Don’t Chase The London Price Action–Let It Come To You

Friday, taking the SPX
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the week, which was essentially the gains on Thursday and Friday. The Dow
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was +1.4% Friday to 10,448, which was also the gain for the week. The
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which had reversed its 12-month EMA after the 07/07/05 36.55 low, closed at

37.77, +1.9% and +2.7% for the week. The QQQQ is now pressing the upper channel

resistance lines (see chart). The Nasdaq
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+2.6% on the week. The most significant index market action on Friday was the
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— the Russell 2000 — breaking to a new bull cycle high at 65.97 and above the

12/27/04 high of 65.33. The IWM is now above all of its rising 5-, 15- and

40-week EMAs, including its linear regression trendlines (see chart). The new

high now puts the IWM into a 1,2,3 HT (Higher Top) situation, so 65.33 is in

billion shares, with the volume ratio 80 and breadth +1675, so that means the

initial PPT action on Thursday picked up some company. The leading sectors were

the basic economic ones with the XLB (basic materials SPDR) +2.0%, $TRAN +2.0%

and XLI +1.7%. The
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the range again which is price positive, but as you can see on the chart, not on

big volume yet. That makes the 34.95 – 35 zone the initial support level for

and most of all the employment numbers as the Labor Bureau has so much leeway to

apply subjective opinion on the number of jobs, etc. I prefer to keep an eye on

the Economic Cycle Research Institute’s Weekly Leading Index (WLI) which showed an

annualized growth rate of +12.2% in November 2003 and +12.1% on 01/30/04. It

then declined to negative territory from 07/30/04 to 11/19/04 before it went

positive again. It only reached +4.0% by 03/18/05, but dropped to -0.3% by

06/03/05. For the last four weeks, it has gone from -0.3% to 0.0%, +0.2%, +0.9%,

and +1.4% last week, so it is in a positive trend now for those that follow the

to a 26.70 05/13 low. That’s in line with the WLI decline. The XLB then rallied

to 29.10 (.50 retracement 29.35) after reversing the 27 support level. It

declined again to 26.70 and then reversed 27 again, closing at 27.69 on Friday.

The 233- and 200-day EMAs are 28.02 and 28.22 with the downward channel line

about 28.50. It remains in a “Below the Line” status, so the daytrading bias is

to the short side on any continuation move up to the levels. You would also

check daily charts for the same levels of individual basic materials stocks. At

the same time, the semiconductors are a primary focus as long as the SMH can

hold the range breakout above 34.95. The
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longer-term EMA 104 – 103.60 zone. As you can see on the chart, the immediate

overhead resistance is 105.50 – 106. The 99.89 low wasn’t taken out, so there

has been no
1,2,3 LT (Lower Top) trend entry yet, but nothing changes until

intraday low,

and the DIA +2.8% from its 101.74 low, so there is no long intraday interest

unless there is retracement early this week. Initial SPY resistance is 121.75 –

121.95. The next daily chart RST is above 123.25, which is the 03/07/05 high and

a key price and time date which declined -7.9% high-to-low. FYI:  It was also an RST entry which sequence and
Inner Circle traders were aware of well in advance

of the reversal. If you haven’t learned about RSTs, then I suggest you get to it