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Keene Little : 8/30/2007 10:27:41 PM

Friday's pivot tables: Link and Link

We had a nice bearish wave pattern setup and it got spoiled by today's rally and push to a new high for the bounce. That move now opens up a few possibilities and I simply have to wait for more price action to tell me what's playing out from here.

The indices now look like they have some bullish potential and I've added a key level for SPX at 1469, near today's high. After what could be counted as impulsive 5-wave move up from Tuesday, today's pullback looks like a correction of it. Another push above today's high should carry a ways and would be a good long play. Notice too that it would be a confirmed break of the downtrend line from July 19th. Link

NDX was stronger today but shows the possibility for being a lot closer to a high and that's what has me wondering if the others are as bullish as they appear. Another minor new high for NDX could complete a 5-wave move and that could complete an A-B-C bounce off the August 16th low. The first Fib projection for the move is at 1985 (wave-C = 62% of wave-A). Link It could of course head higher or pull back and then head higher again.

The interesting thing about the Fib projection to 1985 for the A-B-C bounce is that the 5th wave in the move up from Tuesday also projects to the same level (for equality with the 1st wave): Link Based on this I'd be very tempted to try a short play tomorrow at or around NDX 1485 if it looks like it could roll back over.

The RUT has been providing one of the cleaner wave patterns but it too has now made two different wave counts possible and the only way to tell which one is playing out is to wait for a break of either today's high near 792 or Tuesday's low near 767. Whichever price goes could be the trade to follow for a while. Notice too that a break above 792 would be a confirmed break of its downtrend line from July 19th, like the SPX. Link

Bottom line is that there is no good setup that I see at the moment. I'll be watching to see where the market heads next and let price tell me which wave count becomes the preferred one.

OI Technical Staff : 8/30/2007 9:59:59 PM

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Jane Fox : 8/30/2007 4:07:00 PM

Please be aware that I will not be in the monitor tomorrow. I will be starting my Labor Day weekend one day early. C U all on Tuesday September 4th.

Keene Little : 8/30/2007 4:01:22 PM

Even though the pullback is deeper than what I would have expected for a 4th wave pullback for the NDX pattern, it's still a viable wave count: Link The projection for the 5th wave is now lower because the 4th wave pulled back further so now it's at 1985.42. So the NDX wave count says the rally could be near an end whereas the bullish wave count for SPX that I showed on its 30-min chart is much more bullish (above 1500 projection). Somewhere in between probably lies the answer and it's not clear yet.

Linda Piazza : 8/30/2007 3:31:38 PM

The SPX is back above its neckline, but the possibility exists that it's just reforming its H&S, building a new right shoulder. Be careful. Tomorrow offers tons of potentially market-moving events, beginning with events tonight overseas, so make end-of-day decisions with the understanding that your trade could be impacted even before you wake tomorrow morning.

Keene Little : 8/30/2007 3:14:11 PM

The pullback from today's highs has now gone deeper than I thought it would if there was going to be a quick move higher to finish the bounce. The pullback could fit as a correction to the bounce off Tuesday's low so it's not necessarily bearish. All in all it continues to fit in a choppy pattern and as such continues to hide its intentions from here. But the bullish (green) wave pattern could be in play here. Link

Linda Piazza : 8/30/2007 3:09:26 PM

If the SPX can't regain that converging neckline/Keltner resistance on 15-minute closes, now at 1456.40, it's set a downside Keltner target at 1444.27. It's still trying to regain it, though. USD/yen at 115.78 as I type.

Linda Piazza : 8/30/2007 3:04:44 PM

I've been away dealing with a family emergency. While I was gone, I see that the SPX has confirmed its H&S formation on its 15-minute chart, closing a 15-minute period below the neckline and Keltner support line noted on the chart attached to my 1:55:47 post.

However, the USD/yen hasn't dropped to the same degree. It hasn't dropped below its 12:15 low. It hasn't violated that congruent Keltner support.

What does this say to me? Not much yet, but I see that the SPX is rising to retest that neckline for its H&S formation, or maybe just to form a new right shoulder. I would be cautious about downside follow through if the SPX can quickly regain that neckline area, at about 1456.20 on 15-minute closes.

