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September 24, 2006

BEwARe
by Dominick

In my September 16th update I stated:

I am, for the second time since 2002, looking to go bearish against the 1326 to1360 area with a more precise price and time target which is reserved for members.

We are once again in a region that we think we can safely start to predict a top.Let me make one thing clear as I write this, there is no confirmation that a top is in, we are only preparing and waiting patiently. Many other markets still need some higher moves. As stated last week, I have a September 22nd CIT along with some great price targets to watch for.

I have been stressing for months that I did not believe that the market had seen its highs yet and we were rewarded this week as the SPX made a new 5-year high. The OEX also made new highs and is now flirting with its upper diagonal trend line. Many of the other markets, including the Dow, have not been able to tweak out new highs. Some are close and might still attempt it, while others shouldn't, causing intra-market divergences.

For the first time since the June lows, this market COULD have made its high, but doesn't have to just yet. The market has left us at Friday's close with a pattern that can go either way, in my opinion. For those that have a bearish opinion of the market, NOW would be the time to prepare a strategy for a market decline, and/or seek defensive protection against any long-term investments.

It did not leave me with enough clues to say whether it topped on Tuesday or if Friday's low was only a C wave of a flat within an ending diagonal. The good thing is we are really close to finding out, as the market should be tipping its hand by next week. I am in no rush to jump the gun, since the SPX was only able to close 14 points below its new high. We need to see if the bear wants to play a bit more of peek-a-boo.

When this market tops, it will be very clear to see. Maybe that will happen as early as Monday with a gap down, however, I don't see any confirmation as of yet. Also, if my count is correct, there is plenty to the downside with no need to worry about missing 14 points.

The OEX also shows no sign of a major turn YET as it trades only 5 points from its high. As shown in the chart below, it closed right on the upper trend line. A sell signal will trigger once price re-enters the ending diagonal, after displaying a classic overthrow.

I have also been updating some of my proprietary Fibonacci levels for the SPX. Once we were able to advance from 1245, we had a shot at getting to 1360 with resistance at 1290.50 and 1317. 1290.50 was successfully tested and we advanced to 1317, where we found ourselves vibrating around this week. As many were focused on Yahoo news, the Fed decision, the May high, and a bad economic report, we think the market was testing the 1317 area and is about to tell us what it thinks of it.

The chart below was posted minutes before the Fed announcement, showing my targets of 1328.50/1333. The market peaked at 1328.53 with the announcement from the Fed. Whether that was the final high, or the SPX delivers a perfect target, both in time and price will be my focus going into next week.

I had been looking for a CIT on September 22. Was it a high on the 21st as the OEX made its high, or can it have been on Friday's low and we have more upside? We are about to find out real soon. All developing patterns along with support and resistance levels are posted in the forums daily.

Many are talking about the 4-year cycle bottoming at the June or July lows. I don't do much with cycles, but I agree with Jim Curry, who contributes to the Forum. Jim has posted his view on the 4-year cycle this week and I fully agree with him that we have not put in a low for that cycle yet. Combine that with the completing pattern that I can finally use from the 2002 low, and the markets might become VERY interesting in the nearby future!

Sign up for a FREE TRIAL and decide if you can use our service as the markets might be gearing up for an exciting close to September.

We have also started a Newsletter that is packed with Market analysis from many of our contributing Market advisory members such as, Jim Curry, Tim Ords, Glen Neely, Richard Rhodes, Andre Gratian, Bob Carver, Stan Harley, Chartsedge, and many more. Use the link to signup and receive the emailed update. Market updates Be sure to send the link to friends.

The markets now request constant analysis of their chart patterns and we continue to do that everyday. We cover a variety of markets such as the U.S. and European Financial Markets, Currencies, Metals, Energies, Stocks and Commodities. We use methods like Elliott wave, Gann, Delta, and many proprietary indicators.

Market analysts are always welcome to contribute to the Forum or newsletter. Email me @ Dominick@tradingthecharts.com if you have any interest.

Dominick,
a.k.a. Spwaver
TradingTheCharts.com

This update is provided as general information and is not an investment recommendation. TTC accepts no liability whatsoever for any losses resulting from action taken based on the contents of its charts, commentaries, or price data. Securities and commodities markets involve inherent risk and not all positions are suitable for each individual. Check with your licensed financial advisor or broker prior to taking any action.