For Sunday, May 31, 2009                                                 Go to Website
	Current Strategy Positions FibTimer currently has 11 successful timing strategies   2008 Full Year Results Fibtimer Timing   + 17.3 % S&P 500 Index      - 39.9 %         2009 to Date Fibtimer Timing + 26.4 % S&P 500 Index    + 1.8 %   S&P 500 Position -        BULLISH   Nasdaq 100 Position - BULLISH   Gold Stocks Position -  BULLISH   SmallCaps Position -   BULLISH   U.S. Dollar Position -    BEARISH   Bond Position -              BEARISH These positions were started over previous weeks. You need a paid subscription for real time signals. Sector Funds, ETF and Stock positions are not included above.

Last week we wrote:

"An early week rally reversed midday on Wednesday when the SPX nearly had regained all ground lost in the previous week's selling, but then turned lower and finished with a loss for the day. The next two days each had an intra-day rally that was reversed during the trading day, finishing lower."

This week:

The stock market just does not want to go down. If this is true there is little in the way of news that will stop the advance from continuing.

Though we keep finding reasons why the markets should correct, note that we stay with the trend. That is the huge value of following a non-discretionary trend trading strategy.

Over the past month the S&P has been confined to mostly sideways movement. We keep writing that a correction is imminent, yet every time the market starts down, buyers enter and push it right back up.

In the daily chart below, you can see the SPX has formed a pennant formation. We have drawn a red resistance line connecting the declining highs and a green support line connecting the rising lows. Typically a pennant formation, after a substantial rally such as we have had, is bullish. So we expect it to break to the upside. But either way we break from this pennant will likely be the direction the market goes for the next several weeks.

There is plenty of resistance just above current levels.

First is the declining trend resistance line we just mentioned. Then there is the declining 200-day moving average. Many investors consider this to be the dividing line between a bull market and a bear market. A solid close above would be bullish and likely result in additional money entering the market.

Just above this is the Wave 4 high at SPX 934.70. We have been writing about this level for some time. This is "the" critical level that would constitute an Elliott Wave bull market confirmation should it be surpassed. This has already occurred in the Nasdaq, but not in this important big cap index.

So there are plenty of important levels that the SPX needs to surpass and they are just ahead. This is why we have not moved higher over the past month as traders and investors sell into rallies and buy into declines. Each feels certain the market is topping or will move higher. The coming week will probably give us the answer.

There is strong support on the downside at SPX 861.78 which is the 50-day moving average. So far every attempt to sell down has been halted by bulls so the 50-day average has not even been tested. Should we break below the rising trend support line (short green line) in coming days, this is where we will be headed.

We are hearing less talk of a bear market rally. To some extent this is bearish because as contrarians we want to hear bearish comments. They are usually wrong. But if this market is headed higher as it seems to be, there is little that will stop it barring an event of global significance.

Time will tell if there is another lower low in store for the stock market. If that is the case, either we will be in bear funds or money market funds long before.

The CBOE Volatility Index's (VIX) has now closed below 30. Most of this decline occurred in the rally on Friday, but still we would have liked to see the VIX hold above 30. That VIX 30 level appears to be critical to the markets. It only was broken for two days previously before reversing higher. The VIX is a contrary indicator and many analysts use it as a measure of fear in the markets.

The gold market is rising again. Our Gold Timer is up 69%, which is great, but typically when gold stocks and gold bullion rise, it is not good for stocks.

Note that bond yields have been rising and bond prices declining. Plus the U.S. Dollar has been weak. Typically this is all bad news for stocks, but if there is another run higher in store, we will have it regardless. When markets have a head of steam, little can stop them.

Watch the declining trend resistance line (short red line) for a breakout if the SPX closes above it next week.

Conclusion?

The early March close below the November lows, as well as below the 2000-2002 bear market lows, has probably completed a bearish Elliott Wave (5 Wave) pattern. If this is correct we are at the beginning of a new advance that will last months and possibly years. How far it will go is unknown, but it should be very profitable and consist of several waves higher, with corresponding corrective waves along the way.

The target for this advance is SPX 934.70, about 1.5% above current levels.

