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OI Technical Staff : 11/24/2006 9:59:59 PM

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Keene Little : 11/24/2006 1:18:30 PM

So ES closed at that potential support level of 1403 which now leaves us guessing as to whether it will continue lower on Monday or instead starts the next leg up. YM has dropped to within a point of its target at 12293. NQ had a few more points to go. To me it's a coin toss for Monday morning and that alone is a good enough reason to be flat until then. I hope everyone has a great weekend.

Keene Little : 11/24/2006 12:50:28 PM

Two equal legs down today gives us potential support levels at ES 1403, YM 12293 and NQ 1817.

Keene Little : 11/24/2006 12:45:38 PM

If by chance this morning's move up was just the start of something larger to the upside then watch the current pullback for two equal legs down to then set up a long play. I'm not recommneding a long play because I just don't like the risk here. That may be just a bearish bias but I'm getting very nervous for longs in this market. But if you think there's higher to go, then this pullback will set up a buy into early next week. If I were looking at just YM I might buy it but I don't like the looks of the other major indices.

Keene Little : 11/24/2006 12:06:53 PM

We're entering the last hour of trading so it will become either lethargic or else we'll see price spikes in both directions as buy/sell programs hit. I wouldn't be a bit surprised to see it just consolidate sideways into the end of trading as volume dries up.

Marc Eckelberry : 11/24/2006 12:00:56 PM

NDX 1825 call resistance was hit as was NQ monthly R2 (close enough, it is 1831.50, but NDX 1825 takes precedence). The VIX did a double bottom on Wednesday at 9.84, after a 13 year closing low. Puts have been sold with no fear of ever being assigned. That is not a good bet. The Euro will hit 1.40 next year and the Feds wil not be able to lower rates too much as they try and protect the dollar. These are much more bearish developments than the press is letting you know.
It can all take it's sweet time, but buying gold on every dip, which I have been suggesting since October, is the best course of action going forward. I think we wil hit 850 within 3 to 6 months, at the most. In fact, 1000 is not out of the question by the end of 2007.
Gold has risen 15% since October lows. No equity index trade has beaten that.

Jane Fox : 11/24/2006 11:43:43 AM

Once the VIX made new daily lows you knew the bulls had possession of the ball but the AD volume and line were telling us they didn't have field advantage. However, once the bulls had the ball they ran for a touchdown and now have the ball and field advantage. Although these charts are showing us they are losing field advantage. Link

Keene Little : 11/24/2006 11:31:43 AM

That last high for NQ, at 1829.25, was a perfect tap of its broken uptrend line from November 3rd again. This past week's price action for NQ, and its mulitple retests of that broken uptrend line, is leaving me with a bearish impression for Monday. We could get the usual spike up on Monday morning in order to create some liquidity in getting traders going the wrong way but I'm thinking this index is a good short now or wait until Monday.

Keene Little : 11/24/2006 11:18:16 AM

With NQ pressing to a new high today (certainly a lot faster than I thought it might) it actually fills the bill for "one more high". So interestingly this could be a good setup for THE high. But there's still enough disagreement between indices and this holiday week is tough to try to make sense of what might be happening here. Bottom line? I'd be real careful about long positions now. Today's gap down open could have been just a precursor for what's about to happen.

Jane Fox : 11/24/2006 11:01:11 AM

* NYSE volume 222M
* NYSE has 1,386 advancers
* NYSE has 1,448 decliners
*NYSE has 189 issues unchanged
* NYSE has 115 issues setting 52-week highs
* NYSE has 2 issues setting 52-week lows
* Nasdaq volume 302M
* Nasdaq has 1,111 advancers
* Nasdaq has 1,531 decliners
* Nasdaq has 161 issues unchanged
* Nasdaq has 70 issues setting 52-week highs
* Nasdaq has 15 issues setting 52-week lows

Keene Little : 11/24/2006 11:00:11 AM

NQ has nearly made the run from the bottom of its up-channel that I showed earlier (10:07) to the top which is at 1826.50. Watch for resistance there.

Jane Fox : 11/24/2006 10:59:45 AM

* NYSE most active stocks: LU EWJ TWX GLD C
* Nasdaq most active stocks: QQQQ SIRI LVLT INTC SUNW

Keene Little : 11/24/2006 10:53:17 AM

ES is now climbing back up inside its broken up-channel and YM is hitting its line along the bottom of its recent congestion at 12332. This might be the last little leg up before we at least get a pullback so I'd be reluctant to chase anything to the upside here. But likewise there are no sellers to help with a short play. Being flat is one of those good positions today.

Keene Little : 11/24/2006 10:37:11 AM

I you like to trade gold then today's bounce could provide an opportunity to test the short side in case we get another pullback from its broken uptrend line from August 2005. The line is where gold's bounce stopped on November 9th and is currently near 642, only $2 higher than this morning's high thus far.

Keene Little : 11/24/2006 10:29:15 AM

ES is now hitting the bottom of it small parallel up-channel, that I mentioned below, at 1406. If you'd like to try a short, this is the place the bounce should fail. Otherwise a continuation higher looks like gap close is in the works.

Keene Little : 11/24/2006 10:22:07 AM

The same trend line along the lows since last Friday for YM is at 12332. YM is actually the one that gives me the sense we could see another high before the whole rally is finished. The past week looks like a sideways consolidation that will press higher once it's done. But the current leg down, which should be the end of that consolidation pattern, needs another drop lower to finish the leg down.

So I've got a very different impression right here from different indices, and mixed internals and a light volume post-holiday trading session. It's just not a day where I can recommend anything here. I'm watching and waiting for some clarity which fortunately shouldn't be very far away. If not today then certainly Monday.

Jane Fox : 11/24/2006 10:20:48 AM

ES tags its PDL and is stopped.

