Did You Catch This 1, 2, 3?

finished almost unchanged. The SPX
(
$SPX.X |
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1245.04, while the Dow
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$INDU |
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would be above the top of the range at 10,718. The low end of that range is

10,573. The
(
QQQQ |
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PowerRating) closed at 40.06 vs. Tuesday’s 40.08 close, and the

Nasdaq
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$COMPQ |
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major indices." NYSE volume was 1.51 billion shares with the volume ratio 49 and

breadth -173. Although crude oil lost a point to 60.86 (-1.7%), gold gained 4.5

points to 436.80 (see 08/03 commentary). This was good for +4.0% in the $XAU
(
$XAU |
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PowerRating),

+5.4% for the $HUI
(
$HUI.X |
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PowerRating) , and our core gold stock,
(
NEM |
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PowerRating) was +5.3%, breaking out

of a 10-day range above 38.68 to a 40.27 intraday high and 40.17 close. The

200-day EMA is 40.35. NEM is a two-way core stock (even though it is "Below the

Line") because it is a commodities stock, same as energy. The stock has been

good to traders after we played the 1,2,3 HB (Higher Bottom) reversals in May

action as the
(
SMH |
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37.94, -0.9%. The SMH has been good to us having played it off of the wave 4 low

of 27.75 with position entry above 30 or 30.50 depending on the daily or weekly

chart. The .618 retracement to the October 2002 17.24 bear market low from the

bull cycle high of 45.67 was 28.10 and there was also extended standard

deviation band sequence at that .618 zone. The next level we took long positions

was on the breakout of that 34.95 – 35 range which you had anticipated from many

previous commentaries. The SMH hit 38.32 on Tuesday vs. its 38.82 .618

retracement to 45.67, closing yesterday at 37.94. Only daytrades have been taken

in the SMH after the 34.95 – 35 range breakout. The original commentary was that

the SPX fifth wave would only extend above 1229 to the 1254 – 1310 zone if the

semis were leaders, which they were, and the 1229 magnet was taken out. The

nine-month +2.0 standard deviation band is now 38.50 and the +3.0 band is 40 –

the XLB close at 29.05 and any range breakout with volume could see 30 – 30.85.

(
PX |
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Another XLB component stock,
(
APD |
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yesterday, closing at 61.23, so that becomes a key XLB focus stock.
(
DOW |
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PowerRating) —

47.97 — remains just below its 48.96 range high and is in a similar range as

the XLB. These XLB stocks will only be played intraday if the Generals show up,

and in fact, that goes for all of the big-cap stocks. No long overnight