Linda Piazza : 8/30/2007 2:15:11 PM

USD/yen at 115.86 as I type. It's not doing anything particularly dangerous to the short-term equity outlook, but neither is it pushing above that resistance band just above the current value and confirming any short-term bullish excitement, either.

Keene Little : 8/30/2007 1:58:20 PM

This recent move down may have completed the little a-b-c 4th wave correction that I had on the NDX 30-min chart in which case we should now get the next leg up. Trying a long here would be the recommended play with a stop just below the recent 1967.61 pullback low. The upside projection for equality between the 1st and 5th waves is now at 1999.90. Link

Linda Piazza : 8/30/2007 1:55:47 PM

Short-term bulls want the SPX to hold above 1456.30 or so on 15-minute closes. Here's why, but remember that from this point on, it's really about positioning ahead of tomorrow: Link

Linda Piazza : 8/30/2007 1:30:49 PM

The SPX high of the day was at or near the upside target produced by yesterday afternoon's confirmation of its inverse or reverse H&S. So what, you might ask. While I never count on these targets being met any longer, the actions surrounding such formations can tell us something about underlying bullish or bearish strength. At least on the short-term, bulls were able to set up the formation, confirm it and meet an upside target. Now, I show a potential upside target near 1470.30-1471.50 for the SPX (30-minute chart, Keltner target), but I'm not at all certain how obtainable that is. If you study the 15-minute chart, you see the possibility for a regular H&S, a bearish formation, setting up now. Will it follow the USD/yen's example and fail to confirm that H&S? Or will the USD/yen, hitting resistance, fail to provide any further upward impetus? I just don't know.

Linda Piazza : 8/30/2007 1:22:35 PM

USD/yen at another new high of the day, so another nod should be given to its contribution to bullish tenor for the day. However, remember that it's just moving deeper into or closer to a resistance band, so keep moving your stops higher in any short-term bullish equity trade. This is not a breakout on the daily chart for this currency pair but is instead still a chopping around within a chop zone.

Jane Fox : 8/30/2007 1:12:37 PM

NEW YORK (MarketWatch) -- Merrill Lynch cut its rating on Wal-Mart Stores Inc. to sell from neutral Thursday, highlighting concerns that margins at the world's largest retailer could be compressed "dramatically."

The Merrill downgrade comes as the Wal-Mart's been grappling with a spending slowdown as customers have struggled with rising prices for food and gasoline. The company's also been focusing recently on international expansion as management slows the pace of U.S. growth.

"Following years of weak comps, declining new door productivity and aggressive expense management, margin erosion in the core U.S. division looks set to continue, and may, in fact, accelerate in the years ahead," analyst Virginia Genereux wrote in a note to clients. "The macroeconomic backdrop is not the center the centerpiece of our argument, but it is certainly an incremental headwind

Linda Piazza : 8/30/2007 1:06:29 PM

USD/yen is now at 115.95, with the day's high at 116.00 and yesterday's, 116.15. As has been mentioned, this currency pair is moving up into a distinct resistance band, however, and I'm not sure whether it can push through it or not. So far, the nod must still be given to the bullish camp, but it's not much of a nod.

Keene Little : 8/30/2007 1:04:29 PM

Interestingly, with the market pushing back up here, if it can rally to a new daily high then it looks like NDX could finish up a 5-wave move as I showed earlier on its 30-min chart (12:20). That would then call for at least a pullback correction from there (if not the start of a major decline so it'll be worth shorting it).

At the same time a new high for SPX would give us a 7-wave move up from Tuesday and that's a corrective move (a-b-c-x-a-b-c) and that could end its bounce. That would get the indices back in synch with an expectation for a decline as the next big move. If it instead chops sideways inside of today's range then there will be no setup that interests me.

Linda Piazza : 8/30/2007 12:51:37 PM

After a brief dip below the rising trendline established since 6:00 this morning, the USD/yen rebounded, and it's now back at 115.89, now facing that same resistance that has been so tough.

Jane Fox : 8/30/2007 12:46:02 PM

Markets are getting pushed around today.

Keene Little : 8/30/2007 12:36:20 PM

SPX continues to support the idea that its bounce is finished and now we'll see the next leg down get started, as I've been showing on its 60-min charts: Link But I don't like the fact that the rally from Tuesday's low now looks impulsive. That makes it look like it will get a pullback and then continue higher, as per the green wave projection on this 30-min chart (using the same wave count as what I've shown for NDX this morning): Link I'll have to let price action play out some more before the answer to this question becomes clearer, and why the sidelines is not a bad place to be in the meantime.

