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Keene Little : 10/20/2008 12:19:49 AM

Monday's pivot table: Link

Friday afternoon I had mentioned a break of the uptrend lines for the rally off Thursday's lows should be an indication that that leg up is finished. What we don't know is whether the pullback Friday afternoon was the start of the next leg down or just a pullback before we see another rally leg higher. If we get a bounce Monday morning watch for a retest of the broken uptrend lines.

SPX's uptrend line is at 960 at the open. Futures are up tonight with ES making a high of 948 just past midnight (+14.50). SPX closed near 940 on Friday so a 20-point rally is needed to get it to tag its broken uptrend line. A 50% retracement of the afternoon decline is at 962. Therefore this will be an area of interest if it bounces back up to that level and stalls. The 30-min chart shows a couple of ideas that I'm currently considering for what's next for the market: Link

The pink price scenario is the one that calls for a bounce on Monday and then a turn back down. The dark red count calls for a stronger selloff right away, one that will break below the uptrend line from Friday, October 10th (the bottom of a potential sideways triangle consolidation pattern), currently near 875. It takes a rally above 1006 to tell me that we'll probably get a rally at least up to 1050 if not the 1070 area.

The primary trend is down and that's the way I want to keep trading (especially since the wave count is not complete to the downside yet) but as I've mentioned a few times now, we could see either a higher bounce (green) before it turns back down or a big choppy sideways consolidation (pink) before heading lower again. Therefore I want to try to get a crisp entry for new short entries. We'll see what Monday morning trading brings us.

OI Technical Staff : 10/19/2008 9:59:59 PM

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