Anticipate Your Next Key Zone

chairs with a -0.4% close yesterday to 1229.03. Last week it was -0.6%, +0.7%,

+0.5%, -0.7% and +0.5% on Friday prior to yesterday’s -0.4%. This has not been a

position trader’s ideal situation as the swings shake you out. The only real

thread has been energy’s sharp upside move, including yesterday’s
(
OIH |
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+1.2% close following last week’s +5.6% gain. The Dow
(
$INDU |
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10,596, the
(
QQQQ |
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(
$COMPQ |
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PowerRating) -0.6% to 2167.

The Dow Transportation index ($TRAN) was -1.3%. NYSE volume was 1.3 billion

shares, the volume ratio 34 and breadth -838. The only primary sector SPDR to

close green was the XLE (+0.9%). The XAU, -1.2%, and XLB, -0.8%, led the sector

downside. Many of the focus list energy stocks continue to make new 52-week

highs as this sector has been a daytrading goldmine after any and all

a range from 29.10 – 26.70 since 04/14/05, closing yesterday at 28.53. This

range keeps reversing the 200-day EMA, which is now 28.23 vs. yesterday’s 28.53

close. The three highs of this range are 29, 29.10 and yesterday’s 28.97 vs. the

double 26.70 bottom. This is a chart picture that will take on meaning depending

on the directional resolution. Both the $TRAN and XLI (industrial SPDR) have

broken their downside channels from the March highs. After all the economic and

earnings hoopla hyped by the media, the major indices are still nowhere relative

to their 12/31/04 closing prices. The SPX is +1.4% vs. its 12/31/04 close of

1211.92, while the Dow, QQQQ and Nasdaq remain below their 2004 closing prices

highlights the current RSI 9 negative divergence and three higher drives to

1238. This is the fifth leg of the rally off the 1136 low and also the fifth

wave off the 769 October 2002 low. The most frequent fifth wave measurement for

the fifth wave would be 1305. You measure the 769 low to the wave 3 high of

1163, then times it by .618 and add the result to the wave 4 low of 1061 which

measures to the 1305 level. I consider the initial part of that zone to be 1254,

which is the .618 retracement to 1553 (March 2000 high) from 769 (2002 low). The

2.618 Fibonacci extension of the wave 1 leg measured from the wave 2 low of 789

is 1273, so that gives you some frame of reference for the next high-probability