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WEEKLY CHARTS
New Pattern Emerging?

Last week we said:

"The major indices did take advantage of the "bullish set-up" the Dow and the SP rallied 1.4%, and NASDAQ rallied 1.8%. Going into next week there is still a bit of room left to the upside -roughly 0.5% to 1.0%- however, ultimately the indices will have to deal with the multiple negative divergences. Investors who are not very familiar with technical analysis might wonder what causes the negatives divergences and what they mean.

Negative divergences of the magnitude and nature we have observed during the latest rally are caused by its "narrowness." The rally has been very selective with most issues failing to participate. For example, although the Dow made new highs, the Transportation Index, the Mid-caps, the Russell 2000 -just to name a few- have failed to do likewise. Usually when a new bull move starts we see wide participation right at the very start. It is very-very rare for a new bull  move to start narrowly and widen later on. Consequently, past history suggests that the latest rally is more likely the "end of something" instead of the "beginning of something."

(For the week of 10-10-06) The major indices did push a bit higher and now we have a new pattern emerging -although more confirmation is needed. Regardless of miniscule rallies early on, the pattern calls for a further decline lasting into the later part of next week, with another push rally back up towards last week's highs during options expiration week - the week ending 10-20-06. The pattern is supported by the current technical readings - most of which suggest lower prices next week - and by the fact that the SP is up against channel resistance that has prevailed for the last 3 years.

On a separate note we would like to point out that gold/gold stocks appear to have formed a short-term bottom.

DJIA: Weekly support at  11750. Resistance at  12000.

DJTI:  Weekly Support at 4400 and at 4100. Resistance at   4600.

SP500:  Weekly support at  1325. Resistance at  1360.

NASDAQ: Weekly resistance  at 2300, and at 2375. Support at 2200.

HUI:  Weekly support at  280/275, and at 250. Resistance at    310, and at 320.

OIL: Weekly resistance at $70. Support at  $55.00.

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The TOs are  rising, which means the indices ought to bounce higher during the first part of the week. 

 The trend is UP for NASDAQ.

             
The trend is UP for the SP.

Ike Iossif

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