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Index Wrap

More Of The Same

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        07-30-2001        High      Low     Volume Advance/Decline
DJIA    10401.70 - 15.00 10440.50 10361.40  905 mln   1666/1428	
NASDAQ   2017.80 - 11.20  2039.01  2009.94 1.34 bln   1780/1969
S&P 100   618.89 -  1.27   621.73   616.80   totals   3446/3397
S&P 500  1204.52 -  1.30  1209.05  1200.41           
RUS 2000  484.71 -  0.30   485.54   481.34
DJ TRANS 2912.22 +  2.34  2918.06  2906.04
VIX        24.03 -  0.70    25.07    23.99
Put/Call Ratio      0.44

More Of The Same
Austin Passamonte

"Nowhere slow" is the answer for how market action moved today. A quick pop above near-term resistance to get directional hopes up before diving lower thirty minutes from the open and holding flat from there.

At this point general market action is immune to individual earnings hit or miss unless something astronomical befalls us. If the JDSU debacle last week couldn't take markets past Wednesday recent lows, what will?

By the same token we do need a positive catalyst or at least dwindling further bearish news to push price action up. A bunch of email came in this weekend from readers who were gleeful to hear how bullish I am for the future. I am not overtly bullish and hope it didn't sound like that: my belief still remains that price action will trend higher than lower into next month but how it gets there could be very challenging to trade.

Make no mistake: closet bulls remain alive & well. Regardless what anyone says or how well they fare trading puts right now, the vast majority of players still alive secretly yearn for days of massive green across the screens, markets screaming to the upside and 1999 relived all over again. That bias preference exists in a vast majority of equity traders and always will. Given any chance or excuse to buy markets moving up, the masses will trip over each other in attempt to do exactly thus.

With a continued absence of bearish malice ahead, markets will move higher at least until the next prewarn season arrives. Anticipation of another FOMC gift will keep biased bulls hopeful as well. These are the reasons I believe market prices will move higher and long-term chart signals concur with this view. I do not think odds are good that April lows will hold forever and believe the markets will crash to lower levels in October of 2001, particularly the Dow and S&Ps. If waning consumer spending can't artificially prop markets up when Q3 forward guidance into 2002 remains bleak, bye bye April lows.

But that's outside the scope of tonight's focus, so let sleeping grizzlies lie. Where to in the near term from here?

(Daily/Hourly Charts: Dow)

The Dow remains trapped in bullish patterns by design but only confirmed by breaking out to the upside. Anticipating such action this weekend pushed us to the bullish side when a definitive call one way or the other was demanded.

(Daily/Hourly Charts: QQQ)

Same for the NDX/QQQ as we look for expected upside pressure to kick in that has failed to do so yet.

(Daily/Hourly Charts: SPX)

Looks no different now than last time we talked, except to say that resistance held yet again.

(Daily/Hourly Charts: OEX)

This view shows where tight-range resistance and support lies. Se where the hourly chart (right) has support near 616 and resistance at 621? Part of the reason why we set our bullish OEX plays with these entries and/or exit stops last weekend.

Right now 619 remains a price magnet and viable pivot point from which to trade. A break above there and 621 is clear to 632 next. Failure to penetrate could call for a retest of 600 first.

Chart Signals Measure Trader Sentiment
More than a few readers asked how I could have leaned toward bullish at the time with continual bearish news and potential market-moving reports due out this week. Stochastic values on long-term charts are the answer.

When poised to emerge from one extreme or another, they filter fundamental market "noise". The simple version is that no matter what we are about to learn, markets have upside pressure set for release right now. It would take catastrophic data over the next little while to plunge us back below last week's lows. Could easily happen, but odds are traders will twist interpretation of economic data to justify why they should buy.

In the end, market action is all about human emotion and stochastic values measure emotion in the market. At this moment in time the markets want to go higher and indeed they will unless something more drastic than what we've just seen is the only thing that can thwart upside pressure.

As Buzz Lynn is wont to say, market action is poised to "rise in agony" over the next few weeks from here. Guaranteed? Heck no!

My job is not easy: I must guess market direction each & every day regardless how foggy conditions are to keep a majority of readers happy. If a majority of readers aren't happy, we have no service to offer at all. IS exists to serve the masses and part of that spectrum demand market calls and potential plays each session regardless. That is their individual and collective right as a subscriber, so we guess market direction and pick plays no matter what. Fair warning accompanies each situation we feel less than very confident with and our explanations why.

I cannot express strongly enough that conditions to profitably trade remain very difficult. Guessing market direction correctly is just one small piece of the overall puzzle to success in trading any financial markets regardless the instrument used. Stocks, options or commodities... all are perilous right now and may not improve anytime soon.

A Time To Sow And Reap
Without question, year 2001 has been one of the toughest to trade I've seen in a long time. This has nothing to do with direction, just action. In my opinion year 2000 was the most lucrative of all recent markets, far better than 1999. Most would disagree because 1999 was a full-blown bull that the masses going long could make money from. But 2000 offered far faster directional moves and obscene profits were there for the taking numerous times within days and even hours or less!

It took trading knowledge to reap those rewards. Most people who got rich in 1999 weren't traders, they simply had money in an account to throw at anything moving higher and for awhile markets happily threw more money back. This created a false sense of competency soon smashed in reality when 2000 arrived and that sudden wealth shifted into accounts of veteran traders from there.

Countless bulls got rich and lost it all in a brief span without ever knowing how it all happened. They had no clue what they did right and no idea what went wrong until the money was long, long gone. That is heart-breaking, tragic and didn't need to happen. But rest assured it will happen again real soon.

It is human nature to ignore the difficult and focus on the "easy". Plenty of newbie traders and bias bulls are "sitting in cash" until the bull market resumes where they think 1999 will repeat itself again. I can assure you they will bring their rusty or non-existant skills back to the markets and pay a high price for ignorant mistakes made then.

Those who hone their skills know virtually or otherwise will be on the winning side of those trades. Trillions of dollars were lost in 2000 but not by me, so some hapless bulls must have sponsored Wendy & my opulence last year. That shift of wealth from the ignorant to learned will happen again and again until the end of time, and we can choose which side of that equation to be on when it resumes.

This isn't some cheap attempt to "pump up the troops", it is fair warning of market reality. Each of us will either give someone else our money or take theirs... that's how this game works. Education is the lifeblood for future success, so please learn wisely!

Best Trading Wishes,

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