December 5, 2006 11:00 am (Mountain)

In the last few months, the SPX has formed short lines of horizontal lines of resistance that when over come result in rallies. Each of the resistance lines have had parallel lines of support forming small horizontal channels. The extent of the rallies after the channels have been broken have been related to the width of the channels exactly as one would expect.

We are currently trading above the most recent channel's resistance line (RC) at around 1413. If we can close above RC, then a rally equal to the width of the channel should be expected. That takes the SPX up to around 1450.

Therefore, if the SPX is at or above 1412 at our mutual fund cutoff time (1:45p mountain), we'll consider that a clear break above RC and will go 100% long SPX related funds. Considering the seasonal bullish bias until the third trading day of 2007, we'll give this trade some room and stay long unless SC is clearly broken to the downside.

September 1, 2006 12:00 pm (Mountain)

We are going to relax our sell objective a little bit and sell to 100% cash at today's close.

Historically, the day after Labor day has a bearish bias. This was not true during the 1990s but has again become true this decade.

Interestingly, when the Friday before Labor Day has NYSE Advances higher than NYSE Declines, during all the three periods listed above CARWI is very negative.

• During the 1990s, %Wiiners = 40% and CARWI=-36%.
• From 2000 to present, %Winners = 25%, CARWI = -94%.

August 8, 2006 1:00 pm (Mountain)

Pretty much everything we said yesterday applies to today and every day following until we either bounce off S1 or break below below it. Today it look like a close around 1273 will be an obvious breakout.

August 7, 2006 1:00 pm (Mountain)

There is a very well defined uptrending channel that has formed over the last ten days. As you can see above, we are testing the bottom of this channel today (S1). If S1 fails and the SPX closes below it, we'd expect a minimum drop of the width of the channel to at least 1260.

As you can see in the daily chart, the SPX broke out above a Symmetrical Triangle (ST) which implies an eventual move upward of the width of the Triangle to about 1320. However following breakouts there is often a retest of the old resistance before the main move gets underway. A retest would bring the SPX back down to around 1260 which corresponds exactly to the objective of the R1/S1 channel failure as well.

Lastly, the false R1/S1 channel breakout at the open on 08/04/06 was a disappointment that implies a short-term correction is probably in the cards.

Therefore...

For our capital not managed by mechancial methods, we'll sell to 100% cash if the SPX is below S1 (~1274) at our mutual fund trading cutoff time hoping to repurchase at around 1260. If the SPX collapses to significantly below 1270 at the cutoff, which is very possible, we'll just ride out this short-term correction. At this point we fully expect to reenter SPX related funds after a 1% drop. But honestly the main reason for this sale is that short-term chart pattern failures can turn into more important failures rather quickly. If S1 were to fail today with followthough selling tomorrow taking the SPX below 1260, we'd then have to consider the entire Symmetrical Triangle breakout false and look for the SPX to drop to S2 at around 1230. Admittedly, this is a risky move that could result in us missing out on a big up day. But if the R1/S1 channel fails technical analysis tells us to sell and that's what we'll do. As usual we'd rather be safe than sorry. Hopefully, the SPX will rally into the close making this update totally irrelevant.

July 28, 2006 12:30 pm (Mountain)

For our capital not managed by mechancial methods, at today's close we'll hold our 100% investment cash in SPX related funds as long as the SPX is still up around 14 points at our Rydex trade cut-off time. Monday is July 31st and as we said the last few days in July are bullish. At 12:30 pm with the SPX at 1277, it has made a clear break-out above the top of the Symmetrical Triangle (R1) detailed in the last report. If today's gains hold, Monday could be a huge up day as investors see the breakout and buy heavily. However, if the SPX sells off into the close down to around 1270, we're going to accept a minor gain and exit to 100% cash considering R1 will have turned the SPX back downward. We really want to see strength into the close as that makes our decision to hold for Monday very easy.

Jul 14, 2006 11:00 am (Mountain)

SPX Testing Support

It looks as though the SPX may break down below the important weekly support line S1 today. We'd consider a close below 1230 a clear break down.

However, this scenario is complicated by the fact that the SPX has formed an uptrending channel bound by R2 and S2. S2 is also well-defined support and and would require a close today below 1220 in order to be considered violated. The stakes are signficant. If the next move is going to be down, we'd expect a significant bottom to form around 1150 which is 7% below current SPX levels. We'd prefer not to ride out this type of move. But we don't want to panic sell at a low and get whipsawed either.

It used to be that when ADR (ADR= NYSE Advances / NYSE Declines) on the last trading day of the week was less than 0.5, the following Monday was usually a signficant down day. So if there was any doubt, it paid to exit at Friday's close to be safe. However, since the bull market top in 2000, the exact opposite has been true. Weak Fridays have strongly tended to be followed by Monday bounces.

Interestingly, this down Monday after a down Friday phenomenon was never true for July. It has always been true that Weak Fridays in July have strongly tended to be followed by Monday bounces.

Therefore, for our capital not managed by mechancial methods, at today's close we'll keep our 100% invested position in SPX related funds unless there is a total collapse into the close with the SPX closing below 1220 resulting in a break down and out of the uptrending channel bound by R2/S2.

May 30, 2006 9:00 am (Mountain)

For our capital not managed by mechancial methods, at today's close we'll move 100% of our cash into SPX related funds. Historically, the last day of May and the first three days of June have a significant upward bias with the SPX appreciating at a 42% annual rate since 1942 and even higher in real-time since 1995.

May 17, 2006 11:28 pm (Mountain)

For our capital not managed by mechancial methods, at the next close, where the SPX closes below 1255, we'll move 100% of our cash into SPX related funds. A drop this low today is unlikely but we believe that a significant bottom will set up in the SPX 1225-1250 area. If the SPX crashes at today's close to near 1250 we'll be there to happily buy the panic selling.

May 08, 2006 12:53 pm (Mountain)

For our capital not managed by mechancial methods, at today's close, we are moving all of our stock market positions into 100% cash hoping to buy at lower levels. When you take out the first three days and last two days of May, the rest of the month has a downward bias with the SPX appreciating at an annual rate of -6%. With the SPX near the upper boundary of the uptrending trading range that's been in effect since late 2005, we feel that the probably of re-entering the market at lower levels is very high.

© 2006 ULTRA Financial Systems, Inc.