Key DOW Levels for 4/11
UP Through 10,150
DN Through 10,075

Nearing the Target
Indexes break upper lines as expected (again). Nearing
target on the Dow at 10,200. Expecting a retracement.

>From yesterday's commentary,"In the very short term, I
would expect a strong move up through 9,850. If you can
watch the market, I think the right positioning is to hold
Long with stops at 9,700, expecting the current patterns to
follow through with a break of 9,900. If you cannot watch
the market, it is best to wait until 10,000 is crossed,
setting stops at 9,900 or 9,800..."

Woah, Nellie. What a rally day this was! Certainly,
today's strong move across the board is going to give the
bears cause to rethink their strategies. There is plenty
of negative press out there right now (NASDAQ still at an
average PE of 50, earnings warnings are coming, and so on),
but you have to go with what the market says it is going to
do.

The last two days, we have had upside consolidations, so
the"way to bet" was up. Now, 600 points later, it seems
obvious. I will say, however, that we are still in
dangerous waters, since the Diamond consolidation on the
Weekly Dow has a lower boundary around 10,250. We easily
could rally to this level and come crashing down. But,
based on the patterns we have seen for five days, there was
good reason to bet on the Long side in the Short Term.
Now, we will see.

Our upper target for the prior consolidation at 9,800 is
10,200. I calculated this using the centerline of the
trading range - about 9,800 - down to the low at 9,400.
That's 400 points. Add 400 to 9,800 and you get 10,200.
As we approach this number, we would expect something to
happen. Most likely, the market will retrace back to
10,000 and then either base there or break down.

Short Term Dow

In the short term, we have a new range which is marked on
the 15 Minute Chart from 10,075 to 10,150. In the very
short term, I would trade breaks through either line and
hold mental stops at the same levels. For Wednesday, use
our"higher/lower" rule, which says if you get stopped out
due to whipsaws (moves back and forth through your stops)
set your next stop at the highest high or lowest low (for
shorts) and wait for that level to be broken. This will
keep you in for the wider move, at the expense of at most
2-3 small losses.

Medium Term Dow

Yesterday, I indicated that we were"still Long with our
stops at 9,700. The most likely scenario is that we will
break the high, based on the consolidation from 9,700 to
9,900." We got it. Now, as we approach our target from a
beautiful 800 point run (from the prior low at 9,400) we
need to start getting more cautious. Markets do not
normally just go straight up. And this one is, shall we
say, a bit gun-shy.

NASDAQ and OEX

The NASDAQ made a very nice 100 point move on a gap open.
On our NASDAQ page, we discussed the likelihood of an
upside move, but the strength of the move surprised me.
Now, we are at the upside target predicted by the center of
the consolidation at 1,750 (from the low at about 1,625)
and a retracement is fairly likely. The OEX hit our upside
target of 600 today. **

In Summary:

Yesterday, I indicated we were"watching the upper
consolidation boundaries - particularly 9,900 on the Dow
and 1,760 on the NASDAQ, while holding tenuous Long
positions." Now, we are at resistance, and nearly at our
targets on the OEX and NASDAQ (605 and 1850 respectively).
We could make it, but the thing to watch out for here is a
quick retracement. Our stops have been tightened as we go
into Wednesday's market. One last note - the week before
Easter is usually an up week.

Thanks for listening, and good luck in your trading!

Ed Downs
edowns@nirvsys.com


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