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  Jonathan Levinson   9/7/2004,  3:57:09 PM
7200 tick SMA resistance is next at 34.37 QQQ, above which is confluence at 34.43. The short cycle upphase is strengthening here.

  Jonathan Levinson   9/7/2004,  3:50:05 PM
QQQ chart update at this Link . 34.30 still looks like key immediate resistance (former support on this morning's dip).

  Jonathan Levinson   9/7/2004,  3:48:36 PM
Ten year treasury bond futures continue to remain pegged at their session highs of 112.7656, +.26% for the day.

  Jonathan Levinson   9/7/2004,  3:43:41 PM
The bifurcation between the NDX and its peers is quite dramatic, with QQQ holding within the opening gap as ES and the Dow bounce above theirs. QQQ held just above 34.10, a bullish sign, but this bounce needs to carry forward to the close, ideally regaining 34.30 for starters.

  James Brown   9/7/2004,  3:38:53 PM
The SOX is extending its losses here down 1.73% to 351.

  Jonathan Levinson   9/7/2004,  3:24:32 PM
The VXO hasn't been the most dandy of indicators over the past year or so, but the extreme readings still look useful. Today, those sub-14 readings are looking like a problem for bulls: Link

  James Brown   9/7/2004,  3:16:24 PM
OI put play IRF is down another 1.64% and hitting new one-year lows at $31.66. Given the weakness in the SOX the drop in IRF could pick up speed.

  James Brown   9/7/2004,  3:13:15 PM
There has been no slow down in the rally for Black & Decker (BDK). The stock broke out to new all-time highs last Friday and shares are up another 3.17% today at $74.16. Its MACD has produced a new "buy" signal.

  Jonathan Levinson   9/7/2004,  3:07:34 PM
Not much of a bounce, though. It has that "b" distribution feeling so far, though the short cycle oscillators on the previous chart are very bottomy.

  James Brown   9/7/2004,  3:02:22 PM
Biotech IMCL is looking like a bearish candidate here. The stock is down more than 2.3% after Friday's failed rally under the simple 200-dma. The MACD indicator is nearing a new "sell" signal. This could be one to watch for a breakdown under $51.00 or $50.00.

  Jonathan Levinson   9/7/2004,  2:58:43 PM
Nymex crude went out at 43.30. Gold is back to the 400.20 level, while bonds continue to market higher, with TNX down 4.7 bps, 2 minutes to the cash close.

  Jonathan Levinson   9/7/2004,  2:57:32 PM
QQQ update at this Link . Sometimes it pays to keep old trendlines hanging around.

  James Brown   9/7/2004,  2:44:57 PM
That's interesting... the CNBC political analyst on right now said that historically the candidate with the biggest lead in the first two weeks of September tends to win. Right now that would be Bush.

  Jonathan Levinson   9/7/2004,  2:43:36 PM
Next support is 34.05-.10 QQQ.

  Jonathan Levinson   9/7/2004,  2:43:14 PM
QQQ is breaking this morning's low and trying for a gap fill here: Link

  James Brown   9/7/2004,  2:42:52 PM
I've been watching Anthem (ATH) for the last couple of weeks. In late August the stock was ready to breakdown under the $80.00 level. Now shares have rebounded and are challenging resistance at the $85.00 region but it has to wade through its 40, 50 and 200-dma's. Shares have already broken through its exponential 200-dma.

  Jonathan Levinson   9/7/2004,  2:33:17 PM
Price is virtually unchanged from its opening levels, with neither an upside nor downside breakout all day. This is feeling like distribution to me, but we won't know until the range break, either below the session low confirmed by a move below 34.20 QQQ, or above the high with a move above 34.60.

  James Brown   9/7/2004,  2:31:06 PM
Meanwhile Amazon.com (AMZN) continues to look like a bearish candidate with the recent failed rally under $40.00 and its simple 40-dma. The MACD is rolling over and could print a new "sell" signal soon. More aggressive traders might want to consider a drop under $37.85 as an entry point.

