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WEEKLY CHARTS

DJIA: There is more room to the upside; resistance comes into play at 10625.

There is more room to the upside; resistance comes into play at 3680.

SP500: There is more room to the upside; resistance comes into play at 1200.

NASDAQ: There is more room to the upside; resistance comes into play at 2070.

 
HUI: Bullish on a close above 180, and bearish on a close below last week's lows.

Oil: As long as the $47.5 level holds, the uptrend is still intact.

The T.O. is rising; at the same time, it is close to the top of its range,
which implies that at the very minimum we ought to expect a pullback.

The T.O. is rising; at the same time, it is close to the top of its range,
which implies that at the very minimum we ought to expect a pullback.

The trend is UP for NASDAQ.

The trend is UP for the SP.

Conclusion

In the weekly report for 4-29-05 we said, "...Notice that the level of assets in the RYDEX bear funds. They are pretty close to the zone from where significant rallies have started. If you are short, keep stops at resistance. If resistance is taken out, cover, and if the break-out is fake, you can re-short later, but not get too comfortable in case we get a 5%-8% rally in the next 5-10 trading days. (scroll down the page to see the chart)

(Current) Last week scenario #1 finally came into play, as all the indices--led by NASDAQ--rallied sharply, and the question is whether the rally signifies a true change in the intermediate trend, which has been down since the end of last year. As we can see from all the charts, the indices have rallied towards the uptrend line that was violated earlier in the year, and in that respect, there is even a little more room to go on the upside before they have to negotiate with it.

Rallying back up against previously violated support is the most usual action we see after such violation has taken place. Therefore, by definition, until we have a close above that resistance, the odds that the intermediate term trend has been reversed stands only at 50/50. Some will point out to the downtrend line that has been negated by NASDAQ after last week's rally and take it as a "bona fide" sign that the trend has been reversed. In our view, it only represents half of the picture--and it is a positive sign--but the earlier point we made represents the other half of the picture.

We saw similar action last year. NASDAQ broke its downtrend twice only to make lower lows a few weeks later! Is there a danger of such performance to be repeated? Yes, look at the QQQ/QQV ratio. It is right at the same level it was when NASDAQ registered its last recovery high at the end of last year.

In summary, we believe that the evidence points to a neutral picture with regards to the intermediate term trend, but since all the indicators are above zero, not only the short-term is definitely positive, but also the first test of support ought to be successful, which means the first dip ought to either be used to add to longs, or initiate longs with a stop right underneath support.

Ike Iossif

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