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Weekly Charts - Ike Iossif (9/20/6)

Submitted by WSW Staff on Wed, 2006-09-20 07:08.


DJIA: Weekly support at 11280 and 11000. Resistance at 11670 and 11850.


DJTI: Weekly support at 4000. Resistance at 4600.


SP500: Weekly support at 1290 and 1260. Resistance at 1326 and 1350.


NASDAQ: Weekly resistance at 2240 and 2360. Support at 2120 and 2020.

HUI: Weekly support at 275 and 250. Resistance at 305 and 360.


OIL: Weekly resistance at $70 and $80. Support at $64.50.



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The TOs are rising, which means the indices can still move higher. However, the triple negative divergence implies that the upside potential is limited to 1.5%-2.0%.


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SUMMARY

Last week we said, "The indices were unable to exceed their previous highs--as the technicals were suggesting--and they turned back down. As of Friday's close all the indicators we follow are at the zero line, which means that "technically" the markets are at a neutral point and going forward they can move in either direction. Therefore, we can't exclude another attempt at the highs; on the other hand, if support is violated, then the odds will favor a further decline to the first downside targets."

(For the week of 9-18-06) Since last week, all the technical indicators have risen above their respective zero lines, which is supportive of higher prices. However, the steep negative divergences also suggest that if the indices do move higher--directly from current levels--the magnitude of the additional gains won't exceed more than 2%. Keep in mind that this week there is a FED meeting. The FED's action or inaction, coupled with the language of the FED statement, could turn out to be the catalyst(s) for a 2% advance or for a 2.5%-4% decline. In summary, if there is a rally after the FED meeting, since we believe it will not exceed 2%, we see no reason to add to new long positions. Instead we would use the opportunity the get rid of those holdings in our portfolio that have the lowest relative strength. (Also, please read "High oil prices do not cause inflation".)

Ike Iossif

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