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WEEKLY CHARTS

DJIA: Weekly support at 11000; resistance at 11625.

DJTI: Weekly support at 4575, 4350, and at 4200; resistance at 5050.

SP500: Weekly support at 1245 and 1225; resistance at 1300 and 1325/30.

NASDAQ: Weekly resistance at 2250 and 2350; support at 2135 and 2050.

HUI: Weekly support at 300 and 280; resistance at 345 and 405.

OIL: Weekly resistance at $75 and at $83; support at $70.00 and $65.00.

The TOs are at the top of their range, and stalling, which explains the pullback early on this week.

The trend is NEUTRAL for NASDAQ.

The trend is NEUTRAL for the SP.

Summary

Last week we said, "On Wednesday we pointed out that the major indices had formed the type price pattern which 3 out of 4 times results into a sharp rally within 1-2 trading days. Between Thursday and Friday the SP rallied 35 points (2.8%) from its lows, the Dow rallied 250 points (2.3%) from its lows, and NASDAQ rallied 75 points (3.5%) from its lows. The obvious question in everybody's mind is whether last Thursday the indices put in an intermediate term low, and are they on their way to new highs. Everything is possible, however, in this business we base our decisions, not upon what is possible, but upon what is most probable. "V" bottoms are quite rare; 80% of the time the markets--even if they do not violate the lows for the move--go through a "bottoming process" which involves "backing and filling" and also time. 

For example, take a look below at the chart of the OEX, with the OEX/VXO ratio (relative volatility); we are confident you can see the point. So, although the advance may continue for another two-three trading days, and it may carry up to resistance the odds favor a reversal  between current levels and resistance and a re-test of last week's lows. Therefore, going into next week we will be looking for signs of exhaustion and for a negative price reversal in the zone between Friday's closing levels  and resistance, combined with a downside reversal by the McClellan Oscillators in the  +20/+30 zone. If somehow the indices manage to beat the odds and they do not reverse at resistance but they accelerate to the upside, then in all likelihood we are dealing with  a "V" type bottom. In that case, we will revise our expectations upwards because the major indices will be re-testing their most recent highs within the next 7-10 trading days."

This week, all of the indicators we follow are at the top of their range, and they have stalled. Moreover, price is close to resistance, which explains the pullback of the last two days. The magnitude of the pullback will tell us whether this is the last pullback before a multi-week advance lasting for the better part of summer, or whether last week's advance was the last chance to get out! Also please read: Market Timing.

Ike Iossif

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