For Sunday, June 13, 2010                                             Go to Website
	Current Strategy Positions   2008 Full Year Results Fibtimer Timing + 17.3 % S&P 500 Index    - 39.9 % 2009 Full Year Results Fibtimer Timing + 59.5 % S&P 500 Index  + 24.7 % FibTimer currently has 12 successful strategies   S&P 500 Position -        BULLISH   Nasdaq 100 Position - BULLISH   Gold Stocks Position -  BULLISH   SmallCaps Position -   BEARISH   U.S. Dollar Position -    BULLISH   Bond Fund Position -    BULLISH 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:

"After some early week selling, the stock market had a huge mid-week rally. In fact on Wednesday, the up volume vs. down volume on the NYSE was 20 to 1. Subscribers know that we watch for these unusually strong days (better than 9 to 1) and call them breadth explosion days. Two such days in a two month period tend to be followed by substantial gains in the following months."

This week:

A strong week for the S&P 500 Index has resulted in changes in this strategy as well as an interesting and uncommon indicator becoming very bullish.

Recognizing that the SPX is still very near its correction lows, we nevertheless have a bullish change in this aggressive strategy.

First we will look at the breadth explosion days that have occurred in the past three weeks.

Three weeks ago the stock market had the first in a series of huge single-day rallies. On Wednesday May 26, the up volume vs. down volume on the NYSE was 20 to 1.

Subscribers know that we watch for these unusually strong days (better than 9 to 1) and call them breadth explosion days. Two such days in a two month period tend to be followed by substantial gains in the following months.

Historically these signals have been rare, in some cases they have been 10 or more years apart. Over the past several years that has not been the case, with signals occurring more frequently. But still, according to our records, they have all been followed by substantial gains.

Last week there was a second breadth explosion day. On Thursday June 3, the rally was on up vs. down volume of 36 to 1. Another huge advance and this fulfilled the technical requirement for a buy signal according to this indicator. Advances are not always immediate, but within six months to a year, stock indexes have generally been 14% higher or more.

This week we had the third such breadth explosion day, with up volume exceeding down volume on the NYSE by 44 to 1. This is almost five times more than the required 9 to 1 up volume vs. down volume day and may be a record breaker.

All three of these rallies have occurred on volume so far above the required 9 to 1 ratio we are left with little to add except that, buy this indicator; we are at the beginning of a substantial advance and possibly a new bull market.

Subscribers know we "follow" the stock market by identifying trends and trading them. Forecasting a new bull market is not what we typically do so let me add here that this is only one indicator. But there was more news this week.

Our second bullish indicator to look at was the successful testing of support.

Look at both the daily and weekly SPX charts below. The 1044.50 correction lows from early February have been a potential target for this correction from the start.

On May 25th the SPX reached this level in intra-day trading and reversed to the upside. The following day was the first of the breadth explosion days. This was a successful test of support that was then confirmed by the following day's rally.

On June 8th there was a second test of the SPX 1044.50 level in intra-day trading and again the markets reversed and closed with a gain. This second test of support was then confirmed with the third breadth explosion day on June 10th.

The third bullish indicator was created by the two tests of support discussed above. We now have a double bottom in place and it occurred right at strong support.

A fourth bullish indicator is found in the CBOE Volatility Index - VIX. This indicator is a contrary one. VIX reached almost to 50.0 in May which is a level we would expect to see at stock market lows.

Since then VIX has declined but has held at about the 30.0 level. On Friday VIX decisively broke below 30, closing at 28.79. This indicates a change in sentiment that should lead to more buying in coming weeks.

The fifth bullish indicator is the percentage of loss in this decline. Typically correction losses are around 10%. At the lows, this decline reached losses around 12%.

Any further and we would be looking for a potential bear market ahead with losses of 20% or more. The double bottom at the 12% loss level is about where we should see a strong correction come to its end.

Lastly we have our price indicators that have turned bullish. All of the above indicators would not have forced this strategy into a bullish stance. But when changes in price trigger a buy signal this strategy is forced by its own rules to reverse position.

Importantly, price also protects this strategy on the downside. Should this be a false signal, changes in price will quickly reverse our position. Strict money management rules do not allow losses to build and changes in price in the wrong direction will reverse the bullish position.

What is there to worry about?

The SPX still has not managed to close above its 200-day moving average. We will be watching for this in coming days. Obviously it is critical to the success of this signal change.

The 200-day moving average is also near the SPX 1100 level. Round numbers tend to be important and this one is right at the important average. A close above both would be very bullish. Subscribers should be watching for this next week.

Conclusion:

The SPX is currently below its 50-day moving average and its 200-day moving average. The 50-day average has turned lower.

The markets received a very powerful shock when the mini-crash occurred. Since then we have had three rare and bullish breadth explosion days. The first two such days were followed by lower lows and lower closing lows.

The third such day, occurring this Thursday, was followed by a positive day plus we have had a bullish signal, based on changes in price, in this strategy.

Overall the SPX has lost just over 12% since its 2010 highs. We now have a double bottom in place and that bottom occurred right at strong support.

S&P 500 Index (SPX) Daily Chart

S&P 500 Index (SPX), Weekly Chart

Nasdaq 100 Index (NDX) Chart Analysis

Last week we wrote:

"The Nasdaq 100 Index - NDX continues to hold up better than the SPX. The rally off the correction lows pulled the NDX right up to short term resistance at NDX 1905.87 on Thursday, but Friday's huge selloff erased all the gains of this week."

This week:

The Nasdaq 100 Index - NDX also has a bullish double bottom in place. The NDX never did reach its February 5th lows, but the double bottom is just as valid.

The NDX is typically more volatile and we would normally expect to see a wider trading range than the SPX. But in this decline the NDX did not reach its February lows.

Unlike the SPX, the NDX remains above its 200-day moving average line (see below chart). The NDX did break below its 200-day moving average line but by Thursday's close was back above. It remained above in Friday’s advance.

Just as the SPX position has turned bullish, the NDX has also reversed to bullish as of the close on Friday. This will result in a move to the Rydex Nasdaq 100 Fund - RYOCX or a Nasdaq 100 index fund before the close on Monday, June 14th.

Short term support for the NDX is again at the 200-day moving average at 1824.48. After this is the February Wave 4 low at NDX 1712.89.

Conclusion:

The NDX is below its 50-day moving average. The NDX is back above its 200-day moving average. The 50-day average is declining.

The NDX has a well defined double bottom in place and appears ready to achieve higher highs in coming weeks, with support at about NDX 1770.

The multiple bullish indicators discussed in the SPX analysis apply to the NDX as well