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WEEKLY CHARTS

It stalled at resistance for the second consecutive week. We would expect a 2%-3.5% pullback from it.

It stalled at resistance--just like the Industrials--for the second consecutive week. We would expect a 2%-3.5% pullback from it.

SP500: No difference here! It stalled at resistance for the second consecutive week. We would expect a 2%-3.5% pullback from it.

NASDAQ: It stalled at resistance for the second consecutive week. We would expect a 2%-3.5% pullback from it.

HUI: It finished the week with a bang, but if it stalls at resistance for the third consecutive week, we would expect a 3.5%-5% pullback from it.

Oil: If support holds, it would imply a trip back up to its previous highs.

The T.O. is declining, which implies that we ought to expect a further pullback at this point.

The T.O. is declining, which implies that we ought to expect a further pullback at this point.

The trend is NEUTRAL for NASDAQ.

The trend is UP for the SP.

SUMMARY

Last week we said: "The divergences that have taken place coupled with the stalling at resistance suggests that next week we will get the test of the "zero line" by several of our indicators that we talked about in our daily reports. However, we do not expect a violation of support. In fact, we would be looking for support to hold in order to add some long positions."

(Current) There are three important points to be made, given the price action of the last two weeks.

a) The indices failed to get above resistance for the second consecutive week, and most indicators are declining, which implies that some additional weakness is quite possible this week.

b) The Quantifiers are testing the zero line for the first time since the rally started. If the advance of the last few weeks represents the beginning of a new intermediate term advance, the Quantifiers ought not to fall below -10 for more than a couple of days. However, if the rally of the last few weeks represents the "last gasp" of the intermediate term advance that started in the fall of 2004, the Quantifiers will fall below -10, they will remain negative for several days, if not weeks, and the indices will break below their first support level.

c) The preferred position according to our three trend centric timing indicators is cash by a margin of 5 to 1 (see table below).

In summary, over the next two weeks we ought to see an important development. Either we will get confirmation that the rally of the last few weeks is only the first leg of a multi-week advance, and we should use any successful test of support as an opportunity to re-establish long positions. Or we will get confirmation that the rally of the last few weeks was the last gasp of the advance that started in the Fall of 2004, and we should use the break of support as an opportunity to establish initial intermediate-term short positions. While awaiting for confirmation of the first, or the latter, the best place to be in terms of market exposure is in cash, or in market neutral--hedged--positions.

Ike Iossif

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