  James Brown   9/7/2004,  2:29:28 PM
It is interesting to see that EBAY is not enjoying any part of the rally today. The stock is struggling with the $90.00 mark for the third day in a row.

  James Brown   9/7/2004,  2:26:52 PM
I may have missed it... but I haven't heard or read about any concerns involving the third anniversary of the September 11th attacks. Granted 9/11 is on a Saturday this year but it being an election year in the U.S. could make it a tempting target date for terrorists. Has anyone else heard anything?

  James Brown   9/7/2004,  2:24:07 PM
I see the rally in the XBD broker-dealer index has paused a bit. The XBD is sitting a new eight-week highs but it has yet to breakout over resistance at the 130 level and its simple 200-dma.

Meanwhile Goldman Sachs (GS) is up more than 2.5% and breaking out over the $92.00 mark and its simple 100-dma and exponential 200-dma.

Merrill Lynch (MER) is also breaking out over its simple 100-dma but is struggling under its exponential 200-dma.

Morgan Stanley (MWD) looks stronger with a 3.11% rally and a clear breakout over the $52.00 level and its exponential 200-dma.

  Jonathan Levinson   9/7/2004,  2:21:38 PM
Ten year note futures are at a session high here of 112.7344, with the TNX down 4.5 bps to 4.248%. Gold is down 3.5 at 399.30, HUI -1.83% at 198.19.

  James Brown   9/7/2004,  2:21:29 PM
The recent hostage crisis in Russia and the ensuing deaths is extremely sad but I recently read some analysis of the situation that suggested Al-Queda plans to do the same thing in U.S. and Britain.

The analyst went on to suggest that any capture of Bin Laden, while important, would not stop the terrorist network, which was growing more autonomous.

  Jim Brown   9/7/2004,  2:12:59 PM
The SOX is back in negative territory at 356. My initial target for the SOX during the Sep/Oct timeframe was 350 but I think that was not pessimistic enough. I am rethinking that target with a potential of something as low as 320 or even 300 if the broader market weakens significantly. We continue to get chip downgrades and there is a betting pool for which chip stock will warn next.

  Jim Brown   9/7/2004,  2:10:02 PM
The indexes have slowed their drop but the A/D is still declining at 2343. There does not appear to be any concentrated effort to buy the dip.

  Jonathan Levinson   9/7/2004,  2:04:27 PM
Stepping away for 15 minutes here.

  Jonathan Levinson   9/7/2004,  1:58:48 PM
QQQ tried but has so far been unable to break and hold the 34.55 level- make it 34.60. I see a downward spike to 34.43 here, but it could be a bad tick. In any event, the short cycle oscillators are trying to roll over here, and there's a bearish wavelet divergence against the session high, suggesting that the next downside break should have some teeth. A move above 34.60 will invalidate the bearish scenario short term, but bulls need to get some price traction to the upside in order to defuse what continues to feel like a daily cycle top in place from last week.

  Jonathan Levinson   9/7/2004,  1:52:34 PM
WASHINGTON (Reuters) - The U.S. budget deficit will balloon to $2.29 trillion over the next decade, congressional analysts said Tuesday. This represents a worse outlook than previously forecast and one likely to stir election-year debate about President Bush's economic policies.

The forecast from the nonpartisan Congressional Budget Office compares to its March outlook for a cumulative deficit of $2.01 trillion for the 2005-2014 period, if current economic policies stay the same.

"The outlook in terms of the deficits in 2004 and 2005 has improved, but the projection of the cumulative deficit over the 2005-2014 period has worsened," the CBO said in a summer update of its budget outlook.

  James Brown   9/7/2004,  1:46:12 PM
VFC is on the verge of breaking out over resistance at $50.50 and hitting new 5-year highs. This looks like a bullish entry point (but be careful the stock trades with low volume).

  Jonathan Levinson   9/7/2004,  1:41:36 PM
The VXO is down at 13.71 here. Link

  James Brown   9/7/2004,  1:40:44 PM
A CSFB upgrade this morning sent shares of Leggett Platt Inc (LEG) soaring. The rally has been steady all day and shares have hit $28.79, which is a new all-time high past resistance dating back to 1998.

