technical update - its even trickier - rollercoaster ahead

The week turned out as thought initially, weak we only made perfect 38.2 retracements in SPX and DOW before turning lower. The disturbing part was the NDX, with its daily reversal, but the driving force behind it is the BTK (biotechnology), which tops out today and should enter a correction to the downside starting next week. Get ready for a wild ride in the next weeks with volatile swings, building a temporary bottom. DOW and SPX should have seen the lows, XBD could retest the lows right now (within a week less likely) or some time in August (very likely). These media bull-shitting campaigns are not worth listening to – it's just Paulson propaganda. Bill Gross is closer to the truth but still not close - my call is $2 tril. for mortgage related losses ($45 tril mortgage related derivatives out there). Banks have plenty to lose even Wachovia after their "kitchen sink" media coup.

We will see the truth of the downside magnitude when SPX hits 1225 - a close below indicates more weakness ahead. The driver will be the XBD with a test of 142 area mandatory but further weakness is just a matter of time. The crucial aspect will be the NDX , which should retest 1800 but likely will retest 1760 even. The test of 1760 next week will decide how the story will develop.

Around new moon (solar eclipse) on August 1^st, markets should go up again for a few days, since window dressing is part of the action but some negative aspects on August 6th might bring the rollercoaster aspect back before going higher again.

The time frame from August 5th to 18th is the most dangerous for a military conflict and will be a very challenging time somehow also for the markets. That we will look into when it's closer, for now expect more weakness with Monday likely an upside day. Even later today we can turn upside since the Paulson GSE ruling will come on the weekend, but reality will bite since it does not solve the problem its just a onetime painkiller event. The second half of next week should be positive with a test of 1225 as a likely turning point.