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WEEKLY CHARTS

DJIA: Resistance at 10750, support at 10500.

DJTI: Daily resistance at 3825, support at 3725.

SP500: Resistance at 1238 and at 1245, support at 1220.

NASDAQ: Daily support at 2150 and at 2100, resistance at 2200 and at 2240.

 
HUI: Daily resistance at 200 and at 207, support at 197 and at 190.

USD: Support at 88.5, resistance at 90.50 and at 92.50.

Oil: Support at $57.5, resistance at $60.50 and at $62.5.

Utilities: Daily support at 390, resistance at 400.

Notice the similarities between the two patterns. They give us two possibilities, either the market is consolidating in a bullish manner like it did previously, or it is building a top of significance and instead of a bullish resolution, we'll get a break-down.

The 10/20 day TIs indicate that the trend is UP for NASDAQ (we need 2 consecutive days of downside/upside action by both TIs to confirm a change in trend).

Summary

Last week we said, "We got half of the indicators implying that a pullback is to be expected next week, while the other half are implying that further price strength ought to be expected. When you put it all together it means that we ought to expect a choppy and difficult market to trade going forward. This type of market condition precedes market tops of significance, but we do not believe that such top is completed. It has a bit more to go. Nevertheless, we do believe that we ought to expect a pullback sometime this week, and depending upon how deep the pullback turns out to be, we will draw further conclusions with regards to how far we are into the topping process."

(7-29-05) All the indicators have formed patterns that are identical to the ones we observed in early and mid-June which resulted in the current rally. Therefore, it is quite possible that we will get a similar bullish outcome the second time around. However, these types of patterns tend to be a bit reliable the first time they occur, because the second time everybody is aware of them expecting the same results, and that is when the markets get "cute" and decide to fool the majority by doing exactly the opposite thing! In any case, given where we are at this point we must seriously consider both outcomes. Either the market is consolidating in a bullish manner like it did previously, or it is building a top of significance and instead of a bullish resolution, we'll get a break-down. If the SP can stay above 1230-1220 over the next 5 trading days, the odds  favoring a bullish resolution that will take the SP up to the 1280-1290 zone will increase dramatically (see scenario#1 directly below). On the other hand, if the SP closes below 1220 for two consecutive days sometime over the next 5-7 trading days, the odds favoring a bearish resolution that will take the SP down to the 1200 zone, will increase dramatically (see scenario#2 directly below). Furthermore, a close below 1200 can result in a full scale retreat back down to channel support in the 1170-1165 zone (see scenario#3 directly below).

Ike Iossif

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