  Jim Brown   9/7/2004,  1:28:48 PM
Reminder, Jeff is on vacation all week.

  James Brown   9/7/2004,  1:27:42 PM
LXK's drop today is a reaction to LXK's printer recall announcement. Evidently one model can short-circuit and produce a shock hazard to users although there have been no reports of any injuries.

  Jonathan Levinson   9/7/2004,  1:26:28 PM
QQQ chart update at this Link . Nymex crude is currently down 1.075 or 2.44% to 42.925.

  James Brown   9/7/2004,  1:26:02 PM
Recently added OI put play Lexmark Intl (LXK) is down more than 3.4% to $83.13. The move is a certainly a positive one for the bears not only for its relative weakness while the market is in rally mode but for its technical breakdown under the $85.00 level and its exponential 200-dma.

  James Brown   9/7/2004,  1:20:51 PM
Shares of trucking company Yellow Roadway Corp (YELL) are up 2.47% and challenging resistance at the $44.00 level after raising its Q3 earnings outlook this morning. Analysts had been looking for $1.25 a share and YELL now expects $1.30-1.35 a share. As a component of the Dow Transportation index the news is a factor in the TRAN's 1% gain today.

  James Brown   9/7/2004,  1:15:34 PM
OI call play Phelps Dodge (PD) is looking good with today's 2.87% rally pushing it through the $84.00 level. The move follows a strong move higher in copper prices today.

  James Brown   9/7/2004,  1:14:04 PM
I can't find any news but shares of Mohawk Industries (MHK), a current OI call play, has surged more than 3% and is trading near $81.50. Consider the $80 region was our short-term target I'm suggesting that readers consider taking profits now or at least significantly tightening their stop losses!

  Jonathan Levinson   9/7/2004,  1:13:49 PM
I agree with Jim - while the indices are looking strong at strong resistance, it would be very surprising if they were able to power through all of that overhead weight without at least a pullback. And with the daily cycles at the upper sides of their ranges, there's the potential for that pullback to grow fangs on the way down.

  James Brown   9/7/2004,  1:11:02 PM
Dow-component American Express (AXP) has been consolidating into a tighter and tighter trading range for the last five weeks. The stock began to breakout to the upside three days ago and today's 1.5% rally over $51.00 confirms the bullish break higher. This looks like a bullish entry point but shares do have additional resistance near $52.

  James Brown   9/7/2004,  1:08:53 PM
The Chicago Mercantile Exchange (CME) is up more than 3% as it surges through resistance at the $140.00 mark. I don't see any news powering the move but its MACD has produced a new "buy" signal. The bullish P&F chart now points to a $181 target.

  Jonathan Levinson   9/7/2004,  1:03:45 PM

1:01pm NEW HOME SALES SEEN RISING 7.1% TO 1.16M IN 2004: NAR


1:03pm NAR SEES '04 MEDIAN NEW HOME PRICE UP 8.9% TO $212,300

1:04pm NAR SEES '04 EXISTING HOME PRICE UP 7.5% TO $182,700

  Jonathan Levinson   9/7/2004,  1:03:25 PM
We had a volume spike of 2.5M shares within 100-ticks on QQQ- all the bulls need is for the price to clear 34.55.

  Jonathan Levinson   9/7/2004,  12:58:50 PM
The short cycle upphase for QQQ is looking tired here, but it's building a series of higher wavelet lows to form a small rough rising triangle below 34.55. A new high is printing for NQ here as I type, and I'm looking for an upside break on expanding volume to confirm the short cycle trending move.

  Jim Brown   9/7/2004,  12:52:02 PM
Starting to see some buyers awaken and we are back to new highs on the SPX and DOW. Even the SOX is seeing some benefit from that last buy program.

  Jonathan Levinson   9/7/2004,  12:37:03 PM
So far, the 30 minute cycle downphase is entirely sideways, which is good news for bulls as they run the clock on the bears. A weak downphase is usually followed by a strong upphase, but the cycle picture is complicated by the ambiguous action in the daily cycle from last week. If the daily cycle were oversold instead of overbought, this would look like an obviously bullish picture to me. If bulls can get above 34.80 and ideally 35, then the fog, along with the price targets, will lift. But the bulls need to clear 34.55 QQQ first.

