has, it is good news for the bulls.

DJTI: As long as the 3450 continues to hold, and so far it has, it is good news for the bulls.

SP500: As long as the 1170 continues to hold, and so far it has, it is good news for the bulls.

NASDAQ: As long as the 2000-1970 zone continues to hold, and so far it has, it is good news for the bulls.

HUI: Last week's reversal was discouraging, but the 200 support still held.
It would take a violation of trend support to turn the picture outright negative.

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

Last week I said: "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."

In my view, the overall picture remains mixed, with neither the bulls nor the bears firmly in control. However, the bulls have made small progress against the bulls, the indices are still holding above support, and some of the technical indicators are showing positive divergences,  which explains the "pop" this week, but it would be a mistake to assume that it is certain. At this point I assume that either scenario #2 or scenario #3 is unfolding, and I see no good reason to change our position, that for the time being, cash or hedged, is the best place to be.

Ike Iossif

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