Keene Little : 8/30/2007 12:23:07 PM

Of course the other indices might not cooperate here since it looks like they might have more immediate bearish ideas. I don't like trading in this fractured of a market so I'm just as happy on the sidelines right now (except for a few put options which I'll always have and will add to on any additional rally).

Jane Fox : 8/30/2007 12:21:51 PM

Things are getting bearishier and bearishier out there. USDJPY is now to new daily lows. (using a 9:30 open that is).

Keene Little : 8/30/2007 12:20:34 PM

Keeping with the idea I showed on the NDX chart, this 30-min chart zooms in a little on what could play out from here, and I like the setup it would provide if it does: Link

If the move up from Tuesday's low is wave-C of an A-B-C bounce off the August 16th low then it will be a 5-wave move. The current little pullback should be the 4th wave in that case and we'll be due another rally leg to finish the 5th wave. Depending on the pullback I'll then get a better idea where the 5th wave might end. For now I'm projecting a move to 2000. NDX would then be due at least a pullback so it will be the next good setup for a short play.

Jane Fox : 8/30/2007 12:19:33 PM

And the AD volume makes another new daily low but the VIX is not anywhere near its daily highs so that is certainly not a signal to go short but a signal to bail on any long positions.

Linda Piazza : 8/30/2007 12:19:02 PM

USD/yen at 115.71 as I type, having pulled back from the massed resistance I mentioned. The USD/yen so far still maintains the rising trendline that it began establishing about 6:00 am this morning, with that trendline now at about 115.58 but still rising. No conclusion here as I'm not sure how much further support the USD/yen will provide for equities, now that the resistance has been touched. It may break through and it may not, but Fukui and Trichet and Bernanke haven't revealed to me any plans they have that might impact their relative currencies.

Jane Fox : 8/30/2007 11:55:13 AM

All markets have now broken their PDRs. Link

Jane Fox : 8/30/2007 11:41:47 AM

All indications are the bulls have the ball and have enough power to run for a touchdown. The internals are giving you the go ahead to buy the dips.

Jane Fox : 8/30/2007 11:40:22 AM

It is pretty uncanny how the USDJPY currency pair matches the AD volume charts isn't it Link

Keene Little : 8/30/2007 11:37:43 AM

I had made a brief comment about the 5-wave move down on Monday and Tuesday possibly being the end of a correction to the August rally and now with the push higher that wave pattern is taking on a higher probability. As shown on the this NDX 60-min chart, Tuesday's low could have completed the pullback and we've since been in the next leg up of what will be a larger A-B-C bounce off the August 16th low: Link

Making a Fib projection for this A-B-C bounce has the first upside target at 1985 (wave-C = 62% of wave-A) and then on up to 2038 for equality in the two legs up. We're now approaching the first Fib projection which also could be a retest of the broken uptrend line as shown on the chart.

Jane Fox : 8/30/2007 11:35:40 AM

VIX and S&P futures are in sync so keep your eye out for divergences here to tell you a trend change is in the making. Link

Jane Fox : 8/30/2007 11:34:16 AM

AD line has improved to +482 and AD volume is above 0.

Jane Fox : 8/30/2007 11:24:33 AM

Well at least the SPX has broken its PDH on it way to test resistance at 1480. I don't expect it will break that resistance today or even this week but I expect it will next week. Link

Jane Fox : 8/30/2007 11:15:28 AM

NEW YORK (MarketWatch) -- U.S. stocks traded mixed Thursday as nervous sentiment dominated ahead of Federal Reserve Chairman Ben Bernanke's speech tomorrow, with Dow component Wal-Mart Stores declining 2% after Merrill Lynch cut its shares to sell.

"The Dow was up a good 250 points yesterday, so this is a minor, minor pullback," said Marc Pado, U.S. market strategist at Cantor Fitzgerald.

"We've got Ben Bernanke talking tomorrow so the market is just a little nervous about what he might say," Pado said. "The weakness this morning is not really heavy selling considering the volatility we've seen of late."