  Jonathan Levinson   9/7/2004,  12:34:52 PM
Session high for ten year bond futures here at 112.6562, with TNX down 3.4 bps at 4.259%.

  Mark Davis   9/7/2004,  12:33:35 PM
Leaving for an appt...

  Mark Davis   9/7/2004,  12:27:26 PM
The $BIX is again quietly making new 2 1/2 year highs today

  Jonathan Levinson   9/7/2004,  12:20:19 PM
The current bounce in gold hasn't yet made it to the 402 level, and has pulled back a few cents to 401. Gold bulls want to see the former support-turned-resistance at 402 taken out, which would set up 398 as a higher low. Below 398 is support at 395, followed by 392 and 388.

  Jonathan Levinson   9/7/2004,  12:13:47 PM
There's been no upside break, but the bulls are proving very persistent at 34.50 QQQ- if it can't run lower, then it will try for higher. A break of 34.60 on expanding volume should set the stage for a retest of 34.80 resistance.

  Jim Brown   9/7/2004,  12:05:00 PM
We have been speculating in the monitor for several months that Bin Laden would be "found" just before the election. This would be the last straw for the Kerry camp. A reader sent me this over the weekend. Could they be settig the stage for the eventual capture? Link

  Jonathan Levinson   9/7/2004,  12:04:09 PM
Recall that Greenspan speaks before the House Budget Committee tomorrow, starting at 10:30AM.

  Jonathan Levinson   9/7/2004,  11:53:17 AM
30 min channel resistance is currently at 34.60 QQQ, support 34.20. A short cycle upphase is in progress here, but bulls are currently shying away from the previous high at 34.55. Link

  Mark Davis   9/7/2004,  11:48:18 AM
Things are looking better for the moment... SOX is trying to go green and TRIN just dropped to .99 from the 1.16 HOD

  Jonathan Levinson   9/7/2004,  11:32:58 AM
Gold has bounced off its lows, which held at 398 support with a session low of 398.60, currently trading -1.50 at 401.30. Silver has not, now down to a new low of 6.23, -4.93%. Bonds are firm, no doubt aided by the Fed's large repo this morning, with TNX down 2.4 bps at 4.269%.

  Mark Davis   9/7/2004,  11:32:41 AM
Here's a little bullhorn wedge... Link
There was also a bullhorn wedge last Thursday and it broke to the upside

  Jonathan Levinson   9/7/2004,  11:19:12 AM
QQQ continues to squeeze tighter within its pennant. Link

  Mark Davis   9/7/2004,  11:16:07 AM
There really isn't much to talk about until price does something besides go sideways. SPX is trying to regroup from the decline off HOD but is struggling. We are still above a 50% retrace of this morning's rally so the bullish case is alive. A 50% retrace would be violated below SPX 1117.375... or 1117 3/8 for you old timers (grin)

  Jane Fox   9/7/2004,  11:03:41 AM
Dateline WSJ - WASHINGTON -- The Congressional Budget Office is projecting that this election-year's federal deficit will reach $422 billion, congressional aides said Tuesday, the highest ever, but a smaller shortfall than analysts had predicted earlier this year.

The figure, provided by aides who spoke on condition of anonymity, is sure to provide political fodder for both parties during the remaining two months of the presidential and congressional campaigns.

"This is by far the biggest deficit in American history," said Thomas Kahn, Democratic staff director of the House Budget Committee. "There is no credible way Republicans can portray the record deficits they have created as good news."

  Jonathan Levinson   9/7/2004,  10:57:09 AM
2-day 100-tick QQQ at this Link with updated fib grid and trendlines. The symmetrical pennant here lines up with the 30 min cycle downphase, and should continue to the downside. That's my guess. Look for a break below 34.10 on expanding volume to confirm the break of the pennant, bringing in the downside supports mentioned earlier.