SPX 934.70 is a critical level that, if surpassed, would be an Elliott Wave confirmation of a new bull market for the SPX. It is a Wave 4 high (see chart below) and marks important Elliott Wave resistance. If surpassed, it will confirm that a major Elliot Wave Theory low is in place, having been reached in early March. It would also forecast a continued advance with several waves ahead that should last months if not longer.

The SPX is well above its 50-day moving average.

The 200-day average is now nearly at the same level as the Wave 4 highs, and this makes the SPX 934.70 level the one to beat in coming weeks. Close above it and we have a confirmed bull market in place.

There have been six breadth surges of better than 9 to 1 which occurred during the early weeks of this rally. This is a bullish indicator that points to a lasting advance.

Look for a break, one way or the other, out of the pennant formation we have drawn in the below daily chart. It will likely indicate the direction of the markets for days to even weeks ahead.

For subscribers who overly worry about short term swings in the financial markets, remember that you do not have to be an aggressive timer to be a profitable timer. This strategy can and does incur small losses on occasion. Money is made in both aggressive and conservative style trading. Our Conservative S&P Timer strategy trades only the long term trends but that means it profits without the numerous buy and sell signals that active and aggressive traders take. The Conservative S&P Timer has been in cash since Jan. 7, 2008.

The SPX portion of this strategy is in a BULLISH position and in the Rydex Nova S&P 500 Fund - RYNVX (or other bullish SPX index fund).

S&P 500 Index (SPX) Daily Chart

S&P 500 Index (SPX), Weekly Chart

Nasdaq 100 Index (NDX) Chart Analysis

Last week we wrote:

"... similar to the SPX, the NDX rallied almost to its prior highs and then reversed mid-week to close with only a slight gain. This sets up a possible double top for the NDX. A double top, meaning two failed attempts to reach a new high, points to lower lows ahead. It does not point to a failed market rally. Only time will tell if that is what we are facing, but yes it does indicate lower lows in coming days."

This week:

If the Nasdaq 100 Index - NDX is a predictor of market direction we have good news ahead.

Last week we were looking at a possible double top in the NDX plus there was a good chance of closing below both the 200-day and 50-day moving averages.

Instead, the NDX mounted a solid rally this week, closing at a new 2009 high and erasing fears of a double top.

The NDX is also well above both moving averages again.

The NDX has been the strongest index through most of this advance and surpassed its Wave 4 highs (from last November) several weeks ago. This critical level has been reached, but has not been surpassed, by the SPX. So the NDX has an Elliott Wave Theory bull market confirmation in place but not the SPX. This is a bullish indicator for a long term advance in the NDX, though we still will need this to occur in the SPX to be fully confident.

The 2006 correction lows, at NDX 1451, are now just a fraction above current levels. This was never a strong resistance level, but it coincided with the SPX reaching very strong resistance levels so it has become a level to watch. A close above NDX 1451 next week would be bullish.

The NDX has strong support at the 50-day moving average at NDX 1340 as well as the 200-day moving average at NDX 1343. After that is the 50% retracement of the entire March to May rally at NDX 1237. Below this is the critical Fib 61.8% retracement support at NDX 1191.15.

The target for this advance is still the July 2006 correction lows at NDX 1451. This is where the correction began and this is where the line-in-the-sand has been drawn for the NDX.

If we do rally and surpass this level in coming weeks, the next target will be the 50% retracement level of the last major leg down in the bear market (for the NDX) from August 2008 - November 2008. This resistance level is at NDX 1498.49.

Conclusion:

The NDX has a Wave 5 Elliott Wave low in place at its November 2008 lows. The NDX has closed above NDX 1378.40, the Wave 4 high, which confirms this as a bear market bottom based on Elliott Wave theory. We would like to see the SPX also close above its Wave 4 high to confirm a bear market bottom has been reached.

The NDX remains above its 50-day moving average and the 50-day average has turned higher. The NDX is also above its 200-day moving average.

The NDX continues to outperform the big caps and as the advance progresses, it should continue to outperform.

The NDX portion of this strategy is in a BULLISH position and in the Rydex NDX 100 Fund - RYOCX (or other bullish NDX 100 index fund).