July 23, 2005
The S&P 500 confirmed last week's breakout with a rise above the high of [d]. The week started badly with a fall through support at . The index closed at the low but on lower volume. Tuesday recovered on strong volume ; the 1-day retracement a strong bull signal. This was followed through on Wednesday, with a new 3-year high at . Another retracement on Thursday, accompanied by strong volume , was again short-lived. Buying support emerged on Friday, albeit on lower volume.
The market is still a bit choppy and I would wait for a rise above the high of  to add further confirmation.
Resistance is at 1250 and support at 1150.
Failure of the 10000 support level, while unlikely at present, would be a strong bear signal for the entire market.
UPS formed equal lows and may follow the Transport Average; while Fedex remains in a strong down-trend.
Twiggs Money Flow (100-day) shows a bullish trough above the signal line at [a].
The yield on 10-year treasury notes climbed strongly, in sync with 13-week T-bills, while the yield differential (10-year T-notes minus 13-week T-bills) remained at 1%.
Be aware that China's revaluation may have a negative effect on US bond yields. By shifting the RMB to a trade-weighted basket of currencies, China will need to diversify its holdings of US dollars into a broader basket of currencies. This may drive up bond yields and drive down the US dollar. Higher long-term rates would cool the over-heated property market, while the lower dollar would boost exports; so the impact on equity markets is uncertain.
New York: Spot gold rallied to close at $424.40 on Friday. Whether this is the start of another intermediate rally is too soon to tell.
The metal is above the lower border of a large symmetrical triangle and an upturn from here would be mildly bullish.
The FTSE 100 started the week with a 3-day correction on strong volumes. Sellers faded towards the end of the week with the index consolidating on declining volume. A rise above the high of  would indicate that the primary move is likely to continue, while a fall below the low of  would signal that a test of support at 5040/5060 (the February highs) is likely.
The All Ordinaries has broken through resistance at 4260/4275 after consolidating in a narrow band below that level. The correction at  only lasted one day, a strong sign that an upward breakout would follow. The breakout on Thursday was accompanied by strong volume; a bullish sign. Friday's narrower range on increased volume signals selling pressure, however.
Failure of support at 4260 level would be a bearish sign.
The S&P 500 has a major influence over the behavior of the All Ords; so watch this closely in the week ahead.
To destroy can be the thoughtless act of a single day
- Winston Churchill