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Keene Little : 11/28/2008 1:16:20 PM

It's bullish that SPX is above both its downtrend line from September, currently near 875, and its 20-dma at 887. If we do see a pullback on Monday we'll have to watch both of those levels for potential support. A drop below 875 now would be bearish for a larger pullback at a minimum. In the meantime understand that a short play is a short-term countertrend play and as such will be given very little wiggle room on Monday if it doesn't immediately start to work.

Hope everyone has a great weekend.

Keene Little : 11/28/2008 12:59:27 PM

We're getting a little throw-over above the trend line. We won't know for sure until Monday whether the trend line has any meaning but I like the setup for a short into Monday. Lots of bearish divergences on the charts this week.

Keene Little : 11/28/2008 12:50:34 PM

For SPX, drawing a trend line along the highs from Tuesday morning's high and this morning's high and then an uptrend line from Tuesday afternoon's low it creates a rising wedge pattern. The top trend line is just under 894 and we could get a little throw-over above it if buying continues into the close. It would also be a good setup for a short play into Monday since the pattern calls for an immediate decline on Monday. If it rallies instead then you can immediately exit the short play.

Keene Little : 11/28/2008 12:22:05 PM

I was looking at last year's market for the day after Thanksgiving and we were up 100 and something. However, the Monday after we went into the turlet.

Thanks Mike. The Monday after last year's Thanksgiving holiday was down 33 points. The market was in a leg down at the time and managed a brief bounce on the Friday following Thanksgiving and then interestingly put in a bottom the following Monday and rallied into the December 11th high from which the strong decline started into the January low.

In 2006 we were in a rally in November but the Friday after Thanksgiving was a down day and the following Monday was a stronger selloff (-20 points). The Friday following Thanksgiving 2005 saw a rally of about 3 points and then the following Monday saw a selloff of about -11 points. The Monday after Thanksgiving 2004 also sold off.

So it seems to be a pattern of selling on the Monday following Thanksgiving and considering the huge run up in the markets off last Friday's low I'd say the market is vulnerable to the same thing this coming Monday. Consider a small put position here.

Keene Little : 11/28/2008 11:59:56 AM

If the buyers are able to push this a little higher, keep an eye on the overnight high for ES at 893.50, about 3.50 points higher (so about the same for SPX).

Keene Little : 11/28/2008 11:35:07 AM

Suddenly got a little buying interest. Of course I'm watching the 2-min chart which makes it look like a bigger move. My 60-min chart has tiny little candles since Wednesday afternoon. One buy or sell program during a sleep-inducing low-volume trading day like today can spike the market in either direction.

Keene Little : 11/28/2008 10:49:25 AM

Is it 1:00 PM yet? zzzzz......

Keene Little : 11/28/2008 10:23:02 AM

After the quick probe higher, which failed to test this morning's pre-market high for ES, SPX is now dropping towards its broken downtrend line from September, currently near 878.50. Watch to see if resistance turns into support now. If today's trading remains slow, without much interest in buying (or selling), we could see SPX just slide down that downtrend line.

Jane Fox : 11/28/2008 10:01:52 AM

... also the AD line is falling to new daily lows so not a time to be long.

Jane Fox : 11/28/2008 10:00:37 AM

The VIX is now making new daily highs so the bears are pulling ahead.

Jane Fox : 11/28/2008 9:57:39 AM

I don't want to dampen anyone's spirits this time of year but the bombings in Indian need to be watched and watched closely.

Jane Fox : 11/28/2008 9:56:10 AM

My yoga instructor is in Mumbai with Bikrum (of Bikrum Yoga) opening up some new yoga studios. Her sister told us the other day she is OK but they will not be going back to their hotel and will be staying with some of Bikrum's friends.

If the recent attacks in Mumbai were carried out by Islamist militants as it appears, the Indian government will have little choice but to blame them on Pakistan. That could spark a crisis between the two rivals that could draw the United States into the mess.

We don't want these two countries fighting because both have access nuclear weapons and it is in the world's best interest to throw some water on this fire.

Keene Little : 11/28/2008 9:54:53 AM

Techs are looking the weakest this morning so that's giving us a heads up that we could see some profit taking this morning.

Jane Fox : 11/28/2008 9:34:02 AM

It is not surprising the AD line opens neutral at -266.

Keene Little : 11/28/2008 9:29:40 AM

No surprise, trading in the futures during yesterday's half-day session and overnight were very quiet. A minor new high was made last night but we look to start the day in the red. It's possible we'll at least test the overnight highs (ES 893.50, YM 8763) during today's half-day session. That would be about 100 points higher for the DOW from where it's going to open. Very light volume makes days like today subject to sudden moves as it's easy to push it around.

Jane Fox : 11/28/2008 9:16:07 AM

Good morning everyone and I hope you all had a wonderful Thanksgiving. I started the holiday season a little early this year with my house all decorated and many gifts purchased as well so this Thanksgiving almost felt like Christmas. Now I have a whole month of the festive season. I love this time of year.

I have included yesterday's trading in the overnight session for my ON charts. As you can see the futures are mostly sideways which is quite bullish considering the last four days have seen the biggest percentage climb since 1933. Link

Keene Little : 11/27/2008 11:38:18 PM

Friday's pivot table: Link

If Friday, Nov. 21 was the low for the year we have entered a period of time that could be marked with a lot of choppy price action marked with some big whippy moves. So far we've had a big rally and most people now believe we've seen the low for the year. But even if that's true it doesn't mean we'll just rally straight up from here. In any case we might not have much further upside before turning back down.

The strong rally off the October 28th low to the November 4th high was +19.2% and the current rally has achieved +19.7%. The first leg led to a new annual low on November 21st but we obviously don't know what will happen following the current rally. Late Wednesday I showed the following two SPX 60-min charts side by side to show the first rally leg and the current one: Link

This is a potential fractal pattern playing out and it calls for a pullback and then another new high, probably finishing on Monday around 914-917 (I'm watching to see if the little parallel channels play out the same from here). It's of course also possible we'll see a stronger decline right from here if we see a failure to hold above the downtrend line from September 19th. The significance of the fractal pattern is that we could start back down to a new annual low, shown in dark red on this 120-min chart: Link

If SPX rallies above 917 there's a good chance we'll see it head up to the Fib projection near 963 (possibly even higher to the 1000 area). If we've seen the low for the year (meaning the dark red wave count is not the correct one) it means we'll be inside a large 4th wave correction and it's anyone's guess what it will look like. The pink wave count on the 120-min chart shows one idea for a pullback and then another leg up as part of a larger A-B-C rally to finish the correction by early January. Following that larger A-B-C bounce will be another leg down to a new low next year. This is shown in pink on the daily chart: Link

On the daily chart I'm using dark red to show the idea that we could see a sideways triangle consolidation pattern take us into February before heading down to a new low. These are just two ideas for what we could see. The main point to remember is that price action will probably be whippy with some very large moves. This will be a market to trade and not buy/sell and hold. But trading will be difficult (4th wave corrections are the worst trading environment so be sure to mentally prepare yourself for it and by all means trade lighter than you normally would and take profits much more quickly than you would normally do. If we can catch chunks out of the middle of the moves we will be doing well.

OI Technical Staff : 11/27/2008 9:59:59 PM

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