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Keene Little : 5/4/2008 11:29:59 PM

Monday's pivot tables: Link and Link

The daily SPX chart shows price tagged the 50% retracement of the October-January decline on Friday (pennies short), it did a little throw-over above its rising wedge pattern for price action since the March low and it left a bearish shooting star candle for the day. A down day on Monday would confirm the bearish reversal pattern. But if price can hold above the downtrend line from October then we could certainly see the market press higher (200-dma is at 1432). Link

Several other sectors and indexes are painting the same bearish setup. The RUT also did a little throw-over above its rising wedge pattern and closed back inside. It tagged a Fib projection at 732.60 for the move up from March (2nd leg up = 62% of the 1st leg up) and it was at the same level as the Feb 1st high (for a potential double top). RSI is overbought and MACD is showing bearish divergence. Link

The semiconductor holders (SMH) is a good sector to watch and I'm seeing the same bearish setup in this one. Price hit the top of a parallel up-channel for price action since the January low, and it hit a Fib projection at 32.03 for two equal legs up and it also hit the 38% retracement of the July-January decline at 32.22 (to the penny). Its candle looks like a hanging man (another potential reversal pattern if Monday is a down day). Link

And finally, a look at INTC to see how a company that falls into the blue chip and tech categories--it too tagged the top of a parallel up-channel off the March low and a couple of Fib projections in the 23.50 area. Its 200-dma at 23.76 is just above Friday's high of 23.66. Friday's candle is a bearish dragonfly doji (more bearish version of the hanging man). Link

These charts do not assure us of a top in the market but the setup is there. I like a short play against Friday's highs but recognize we could see at least a marginal push higher (such as to the 200-dma for SPX at 1432). Keep stops tight until we see whether or not we're going to get some confirmation of the bearish setup.

OI Technical Staff : 5/4/2008 9:59:59 PM

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