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Keene Little : 10/13/2008 1:57:57 AM

Monday's pivot table: Link

Equity futures are up big Sunday evening, better than 4% (YM +330, ES +43, NQ +52). At the end of the day on Friday I showed 60-min charts for NDX and SPX with some ideas for what we can expect early this week. With the futures up, and assuming they'll stay up until tomorrow morning, it's looking like the NDX pattern could be in play (which expected a bigger bounce before turning back down). It also has a clean price pattern and makes a good index to watch. I've made a couple of changes to its chart to better reflect the wave count that I think is current (still has some unwinding to do to the downside to finish the multiple 3rd waves): Link

The top of the narrower down-channel is near 1329 and reflects the channel where the next 4th wave (labeled wave 4 for Monday) should find resistance. If we're into a larger 4th wave correction then the upper channel line meets the broken trend line line along lows since August 19th Monday morning just under 1371 so that's the upside potential I see for the index. One of the possibilities is for a gap n crap Monday morning (as the crowd groans).

Friday's pattern looks like what's called an expanded flat correction. Even though there was a new low Friday afternoon it looks to be part of a larger a-b-c bounce off Friday morning's low (the pullback from Friday morning's high is only a 3-wave move and suggests it's part of a larger upward correction). The 2nd leg up in this kind of correction is typically 162% of the 1st leg. NDX 10-min chart: Link

Because futures spiked down further first thing Friday morning than did the cash indices, I get different projections for the 2nd leg up for cash vs. the futures. On the 10-min chart I'm using NQ and show two potential Fib targets--one at 1335 and the higher one at 1364. So far NQ has reached a high of 1334 tonight so this makes for an interesting setup on Monday. We've got the potential for an early rally on Monday that leads to failure and then continued selling.

The daily chart shows how the wave pattern calls for continued stair-stepping lower: Link . The market built up so many degrees of 3rd waves (which is why I was warning of a crash in the October 4th weekend newsletter) that it's now going to take a while to unwind the count. We're nearing the point where the bounces will get bigger and last longer but we should continue to stair-step lower into the end of the year.

Jeff Bailey : 10/12/2008 11:20:24 PM

Closing Internals found at this Link

OI Technical Staff : 10/12/2008 9:59:59 PM

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