  Jonathan Levinson   9/7/2004,  10:46:27 AM
Silver is getting creamed, down 29.3 cents or 4.47% to 6.26 currently. This is a support level from a few months ago, below which the next support is in the 6.05-6.10 range.

  Jonathan Levinson   9/7/2004,  10:44:44 AM
New session lows a breaking for QQQ at 34.30- there's huge volume on the sell program, with nearly 3M shares hitting the tape within a mere 100 ticks.

  Mark Davis   9/7/2004,  10:42:00 AM
There goes the 10:09 swing low with a fairly large red candle. Much lower and we can start looking for support levels, however, if SPX is able to rally back up towards or over HOD we'll have a small bullhorn wedge. It's still up for grabs as SPX tries to hold its ground in the 1118 area.

  Jonathan Levinson   9/7/2004,  10:40:14 AM
Thanks to Ldudley for helping me fashion a jury rig for my Quotetracker problem. I now have 30 and 60 min Keltner projections, which both currently line up at 34.00 QQQ- always nice to have redundancy in our TA... Link

  Jonathan Levinson   9/7/2004,  10:36:04 AM
There's a downtick in the 30 minute cycle on the NQ futures (proxy for QQQ using premarket data), and with QQQ having never retested 34.55, that now looks like the 30 min cycle high. A move below 34.20 QQQ should confirm the new 30 min cycle downphase, and sets up a retest of 34.00 support. A break below 33.90 would target 33.60, the former low for last week, and a break below that will confirm a new daily cycle downphase in progress.

To extinguish this bearish picture, bulls need to break 34.80 QQQ to the upside.

  Mark Davis   9/7/2004,  10:28:58 AM
Note the similarity of the last two confirmed inverse H&S patterns on the SPX daily chart. Link

  Mark Davis   9/7/2004,  10:24:51 AM
SPX is being held back (or is it just pausing?) at the 10:01 swing high

  Jim Brown   9/7/2004,  10:17:02 AM
Volume is shaping up to be the same as last week, very light. It appears many traders extended their long weekend.

  Jonathan Levinson   9/7/2004,  10:06:04 AM
Headlines from the Challenger announcement reported by Jim:

10:00am U.S. AUG. CHALLENGER LAYOFFS UP 6.6% TO 74,150


  Linda Piazza   9/7/2004,  10:00:38 AM
I've got to close up shop here now to leave for my appointment. OEX traders can watch Jim's commentary about the ES on the Futures side and Mark's comments about the SPX in options-related trades on the Options side. I hope to be back this afternoon, but can't guarantee that I'll be back.

  Jim Brown   9/7/2004,  10:00:16 AM
Alert - Challenger Report = 74,150, Largest job cuts in six months. (last 69,572) The survey also showed employers were planning to hire 132,000.

  Jonathan Levinson   9/7/2004,  9:57:34 AM
Overnight repo of 8.5B from the Fed for a net add in that amount.

  Jonathan Levinson   9/7/2004,  9:57:09 AM

> 9:56am U.S. 2004 DEFICIT EXPECTED AT $422B: CBO

  Jonathan Levinson   9/7/2004,  9:56:17 AM
INTC is down to 20.06, a session low, as is WMT at 53.08. I suspect that the spike to 34.55 QQQ was a 30 min cycle high as indicated by the shape of the 300 min stoch for the NQ futures, but we won't know until the overnight low is broken- I'd look for a move below 34.20 for confirmation. Unfortunately, Quotetracker wiped out my Friday data, and so I'm waiting for more ticks to accumulate in order to calculate my Keltner projections.

  Linda Piazza   9/7/2004,  9:53:15 AM
Bulls don't like to see the VIX leap higher from a sub-14 level. Be careful about bullish positions, but remember that the VIX is not a great market-timing tool.

  Linda Piazza   9/7/2004,  9:52:14 AM
TRIN still climbs. (See Jane's 9:50 post on the Futures side.)

  Linda Piazza   9/7/2004,  9:51:19 AM
So far, OEX 15-minute closes have held where they need to hold, above the Keltner lines currently gathering from 543.96-544.14, but there's still been no breakout above the Keltner line currently at 545.24. If there isn't one, that sets up bearish divergence, Keltner style. Again, when a strong trend gets going, those divergences can continue all day long while prices continue to move higher, so this isn't suggesting that you should pile into puts right now. Do be cautious in your bullish positions, however.