Linda Piazza : 8/30/2007 11:14:41 AM

USD/yen at 115.92. I see lots of resistance from about 116.10-116.50, so be aware that while the nod must be given to a short-term bullish tenor promoted by this currency pair, there really hasn't been a breakout on anything other than a short-term basis. There's no breakout on the daily chart as yet. In this climate, don't ever let a short-term profitable play's profit seep away and that play turn into a losing one.

Linda Piazza : 8/30/2007 11:10:14 AM

The Kansas City Fed reported that its manufacturing survey showed a moderate expansion of manufacturing activity in August. The district manufacturers' expectations for future growth declined slightly. Prices indices eased when compared to the previous survey.

Keene Little : 8/30/2007 11:06:16 AM

Stopped out of my short and now I'll just watch to see what develops from here. It's hard to feel bullish with the weakness in market internals but nor can I argue with price. Choppiness is not what I want to trade and it's possible that's all we'll get for the rest of the week. If something bearish sets up again I'll try it but now price will need to show me it's ready to decline (and then I'll try shorting a bounce again).

Jane Fox : 8/30/2007 11:01:28 AM

Dateline WSj - WASHINGTON -- When Ben Bernanke was nominated to head the Federal Reserve in 2005, he promised to "maintain continuity with the policies and policy strategies established during the Greenspan years." But in handling his first financial crisis, Mr. Bernanke shows signs of a break with Alan Greenspan, the Fed's chairman from 1987 to 2006.

That shift is important in understanding why Mr. Bernanke hasn't cut the Fed's main interest rate yet, and it could alter investors' expectations of how the Bernanke Fed will function.

The Fed historically has had two major economic duties. Maintaining financial stability is one. Controlling inflation while preventing recession is the other.

To Mr. Greenspan, market confidence and the economy's growth prospects were so intertwined as to make the Fed's two duties almost inseparable. He cut rates after the 1987 stock-market crash and the near-collapse of hedge fund Long-Term Capital Management in 1998 to prevent investor reluctance to take risks from undermining the nation's economic growth.

Linda Piazza : 8/30/2007 10:57:56 AM

New high of the day on the USD/yen. It's at 115.82 as I type, down from the 115.85 it just reached. Keep in mind the resistance that lies just ahead, too, but, as in my previous post about the currency pair, I have to give a slight nod to the bullish version so far, if only a slight nod.

Linda Piazza : 8/30/2007 10:53:39 AM

The Federal Reserve Bank of Kansas City releases its Survey of Manufacturers for the Tenth District at 10:00 central time, in a few minutes. I don't typically find any coverage of this report anywhere other than at the District's website (www.kansascityfed.com), so it doesn't appear to me that this is ever market moving. It's not as important as the Philly Fed, for example. However, I thought I would mention it just in case.

Keene Little : 8/30/2007 10:52:34 AM

The bounce in SPX was close enough to yesterday's high for the correction of this morning's initial drop. Any higher and it will probably head for new highs. Therefore I've lowered my stop on my ES short to 1466 (above the bounce high and allow for one more attempt at gap closure). If stopped out I'll stay on the sidelines to avoid what could be a choppy day while waiting to see if something sets up later.

Linda Piazza : 8/30/2007 10:46:57 AM

A few minutes ago, the USD/yen attempted a breakout to a new day's high, rising to 115.81 with the previous day's high at the same 115.81. It's at 115.73 as I type, having been knocked back from that day's high which had moved it into the gap down this morning. The USD/yen has been rising since that 6:00 am drop this morning, but it's got significant resistance ahead, too. Again, it's not supporting, yet, too bearish of a tenor, but neither is it providing a prediction that currencies are about to break to the upside, either. Sometimes the currency pairs provide a lot of insight, and sometimes they just confirm a lack of direction as yet, and that's what I'm seeing. So far, I'd give a slight nod to the short-term bullishness for equities and this currency pair, but only a slight nod. Maybe only enough to prop it up for resistance tests that it will ultimately either fail or not fail.

Jane Fox : 8/30/2007 10:41:57 AM

AD volume to new daily lows again. Beware bulls.

