First off,

I'd like to apologize to all my readers for the lack of reports in 2008. No excuses just a promise to do better. I'm going to change the format a bit that will hopefully allow more information more often. All subscriptions are either lifetime or based on the issue number but that is no excuse for the lack of information in 2008 so far. The rest of 2008 will be much better.

Sincerely,
Steve Hunter, ULTRA Financial Systems LLC.

SPX Technical Analysis

Bear Market Aborted

We are now looking for an long entry into this market with our accounts not managed by mechanical methods as we believe the SPX will make a run at new highs. Considering all the recent events; political campaigns, oil prices, media exaggerations, etc, we believe everyone just got too negative too fast to support further downside at this time. The market will almost always do the opposite of what the majority expects. With the majority expecting $200/bbl oil and further mortgage disasters, we believe that a significant bottom is in. We're a little late to this party but such is life.

Here is the scenario we expect:

• A Head-and-shoulders bottom (HSB) has formed and has been confirmed by a break above NL. We were worried that this would be a false break as there is still strong overhead resistance due to R1. Honestly we still are worried about this possibility.
• The SPX is having some problems getting above R1 but we believe it will soon succeed and move sharply higher to 1500. The SPX has moved above the R1 version in the line chart which is often a predictor of a future break above the bar chart version.
• The height of the HSB implies an eventual move to around 1600 near R2.
• Once the break above R1 becomes obvious, the SPX should move quickly to 1500 replicating a symmetrical move down in the past.
• We believe that R2 and S2 will eventually end up being the boundary of a large Broadening Top. (S2 does have another point before 05/14/07).

Short-term Plan

Most gaps in the indexes fill and we believe the SPX gap formed on today's open will fill during the day tomorrow as the SPX drops down to support S3. Once R3 is overtaken to the upside, the SPX should move to 1500 very quickly.

Therefore, we are looking to go long at tomorrow's close with our accounts not managed by mechanical methods. About the only case that will abort this plan is if the SPX explodes to the upside on 05/15/08 to 1500. We feel this is unlikely. More likely is that we'll fill the gap and churn between 1400-1410 throughout the day.

NDX Technical Analysis

The NDX Chart is Troublesome

There are a number of unfilled gaps in the NDX which frankly have concerned us about this rally. Most gaps fill but the NDX is noisy and we're now ready to admit that these gaps may not fill any time soon.

Having said that, the NDX is in an obvious uptrend. It has formed a very obvious channel bound by S1/R1 that will indicate whether this rally has legs. If S2 were to fail, we'd expect a drop to S1 which we'd expect to hold. If S1 fails we'll have to reevaluate our entire bullish opinion on the market.

We'll move 1/3 into the NDX at its next test of S1 as long as our general market opinion is still bullish. We'll update as the NDX nears S1.

RUT Technical Analysis

RUT Breakout

The RUT has broken out above the downtrend line R1 and has confirmed a Head-and-Shoulders Bottom (HSB) that implies a move above 800 (HSB-IMP). This is another indication that the next significant move in the market is going to be up. The RUT ran into resistance at the old HST-NL as old support is often resistance to moves back up.

We'll move 1/3 into the RUT at its next test of S1 as long as our general market opinion is still bullish. We'll update as the RUT nears S1.

XAU Technical Analysis

Is 160 going to Support the XAU ?

Last time we said, that we expected the XAU to drop to 160 at which point we'd be heavy buyers. We still believe that the XAU will touch S1 at 160 soon. But now we're not so sure that will be the bottom. The XAU in 2008 has formed an imperfect Head-and-shoulders Top (HST) which if NL? were taken out would imply a drop to S2 at 120. The XAU is noisy and patterns are very imperfect and less reliable than stock market index charts. However, this is still a possibility. Are we entering a new period of sinking commodities, a rising dollar, and a big stock market rally? It's very possible and we're going to watch this chart very closely.

We are still looking to buy XAU related stocks at 160 but we'll be doing so cautiously. More later...