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The McClellan Oscillators are at support. If it continues to hold we will see higher prices for the rest of the week.
SUMMARY For last week we said, "The indices remained in a "state of suspended animation" during OPEX week--as we had suspected. For next week the odds favor a retreat, but we won't have confirmation of it until we have a close below 1357 for the SP and below 2325 for NASDAQ. On another note, we would like to issue an alert for a BUY SIGNAL on gold/gold stocks that may come during the first 2-3 trading days of the week. This week, given last week's price action, the two most likely scenarios are shown in the illustrations below. Basically the pattern suggests that either: a) Friday's decline will be extended by another 1%-1.2%, but it will be followed by another run to the upside (see scenario#1). In that case, the 2325 level for NASDAQ and the 1370/65 level for the SP should provide support triggering an upside reversal by no later than Tuesday. b) Friday's decline will continue down to the first downside targets (see table below), but it too will be followed by another run towards the most resent highs (see scenario#2). In that case, the 2300 level for NASDAQ and 1360/55 level for the SP should provide support triggering an upside reversal by week's end. Regardless of which scenario ultimately takes place, there is an additional important message that can be derived from the current price pattern: although the rally from the July lows may be near its end, the "end" is at least 7-15 trading days away; thus, shorting the equity markets at this juncture may turn out to be a rather poor idea. Also please read: "A market top is expected on the week of 11-6-06."
Ike Iossif
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