Linda Piazza : 8/30/2007 10:28:54 AM

The USD/yen is at 115.68. So far, it's still maintaining the rising trendline it began forming about 2:00 yesterday afternoon. Although it narrowly averted confirming a H&S neckline about 6:00 this morning, it's since been rising back into the shoulder area, stretching that shoulder out so far that the formation doesn't have much relevance any longer. My conclusion? This currency pair looks as currency traders are just marking time right now. It's not supporting either a very bearish short-term view or a very bullish one.

The euro/yen did fall through its H&S neckline this morning at about 5:45 am. It's now bounced back above that neckline. Back in the heyday of the rally days over the last year, such a movement in equities was a sign that bears had been routed and that bulls were taking over again, but this is not the heyday of that time.

Keene Little : 8/30/2007 10:24:00 AM

Other than the techs though, I still like the short side of the market.

Keene Little : 8/30/2007 10:23:32 AM

It's certainly a split market this morning with NDX approaching +1.0% on the day and everyone else in the red. Normally a fractured market like this is a caution flag to be wary of a choppy day.

Jane Fox : 8/30/2007 10:21:51 AM

AS long as the AD volume is making new daily lows I really don't care what the other internals are doing. If the AD volume is that bearish any rally will never have follow through. Same for the VIX if the VIX were making new daily highs (bearish) but the others were bullish I would not be trading because once again no follow through. Both the VIX and AD volume need to be in sync for a direction that is tradable.

Keene Little : 8/30/2007 10:12:40 AM

New 52-week lows is still higher than new highs for the Nasdaq as well. This is being manipulated higher in the indices in hopes of keeping the bears at bay.

Keene Little : 8/30/2007 10:11:37 AM

Even the a-d line for the Nasdaq is still negative.

Keene Little : 8/30/2007 10:10:46 AM

As Jane pointed out, the a-d line (both volume and issues) is not supporting this rally (yet).

Keene Little : 8/30/2007 10:09:45 AM

If ES manages to close its gap at 1465.25 I'd try a short there with a stop just above yesterday's high, so about 1468. It's a nice tight stop to see if it works.

Jane Fox : 8/30/2007 10:06:35 AM

The AD volume should have been telling you the bulls were not in full control. IT is now making new daily lows and has brought the the little rally the bulls had going to a screeching halt. Never unestimate the power of the AD volume!

Jane Fox : 8/30/2007 10:03:19 AM

NDX futures is the only market to break it overnight highs. Link

Keene Little : 8/30/2007 9:58:50 AM

Probably a few more calls came in from the Hamptons this morning after seeing the gap down opening with a few choice words from the senior traders to not let the selling get out of hand.

Linda Piazza : 8/30/2007 9:58:26 AM

The USD/yen is at 115.63 as I type.

Linda Piazza : 8/30/2007 9:58:18 AM

The USD/yen is at 115.63 as I type.

Keene Little : 8/30/2007 9:55:12 AM

Nice bounce for the NDX which has made it back into the green. The rest of the market is not participating as much in the bounce so we'll now see if the techs can pull everyone else up or else intramarket divergence here is bearish and techs will be pulled back down with the broader market.

Jane Fox : 8/30/2007 9:53:30 AM

NDX futures are just about to test their Previous Day Highs (PDH). Link

Jane Fox : 8/30/2007 9:51:04 AM

TRIN opened at 1.79 but has fallen to 1.16 telling me the AD line and volume are improving.

Jane Fox : 8/30/2007 9:49:59 AM

The only internal out of sync is the AD volume but that is a very important one. Link

Jane Fox : 8/30/2007 9:48:13 AM

DAX to new daily highs and USDJPY moving upward as well so the bulls are coming alive.

Jane Fox : 8/30/2007 9:47:29 AM

VIX is making new daily lows as the S&P futures are making new daily highs but with the AD volume moving down and the AD line at -1660 don't expect any kind of followthrough.

Linda Piazza : 8/30/2007 9:45:28 AM

The Fed has now announced another $5.00 billion repo, this one maturing September 5. As per my 9:31:21 post, this and the previously announced repo of the same amount are replacing $10.25 billion in repos maturing today. That's now a total $0.25 billion draw for the day if no further actions are taken.

Jane Fox : 8/30/2007 9:45:16 AM

AD line is a bearish -1660 and of course under -1000 which is par for the course nowadays.