  Jonathan Levinson   9/7/2004,  9:50:59 AM
Session lows here for gold and silver futures, CEF and MSFT.

  Jonathan Levinson   9/7/2004,  9:49:57 AM
Friday's repo was done on a 6-day basis, and for that reason there are no expiries today. Any amount added by the Fed's open market desk will be a net positive for the market. I will post the 10AM announcement as soon as it is released.

  Linda Piazza   9/7/2004,  9:48:06 AM
The TRAN is gaining this morning, gapping higher and now moving just above the 7/21 swing high of 3171.66, with the TRAN at 3177.13. Next resistance is at the 7/01 swing high of 3208.00.

  Mark Davis   9/7/2004,  9:47:58 AM
Today is starting off like the last half of Thursday's trading... a flagpole rally punctuated by small bull flags. It will be interesting to see if we have a repeat performance.

  Jonathan Levinson   9/7/2004,  9:47:29 AM
I show 34.55 as the QQQ session high.

  Linda Piazza   9/7/2004,  9:46:12 AM
The SOX isn't exactly zooming up, is it?

  Linda Piazza   9/7/2004,  9:45:20 AM
I just have a few more minutes to hang around. I'm sure Jane will keep you up-to-date on the TRIN's value and the implications of any trend that's seen, but I note that the TRIN has been rising this morning.

  Linda Piazza   9/7/2004,  9:43:18 AM
Okay, now we have some levels to watch during the first retracement of the day. The OEX hit the top Keltner resistance on the 15-minute chart, but that resistance is turning up now. Bulls want to see the OEX maintain 15-minute closes above the Keltner lines now at 543.90-543.98. If 15-minute closes during this first pullback are below that line, that creates the possibility of bearish divergence, Keltner-style, on the 15-minute chart.

  Jonathan Levinson   9/7/2004,  9:41:43 AM
Gold is below 400 here, -3 at 399.80. HUI is down 2.13% to 197.59, XAU -1.69% at 91.37.

  Linda Piazza   9/7/2004,  9:40:46 AM
The OEX has not yet passed Friday's intraday high at 545.11.

  Jonathan Levinson   9/7/2004,  9:39:51 AM
The opening strength is a great start, but we're going to need another 30-40 cents higher from QQQ before bulls can start relaxing about the fate of the toppy daily cycle.

  Linda Piazza   9/7/2004,  9:35:49 AM
Well, that answered that question about where the OEX would open, didn't it? With the 200-sma at 546.16, I'd be careful here. Options prices are sure to be elevated with this quick rise on top of the usual elevation in options prices during amateur hour. You'd have to see a big move upward from here to see a gain if you were to buy calls from this level. A move up toward 549-550 is possible, as that's the top of the descending regression channel on the daily chart, but it's got to get through that 200-sma, too, so it's a dangerous assumption that it could get up that high.

  Linda Piazza   9/7/2004,  9:30:30 AM
I'm going to be watching the Dow and SPX with regard to their 200-sma's this morning and suggest that you do, too.

  Linda Piazza   9/7/2004,  9:28:49 AM
With futures higher this morning, the OEX may head right up to test the 542-542.15 resistance on the five-minute Keltner chart, and could even open above that level, I suppose. I've confessed before that I'm not particularly good at measuring where the OEX will open based on where the S&P 500 futures trade during the pre-market session. Sometimes that's because there's not good correlation between where the futures trade and where markets open and sometimes it's because the big caps that compose the OEX are trading differently than the mid- and small-caps. If the OEX can get past that first Keltner resistance, something we may not know until the first retracement of the day is over, the Keltner line that usually stops the OEX is currently at 542.85, but may have changed by the time that first retracement is over. Five-minute closes over that line will then suggest a move up toward the next resistance, currently at 543.83, and a breakout above that line will suggest a move up toward 545 and maybe even toward the 200-sma. I'd be careful, though, as volume might be light.

