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Keene Little : 1/28/2008 1:23:45 AM

With the equity futures down hard tonight (no idea if they'll stay down but just a heads up here) we could see a different kind of move down than I showed on the 10-min chart (which called for a relatively small drop, to about 1320, and then a bounce before turning lower again).

We could instead get a sharp move lower to give us two equal legs down from Friday morning's high. That would be a projection down to 1301 (ES 1300.50) before we get another bounce. That would have price dropping down to the broken downtrend line from Jan 14th and a little below a 62% retracement of the rally off last week's low.

Keene Little : 1/27/2008 11:02:33 PM

Monday's pivot tables: Link and Link

On Friday SPX was rejected at the August low near 1370 so there is the bearish possibility that we saw a bearish kiss good buy against previous support turned resistance. This SPX daily chart was posted at the end of the day on Friday to show potential price action over the next couple of months: Link

As explained on Friday, the key levels are the recent lows near 1270-1280 and Friday's high near 1368. As usual, I'm showing multiple scenarios on one chart instead of using multiple charts which can get a little confusing. So the different scenarios are shown with different colors.

My best guess is the dark red one which points to price playing out sideways in a triangle consolidation for a 4th wave correction that could take us into February opex. It means a drop back down to test last week's lows will be successful but resistance at or below 1370 will hold and price will bounce up and down a few times, potentially in a contracting triangle.

After the triangle consolidation completes (which would work off the extremely oversold conditions), we'll see new lows into March before a much larger upward correction into early summer kicks off. But if price rallies above 1370 after a relatively small pullback completes, then we would likely see a rally up to around 1450 and the downtrend line from October (pink wave count).

If price drops below 1270 from here then we should see price stair-step lower into April (grey wave count), staying within the parallel down-channel from October. Zooming in a little closer with the 60-min chart, the same colors show the different scenarios: Link . For now notice I'm expecting a further pullback before we see either a continuation lower (grey) or a bounce (dark red and pink). As the move progresses I hope to get an idea as to which scenario will play out.

If we get an early drop Monday morning be careful about a quick bounce back up to correct the drop from Friday. This 10-min chart shows what I think could play out on Monday: Link . The move could take longer than the one day that is shown on the chart.

OI Technical Staff : 1/27/2008 9:59:59 PM

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