Jane Fox : 8/30/2007 9:39:08 AM

One other item I would like to bring to your attention on the SPX chart is that the MACD has not been able to break back above 0 and if it crosses below 0 that is considered quite bearish and an indication support at 1427 will break.

Linda Piazza : 8/30/2007 9:38:43 AM

Forgot to mention the USD/yen's level now, for the benefit of those who don't have quotes. It's 115.46 as I type.

Jane Fox : 8/30/2007 9:37:01 AM

The scenario I am looking to play out is that the SPX will find support at its August 6th lows (1427) and will use that support as a springboard to break the swing high at 1500 however, it needs to break the swing high at 1480 first and that swing high found resistance at the confluence of the 50 and 100EMA so may not be easy to do. I also expected this all to play out in September and we would not have any kind of large moves for the rest of August. So far the SPX has found support at its Aug 6th lows but I was wrong about the large moves for sure. Link

Linda Piazza : 8/30/2007 9:36:56 AM

After climbing into the close yesterday, the USD/yen turned lower overnight. By 6:00 this morning, it threatened to fall through the neckline of a head-and-shoulders forming on its 15-minute chart, with the rising neckline then at about 115.23, but now a little higher. It rose again, averting that neckline confirmation, but anyone hoping for a steadying in equities wants to see the USD/yen maintain the rising trendline that it began forming yesterday, with that trendline now at about 115.28. Failing that, they'd like to see 115-ish support hold.

Linda Piazza : 8/30/2007 9:31:21 AM

The Fed has already announced, earlier than is typical, a $5.00 billion repo for today, with that repo maturing September 13. However, yesterday's $5.25 billion repo matures today as does a $5.00 billion repo made August 16. Unless I'm missing something somewhere, that means that the $5.00 billion repo made today results in a $5.25 billion draw, so far.

Jane Fox : 8/30/2007 9:22:27 AM

NEW YORK (MarketWatch) -- U.S. stocks are positioned to open lower Thursday as nervous sentiment dominates ahead of the long holiday and Federal Reserve Chairman Ben Bernanke's speech tomorrow.

"We're probably headed for some profit taking after yesterday's surge," said Peter Cardillo, chief market economist at Avalon Partners. "The market will be preparing for the long weekend so most of the market action will take place today."

"Tomorrow we have Mr. Bernanke speaking and today we'll have nervous investors wanting to take some profits before he speaks," Cardillo said.

Jane Fox : 8/30/2007 9:21:34 AM

Gold is down and the US$ is up so these two are in sync.

Crude broke $73.00/bl yesterday and the during the overnight session it was able to stay above $73.00

The Dax is supporting the bearishness we are seeing in the American indexes. Link

Jane Fox : 8/30/2007 9:17:57 AM

I was very surprised to see the American major futures markets making lower lows and highs overnight after the GDP numbers out at 8:30 but as the report said "The upward revision is likely to have minimal impact on the financial markets because they are preoccupied by the credit crunch." Link

Jane Fox : 8/30/2007 9:10:13 AM

WASHINGTON (MarketWatch) -- First-time claims for state unemployment benefits crept up in the latest week, hitting a high last seen in mid-April and signaling some weakening in the nation's labor market.

Including a revision to the prior week's claims data, initial claims have now risen for five straight weeks, according to a report from the Labor Department issued Thursday.

Claims for the week ended Aug. 25 rose by 9,000 to 334,000, the highest since April 14.

Meanwhile, the four-week average of those claims climbed by 6,250. At 324,500, it was the highest reading since April 28.

Jane Fox : 8/30/2007 9:08:51 AM

WASHINGTON (MarketWatch) -- The U.S. economy bounced back in the second quarter, growing at a 4% annual real growth rate, the Commerce Department reported Thursday.

The upward revision to second-quarter gross domestic product is likely to have a minimal impact on financial markets, however, which are preoccupied by the credit crunch.

The upward revision to GDP was largely due to an improved trade balance and to the biggest increase in investments in commercial buildings in 26 years

Keene Little : 8/30/2007 9:07:33 AM

The setup at yesterday's close was for a gap down and it looks like we're going to get it. If you shorted yesterday's high then that's where your stop belongs for now. The short setup has to work right away otherwise I'll be back on the sidelines to see what sets up next. I'm not sure we'll see gap closure today but if it does then Tuesday's gaps will probably also be closed.

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