I'm unfortunately going to have to leave for another appointment this morning and am not sure whether I'll return before the end of the trading day. With Jeff on vacation, I would not also take so much time away if it weren't necessary. I'll return as soon as I can. In the meantime, OEX options traders can watch Mark's commentary for guidance. Be aware, however, that the OEX's composition of big caps sometimes means that it trades somewhat differently than the SPX. For example, last night in Japan, decliners outstripped advancers, but the Nikkei gained because investors were spending their money on big caps. The big caps outperformed. That kind of behavior appears a little defensive to me, so be careful here, too. The OEX would benefit if investors were concentrating on big caps, of course, but you'd like to see mid and small caps gaining, too, if gains are to be sustainable. I'm particularly cautious with the low VIX number Friday and with September's history, but I wouldn't pile into puts based on that worry alone. I'd want to see prices prove a decline was underway.

  Jim Brown   9/7/2004,  9:28:04 AM
Jeff is on vacation this week.

  Jonathan Levinson   9/7/2004,  9:18:18 AM
The NQ and QQQ are looking considerably less impressive than their Dow and SPX-based peers, with the 30 min cycle for the NQ in overbought territory from a significantly lower price high. If QQQ drops into negative territory, bulls should be very careful about holding longs on a break below 33.90-34.00 confluence. A new 30 min cycle downphase from these levels would confirm the daily cycle top about which I speculated in the weekend Futures Wrap, and set the stage for a lower low below 33.60.

  Jonathan Levinson   9/7/2004,  8:13:30 AM
Naval Research Laboratory map of Ivan's projected flight path at this Link.

  Jonathan Levinson   9/7/2004,  8:07:09 AM
Equities are higher, with ES trading 1119, NQ 1381.5, YM 10306 and QQQ up .19 to 34.34. Gold is down .60 to 402.20, ten year bonds +.031 to 112.50, and crude oil down .85 to 43.15.

There are no major economic reports scheduled for today.

  Linda Piazza   9/7/2004,  7:01:15 AM
Good morning. Although our markets were closed yesterday, overseas markets traded. Before the open Monday, the Japanese Ministry of Finance released quarterly capital spending numbers, showing a 10.7% rise on year for the quarter spanning the April-June period. That prompted hope that the GDP estimate would be revised upward, with that revision expected Friday. The Nikkei tested 11,050 twice during the morning session and then soared at the opening of the afternoon session, hovering near the high of the day the rest of the afternoon. It closed higher by 221.88 points or 2.01%, at 11,244.37.

Other Asian markets performed less exuberantly, however, with semi-related weakness throughout Asia dampening some gains. The Taiwan Weighted gained 0.26%, and South Korea's Kospi gained 0.43%. Singapore's Straits Times gained 0.05%, and Hong Kong's Hang Seng gained 1.21%. China's Shanghai Composite lost 0.43%.

Almost all Europe's markets closed in the green Monday, with Moscow's closed for a holiday after the ending of the hostage crisis. The FTSE 100 closed higher by 13 points or 0.29%, at 4,563.80. The CAC 40 closed higher by 7.09 points or 0.19%, at 3,673.03. The DAX rose 20.59 points or 0.53%, to close at 3,887.58. Tech stocks recovered while retailers performed poorly, perhaps due in part to August's Bloomberg Retail PMI for the eurozone declining below the benchmark 50, to 49.7 from July's 51.2.

The Nikkei started out in the green Tuesday, too, still building on the enthusiasm from the capital spending number. The index dived into negative territory early in the afternoon session, but then recovered to close near the high of the day, up 54.57 points or 0.49%, at 11,298.94. Market watchers concluded from volume patterns, however, that gains were concentrated in big-cap stocks.

Techs gained. In stock-specific news, Sony has decided to refocus its personal computer marketing strategy on business customers and to sell more low-priced models. The stock rose 0.8%. Lender Mizuho Financial Group also rose, by 0.9%, after announcing plans to sale part of its stake in Mizuho Securities. When the unlisted Mizuho Securities is listed, Mizuho Financial Group will also gain from that listing.

