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Jeff Bailey : 1/23/2005 7:56:49 PM

March Crude Oil futures (cl05h) ... $49.08 +1.13%

e-mini S&P futures (es05h) 1,169.78, up 1.25 points or 0.10%.

Linda Piazza : 1/23/2005 7:40:02 PM

Friday, the OEX closed in on the 557-557.30 support that I had been pinpointing all the previous week. It ended the week at 557.32: Link As mentioned on that chart, there's the potential for the already confirmed H&S, visible on this daily chart but not looking as balanced as it does on the 60-minute chart, to resolve into another potential H&S. This one would have a horizontal neckline and shoulders at the 568-570 region. That's been happening repeatedly over the last weeks. If there is to be yet-another H&S formed, it's now lacking a right shoulder. Forming that right shoulder could require a several-day rise followed by several days to a couple of weeks of consolidation before either a confirmation or an invalidation of the formation. Might be time for a bounce. We'll look at that possibility Monday morning, seeing how the futures behave in the overnight session and how internals look, to judge whether there's a likelihood of a bounce. At this point, anyone participating in a long play must consider the possibility that it's a countertrend play that's not particularly amenable to technical analysis. Could be a straight-up zoom or a choppy move up to resistance, with multiple fake-out moves along the way. As you've heard me say multiple times lately, not my favorite type of play.

However, the bulls who have fought each confirmation might finally be exhausted. The TRAN dropped below 3500 and looks vulnerable to 3400. The SOX appears to have confirmed a "b" distribution pattern, with such patterns typically forming in the middle of a decline, hinting that it might have more downside to go, too. The OEX's weekly Keltner chart shows vulnerability all the way down to about 550. Unless there's a weekly close next week above a Keltner line currently at 564.57, that is. Bears have to be prepared, though, if the OEX is going to just crater and move down toward 550-552 (downside target of the already confirmed H&S). I'm going to throw another Fib level at you: the 38.2% retracement of the total rally off the August low and not just off the October low. That level is about 556.00. A push down through the 100-ema at 557.28 should get some momentum going, but conservative traders might want to wait until a push through that 556 level. If the OEX does dive, plans should be made to protect profits near 550-552.

We'll look at both possibilities Monday morning, depending on how futures react and other parameters.

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