Keene Little : 11/24/2006 10:15:22 AM

NQ has already made it past 50% of this morning's gap down. ES's 50% is just under 1405 and is currently struggling at 38% at 1404. If ES can push higher then resistance could be found at the trend line along the lows since last Friday (the bottom of its own little parallel up-channel since then) at 1406.

Jane Fox : 11/24/2006 10:15:21 AM

AD Volume once again to new daily lows.

Jane Fox : 11/24/2006 10:17:36 AM

When the internals are in conflict many think you should not trade (I know I will say that here) but if you have a trading strategy that does well in choppy markets that is the one to use. Since the markets are choppy much more than they trend, a trading strategy that does well in choppy markets should probably be your core strategy.

So if you have a trading strategy that does well in choppy markets, you can use the internals to tell you when to use this strategy or when to use a strategy that does better in a trending market.

Jane Fox : 11/24/2006 10:08:31 AM

... but AD volume is still under 0 and AD line is -507 and those are telling me we don't have further to go. Internals are in conflict.

Jane Fox : 11/24/2006 10:07:29 AM

VIX made a new daily low when ES made a new daily high telling me we may have further to go.

Keene Little : 11/24/2006 10:07:13 AM

I'm not sure what's playing out in NQ. After dribbling through its uptrend line from November 3rd this week it bcounced back up and stopped just under it on Wednesday. The recent price action since Monday has created a small parallel up-channel, the bottom of which was this morning's support. The pattern inside this channel is the same--chop higher, spike down, chop higher, spike down--and now this morning's spike down. Will we chop higher again? Link

This actually looks like an ending pattern to the upside and as of Wednesday's high I wasn't quite sure if that high was it or instead it needs "one more high" to finish it. As of Wednesday I was thinking a pullback would be followed by one more high but I wasn't expecting this hard of a pullback.

So, it's possible we'll see the same thing we've seen all week where you'll want to be long here and just hold it until we get that last high. But if you're waiting to get short, a break below this morning's low is your signal. It should bust a move to the downside if that happens and it could very well mean the entire rally is finally finished.

Jane Fox : 11/24/2006 10:05:53 AM

Bearishness didn't last long did it?

Jane Fox : 11/24/2006 10:04:29 AM

Here comes the Rescue team. TICKS +800

Jane Fox : 11/24/2006 10:02:10 AM

This chart baffles me. I'm not sure I have seen a market move down while the MACD moves up for such a long time. I understand MACD divergences and when the MACD moves up while price moves sideways but this setup is quite out of the ordinary. I would remain on the sidelines until at least the upper trendline is breached AND MACD can get above the 0 line. Link

Jane Fox : 11/24/2006 9:52:10 AM

AD volume continues to make new daily lows and as long as it does you should not be long.

Keene Little : 11/24/2006 9:49:51 AM

ES is working hard to hold onto its uptrend line at 1402.

Jane Fox : 11/24/2006 9:48:19 AM

VIX opens well above its PDH and ES well below its PDL so these two are in sync.

Jane Fox : 11/24/2006 9:47:30 AM

I would not be long here. AD volume well below 0 and AD line at a bearish -851. Link

Jane Fox : 11/24/2006 9:41:26 AM

Here is the story Keene commented about in his 9:37 post.

LONDON (MarketWatch) -- The euro on Friday broke through the $1.30 for the first time since April 2005, and kept moving well above that level, as the greenback's rout continued amid concerns over flagging economic growth in the U.S. The euro rose as high as $1.3085 in a matter of minutes after it captured the $1.30 mark. After some brief dollar buying, the euro then rose to $1.3108. At 7:54 a.m. Eastern, the euro was trading at $1.3081.

Keene Little : 11/24/2006 9:37:57 AM

The headline this morning, "Europe is Dumping the Dollar", is what's spooking equities. The dollar has dropped below $84 and that's the level I've been mentioning in my Wraps that if broken it probably means the consolidation in the dollar could be complete as of the October high in which case we'll see the dollar start its next decline (and the Euro and gold will rally).

Currently the dollar could find support near its 2006 low of 83.61 in May where it dropped slightly below this morning but has been consolidationg since the early morning hours. If the selling of the dollar is joined by Asian countries then the greenback is in trouble. A potential scenario is that foreign bankers could be voting with their feet in voicing their concern that the Fed is creating too many dollars and thereby depressing its value.

If the Fed is forced to slow down its printing machine then the equity market loses its prop. If the equity market loses its prop the entire rally since the summer is at risk.

Jane Fox : 11/24/2006 9:33:10 AM

Gold continues to be bullish and is now breaking its overnight highs.

Bonds also continue to be bullish and have broken to a new yearly high. Link

Jane Fox : 11/24/2006 9:25:54 AM

Reporting here from the great white north where it is cold. I had forgetten just how cold it gets up here.

All the equity markets except NQ broke their PDLs yesterday and during the overnight trading. I will be using the range made on the 22nd as my previous day reference points. Link

Keene Little : 11/24/2006 9:23:00 AM

The big overnight drop in futures will certainly catch the attention of more than a few traders caught sleeping at the switch this week. The pre-market low for ES will have it breaking its uptrend line from November 3rd, near 1402, and that will look bearish. But YM's equivalent line is quite a bit lower at about 12250. NQ will have clearly broken its line at 1814.

There is the possibility that a sharp decline today will be the leg that finishes the consolidation patter we've been in since November 16th and a downside Fib projection for ES at 1395 would be a typical move for this leg in that case. Therefore I wouldn't say at this time that the market is in trouble. In fact a sharp drop could provide the needed fuel to get that "one more high".

In the meantime a break in the uptrend lines for ES and NQ followed by a retest of their lines could provide an opportunity to test the short side. Just be careful of today's low volume price spikes.

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