Most other Asian markets closed in positive territory, too. The Taiwan Weighted gained 1.23%. South Korea's banks pressured the Kospi, however, after a report that Goldman Sachs thought the country's banks might not continue recent upward momentum. The Kospi declined 0.66%. Singapore's Straits Times climbed 1.24%, and Hong Kong's Hang Seng hit a six-month high, rising 0.24%. China's Shanghai Composite rose 0.21%.

Currently, European bourses turn in mixed performances, with many having dipped sharply soon after opening today, but then regaining those losses. In the U.K., attention focuses on possible deals in the banking sector, including offers for investment bank Cazenove, perhaps by American banks, and mortgage lender HBOS's possible bid for lender Abbey National. Recruitment firm Hays cheered those watching the job market when the company reported earnings.

Reaction to earnings from Swiss staffing company Adecco weren't so positive, however. The company reported results characterized as in-line with expectations and was upbeat about demand and the strengthening business environment, but shares were down in early trading as some worried about growth potential in Continental Europe. Tour group Tui decided the economic climate no longer favored its planned IPO in its container shipping subsidiary, and the resultant decline in the stock and the ramifications of the decision pressured European markets. Also pressuring the markets was a decision by Kuwait Petroleum Corporation to sell part of its position in the newly merged pharmaceuticals company Sanofi-Aventis. Goldman Sachs' downgrade of telecom-related Alcatel didn't improve sentiment, either.

As of this writing, the FTSE 100 had fallen 3.10 points or 0.07%, to 4,560.70. The CAC 40 had climbed 5.45 points or 0.15%, to 3,678.48. The DAX had risen 8.19 points or 0.21%, to 3,895.77.

  Linda Piazza   9/7/2004,  2:12:02 AM
A VIX dipping below 14.00 as markets head into the most difficult month of the year: that's not a combination that those with bullish hopes want to see. Yet we know that the VIX is an untrustworthy market-timing tool, and low VIX levels can move lower. Many watched in vain for a market reversal in the spring of 2003 when the VIX dropped toward and then below the 20.00 level that had for many years marked turning points in the markets. It didn't come, and the VIX just moved lower. That can happen again, so it's always best to watch price action. The VIX is one tool that traders can use to help manage risk, and this time it's signaling that bulls may be assuming a lot of risk, but may is the operative word.

Markets didn't have a great day Friday, but was it really all that bad? It was for the SOX, and many other indices declined, too, but on the Dow and the SPX, two often-watched indices, the retreats essentially constituted retests of their 200-sma's. Those retests could and should have been expected at some point. Those tests also constituted retests of the possible necklines of the misshapen inverse H&S's on the Dow and SPX, as well as on the OEX. Neither the Dow nor the SPX closed below the midpoint of its tall white candle from Thursday.

The OEX did, though, but its decline also constituted a retest of the neckline of its misshapen inverse H&S. As has been true several times over the last week, oscillator evidence is scrambled on the daily chart. RSI says the OEX could head down; MACD says it could head up. As seen on the 30- and 60-minute charts, it's possible that the OEX's decline has been in the form of a bull flag such as those seen as the OEX travels down through an ascending regression channel that began building 8/31. The thirty-minute chart shows that the OEX ended the day Friday sitting on the ascending trendline off the 8/31 low and at the bottom support of that ascending regression channel that had been in place since then. A fall beneath 540.80 would tend to confirm a downside break out of that channel, especially if the SPX was breaking through its 200-sma, and a break above 542.50 would tend to confirm an upside break out of that possible bull flag.

At Friday's close, the OEX 5-minute chart indicated that the OEX was likely to find support near 541, but that it would then face resistance that was converging right overhead, all the way up to 542.14, so that it was as of then unclear which of the two breakout levels the OEX was likely to hit. As I type, futures are higher than at Friday's close, responding to Monday's positive day in the overseas markets, but they're off their overnight highs. If there is nothing to change that picture before tomorrow morning, resistance may be tested ahead of support.

  OI Technical Staff   9/7/2004,  2:11:56 AM
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