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WEEKLY CHARTS

DJIA: Support at 10900 and at 10680; resistance at 11050.

DJTI: Support at 4000; resistance at 4250.

SP500: Support at 1275; resistance at 1295.

NASDAQ: Resistance at 2350; support at 2280 and at 2200.

HUI: Support at 300, 275, and 250; resistance at 325.

OIL: Resistance at $64.5, $67.50 and at $72; support at $56.50.

It could be that the rally is over. However, we do not have enough evidence as of yet to make such conclusion. Notice the similarities; there could be another 1%-2% left  on the upside.

The trend is UP for NASDAQ.

The trend is UP for S&P.

SUMMARY

Last week: "In the report for the week of 11-25-05 we had said, "We have got to look for the advance to continue until price reaches the 1285-1290 zone for the SP, and in 2280-2300 zone for NASDAQ.  At those levels, we ought to get  a sharp and short reaction back to support." (see report112505, and also see report121605)

In addition, the technical set-up appears to be almost identical to the one that accompanied the rally that started in July of 2005. Consequently, we believe that the rally may  have another 1%-2% to go on the upside. However, when the current advance is over, we can expect a decline in excess of 3%, and it could be as much as 7%. Notice the similarities between the current rally and the one that started under similar technical circumstances in mid-July of 2005."

Currently, one of the most important things when trying to decipher what the market is telling us, is to avoid getting fooled, which can happen rather easily! As we mentioned early on in the week, the markets could be at an "inflection point" and the rally could very well be over. However, both the current chart formation and the pattern formation of the technical indicators, are identical to what we see right before either a rally  termination, or right before a rejuvenation of the rally (see charts below). Therefore, based upon the evidence at hand, it is early to make the determination with any degree of authority or certainty. If the first is true, we ought to see a close below last Tuesday's lows (Dow<10950, SP500<1283, NASDAQ<2300) sometime this week, followed by a subsequent close below support. If the second is true, we ought to see a close above last week's highs by mid-week. Stay long and keep  half of your stops below Tuesday's lows and the other half below support (also please see sentiment).

Ike Iossif

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