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Keene Little : 1/3/2007 1:14:49 AM

Marc, probably the difference is between the thickness of trend lines ;-)

In either case it looks like we'll be near resistance if the current pop in the futures holds into the cash open. Bears will get all excited if they see a run up followed by a sell off, like we saw on the first day in January 2005.

But I don't think that will be the end of the run higher, and the move back down could be one that just sucks in the bears for the fuel to push it higher again. Each new high we should see continuing bearish divergences but I'm not going to be anxious to jump on this market to the short side yet (except for some quick scalps). Unless you were long on Friday I don't think going long from the current futures level (ES 1436 as I type) is a wise move.

Marc Eckelberry : 1/3/2007 12:47:31 AM

Keene, I actually have it at 12541/12543. If you add about 75 points premium for YM, that resistance was hit Monday morning at 12619. In any case, we are close to weekly R1 at 12626. Link

Keene Little : 1/2/2007 11:31:42 PM

BTW, tomorrow morning the top of the DOW's ascending wedge in the chart I just posted is at 12558, or almost +100 points from Friday's close. If that level were to be achieved within the first 30 minutes of trading I'd be very tempted to short it for a scalp play. We should get a healthy pullback from that kind of move before it presses higher again.

Keene Little : 1/2/2007 11:27:56 PM

In case you missed it, see Tuesday evening's postings where I mention some upside targets for SPX and DOW and a posting about Lennar's (the home builder) disappointing earnings warning. In the post about the DOW and SPX I discuss my view that the leg up that is apparently starting off of Friday's pullback (considering the huge run up in futures as of this evening) should be the last leg up. This is the chart I had posted for the DOW on Friday: Link

I'm looking for a leg up to match last week's rally (or as I had discussed previously, a move that will be 162% of that leg). That gives us an upside projection to DOW 12633 which is very close to the 12626 projection I get off the initial move up from July (for the 5th wave to equal the 1st wave). Good correlation like that makes me pay attention to that level as a potential high. It doesn't mean the DOW will make it there or stop there but it is a "area of interest".

It won't be a straight shot up to that level but could instead be very choppy or at least have some volatility associated with it. We could get a big gap up Wednesday morning, a big pullback into the afternoon and then another big rally leg into Thursday. Hopefully as the move progresses I'll get a better sense from the wave pattern about where and when I'll try calling a top again. In the meantime be careful out there.

Keene Little : 1/2/2007 11:04:49 PM

Wednesday's pivot tables: Link and Link

OI Technical Staff : 1/2/2007 9:59:59 PM

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Keene Little : 1/2/2007 7:07:08 PM

In what could be a another depressing bit of news for the home builders Lennar warned this morning that it will miss Q4 earnings and post a loss intead of a profit. In late September Lennar had warned it would be dropping its earnings forecast from $1.60 per share down to $1.00 to $1.30. Today's warning said they now expect a loss between $0.88 and $1.28. This compares to +$3.54 per share for Q4, 2005.

There's certainly no reaction from the futures about this, unless bad housing news is good news for the broader market. I know, doesn't make any sense to me either. Lennar said it has "not yet seen tangible evidence of a market recovery." They're even selling off its interest in a joint venture which owns a major amount of undeveloped property near Los Angeles. They would not do this if they saw a turnaround in the housing market in the next year.

With the stock market in lala land with these kinds of continuing announcements about housing and the economy we know it's just a matter of time before a little fear starts to set in. In the meantime, it looks like we'll have a little bullishness to start off the year. This is doing a nice job in meeting my expectations for another leg up, which should be the last one, and it could take another couple of days to finish playing out. Be very careful about volatility picking up.

Keene Little : 1/2/2007 6:33:03 PM

Pretty amazing bounce in the futures during this morning's early morning hours. Europe and Japan were up big so our futures got lifted as well. Just because it's the new year I suppose. I can't see a good reason for the huge rally but then again this market has been riding high on fluff for a long time so what's another shot higher.

As most of you know I've been looking for a 3-wave move up from the December 22nd low. It looks like Friday's low will be the end of the pullback so now I'm looking for where we'll have two equal legs up from 12/22 which is at SPX 1434.16 (ES 1445) and DOW 12633 (YM 12721).

If they get carried away to the upside then the next Fib projection is where the 2nd leg up would be 162% of the 1st leg up so at SPX 1444.94 (ES 1456.75) and that 1445 number is one I had mentioned a while ago as being a potential high for the bull market). A 162% move for the DOW would be at 12745 (YM 12841).

Interesting thing about those two DOW projections is that the 12633 is very close to the projection I get off the initial moves up from June and July (projects to 12626-12631). That's good correlation within the entire move and gives me more confidence in looking for a high there. But again, if they get carried away to the upside with more of a blow-off top to cap off the blow-off move from July then the higher number at 12745 is the next level I'd look towards. In 2000 the DOW topped out at 11750 so it would be interesting if we topped out 1000 points higher in the same month 7 years later.

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