NASCOMP

Trading Range..
Rallied back into the range. Expect a short term retracement. Holding longs down to 2,675.

From yesterday's commentary,"....In the very short term, I expect an orderly market. Draw a tight range around Friday's afternoon bars - low at 2,760 and high at 2,780 (approximately) and trade breaks of this range."
The NASDAQ did retrace at the Open, as I feared it might. But then, it found footing and formed a tight consolidation, at which point we issued an"early Long warning" in our Intraday Alerts. The break through the short line at 2,780 cinched it for the afternoon rally. As we crossed 2,800 we closed our Shorts in the medium term (from three days ago, at 2,830).

For Tuesday, I'd like to call your attention to the 60 Minute Chart, and especially the two yellow trendlines. These form what we call an"expanding triangle", because the right side is expanded out. First the good news - the consolidation (triangles are consolidations) is forming at a center of 2,800 measured from a low of 2,300. This implies an ultimate move to 3,300. Now, the bad news: The two lows of the pattern create a flat line, which means it has a good probability of being broken to the downside.

Sorry. I know this is very similar to the Dow, and when you read the OEX you're going to get it again. We are in a mushy zone where the market is trading back and forth, and so we are left not really having a good feel for medium term direction. So, what do we do?

If you can watch the market during the day, I would generally plan on being Long or Short above/below the 2,800 line. This is roughly the center of the pattern. We have fairly high odds that this line will be crossed tomorrow, but we also have a good chance that the top of the channel, at 2,950 will be hit. So, we are Long with a stop at 2,800 (short term) and 2,675 (medium term).

Short Term NASDAQ

Again, we had a good day in the short term, going Long on Intraday Alerts early, almost exiting but then going in again at 2,780 for the ride up. Surprising strength. Now, I would trade the trendline formed across lows in the 5 Minute Chart, or the line at 2,800. I definitely would trade the Short side if we cross 2,800 down.

Medium Term NASDAQ

The medium term is mushy, as I have said. We are consolidating in a wide range, from 2,675 to 2,900. Best bet is"up from here." Why? Because of the long blue trendline in the Daily Chart. We broke it, and are consolidating above it. That's good. So, the"way to bet" is that the market is ultimately going higher. We are Long at 2,800 and I am moving our mental stop down to 2,675 in recognition of this fact (high odds of a further up move). If we drop that much, and cross that line, we should be able to make up for it on the Short side, down to 2,500.

Summary:

We have moved back up in the channel between 2,675 and 2,900, and are at 62% of the range. For this reason, we have a high probability of a retracement at the Open, but probably not past 2,800. Tomorrow will be a"trendline" day - watch for breaks of lines in the 5 Minute Charts as the index oscillates back and forth. I'm expecting to pick up 100 to 200 points tomorrow trading both directions.

DOW


Trading Range
The Dow is holding above 10,620. Holding Long with stops at this level.

From yesterday's commentary,"...From the 15 Minute Chart, I would expect a rally back to 10,700 and from there - who knows. The key levels to watch are 10,700 and 10,625 - and behavior off these lines...."
We had a nice rally today after dropping - again - right to our lower boundary of 10,625 (a little less, actually) and then rallying from there. We did end up going to 10,700 (and a little more) by day's end.

The Dow is just pure mush right now. I need to tell you that because it has been very difficult to determine directional bias in a directionless market. Right now, the best info I have is the fact that this important line at 10,620 (down a bit) has held. The problem here is in the Daily Chart. Look at the"green line" channel within the"blue line" channel. The"blue" channel says the market is going to 11,250, but the"green" channel - a pennant consolidation, says it's going 1,000 points below that, to 10,250. Which one is right?

The best way to read this is probably"10,250 first, and then 11,250 on the breakout." This is what I thought might happen today, but we keep holding above 10,620. So we'll just stay Long until it is crossed - and won't go Short until 10,575 is crossed to the downside. That's all I know to do right now.

Short Term Dow

Nice short term day. In our Intraday Alerts, we indicated a Long Signal an hour after the Open, and this ended up well by day's end. You can see in the 15 Minute Chart that we consolidated at the extreme end of the range. This gives us our action levels for Tuesday - at 10,695 (dn) and 10,725 (up). I would trade the break and hold your mental stop at about 10,710 (the midpoint).

Medium Term Dow

In the medium term, we are still Long above our fulcrum, and holding on to see if it"takes" or not. Like I say, we just don't know right here. I think we have pretty fair odds of a breakout to the upside, and so it is a"good bet" to be Long right here. As soon as the lower line at 10,620 is crossed with force, we will exit. At 10,575 we will go Short.

NASDAQ Composite and
OEX (S&P 100)

We covered our Short position in the medium term on the NASDAQ at 2,800 - keeping a small profit on that move. We have a trading range here, too, and are watching a lower trendline in the 15 Minute Chart at 2,800. The NASDAQ is forming an expanding triangle in the 15 Minute, which will only be bearish if the lower boundary at 2,675 is crossed..

The OEX bolstered above 710 today, but just barely, closing at 711. Here we have a range from 703 to 717 - a fairly wide one. The index could oscillate wildly between these two boundaries. We are Long again, and I am moving our mental stop down to 703, to give it some breathing room.

In Summary:

All three indexes are now in trading ranges. Our"stance" is Long with protective stops at Dow 10,620; NAS 2,800; and OEX 703. After the fundamental information released by the fed is digested, I would expect resolution - and probably to the upside. For now, all we can do is hold on, and wait.

Thanks for listening, and good luck in your trading!





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