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Keene Little : 6/29/2008 10:05:40 PM

Monday's pivot tables: Link and Link

I don't think there's anyone who will disagree that the stock market is oversold. But picking a bottom in an oversold market can be hazardous to your health. We need to wait to see what kind of bounce we get before trying to determine whether or not the market is ready to make a bigger bounce.

SPX dropped down to the target on Friday that I was thinking would be support--right around 1273 which is its March 10th closing low and the bottom of a parallel down-channel for price action since its June 5th high. It's a good place for a bounce and I think it has the potential to rally at least back up to the 1295 area before continuing lower (dark red on the 60-min chart): Link

This coming week is historically bullish so we need to keep that in mind and there's a way to count the wave pattern that sets up a correction of the decline from May 19th (which would likely mean a 2-week effort and perhaps back up to the 1350 area). But the bearish wave count, as I'd mentioned several times last week, is very bearish and we could see the market simply consolidate sideways for a day before proceeding lower again.

The DOW has been the weakest so watching it could give us a heads up for what's next. If it goes sideways for a day or so then there would be a good chance of continuing lower, as shown in dark red on the DOW's 60-min chart: Link

The significance of the bearish wave count is that it calls for a continued decline with only small bounces as it heads down to the 10200-10500 area, possibly bottoming around there by July opex and would look something like the dark red path on the daily chart: Link

But also shown on the DOW's daily chart is the possibility that we'll see a bigger bounce into mid July that could chew up time while not making a whole lot of headway from a price standpoint (maybe 12k and back up to its broken uptrend line from January). However, keep in mind the kind of decline we saw from 2000-2002 and the sharp and strong bear market rallies. Don't think for a minute that we couldn't see that kind of price action again. DOW weekly chart, 2000-2003: Link

OI Technical Staff : 6/29/2008 9:59:59 PM

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