Updated Tuesday, 4/24 for Wednesday's Market

Key DOW Levels for 4/25
UP Above 10,550
DN Below 10,400

Rally Failure
Dow rallies to 10,600 and pulls back - a bearish sign.

>From yesterday's commentary,"We are still out of our
Longs, and I don't think it's going to be safe to go Long
again until we get solidly above 10,600. If we cross it
tomorrow, you could enter Long there with a tight stop (at
10,575) but you must be careful here. We are very, very
vulnerable to the pop-and-drop syndrome, that is, a rally
to 10,600 and a failure..."

You can see that this is exactly what happened. We had a
nice lift off our retracement level, but then fell back to
drop through yesterday's low. Not good.

Now, we are vulnerable - EXCEPT for the formation of the
pennant in the 60 Minute Chart. If we get a lift tomorrow
and cross 10,600 this market could rally substantially
higher. Why? Pennant formations are bullish patterns. I
have to admit that my"gut" says this market is going
lower, but if we break 10,600 in the next two days, and
hold above it, we have a potential 1,000 point rally behind
that.

Now, let's look at the other side. You can see that the
lower boundary of this line is right at 10,400. So if we
drop through 10,400 tomorrow, all bets are off and this
market is very likely to drop down to the 10,000 zone. I
know that's a wide range of"predictions" but as I have
said before, trying to predict the market is very
dangerous.

The way to make money is to establish clear support and
resistance and then go with the break that shows you where
the market is headed. 10,400 down and 10,550 up. That's
how I see it. If we do start up and cross 10,500 you might
want to buy there, and hold your stop tight at the same
level.

Short Term Dow

We have a fairly clear upper line across highs leading down
to 10,475. This line would imply short term Long positions
if it is broken and holds 30 minutes into the day.
Otherwise, a drop through 10,400 should be shorted.

Medium Term Dow

We are now Short on the drop through 10,475, per
yesterday's commentary. We will hold our mental cover
stops at 10,550. It is difficult to tell if tomorrow is
going to follow through because of the pennant formation.
But, the market is weak, and it's a fair bet.

NASDAQ and OEX

The NASDAQ keeps retracing, and did the same thing the Dow
did today - rallied and failed. There was a great deal of
evidence this would happen yesterday, so we were prepared
for it. Now, we have many weak NASDAQ stocks so it is
quite likely to continue in the retracement, probably
another 100 points. The OEX is pulling away from 650 and
will likely get back to 605.

In Summary:

We were skeptical of any upside movements today, and for
good reason. Now, we want to watch how the Dow behaves
around the 10,400 line, and whether it drops through. If
we rally, a pennant break could result and therefore we
should be buyers at 10,500 with tight stops. As always, we
continue watching the Diamond and the critical 10,600
level. The market must get above 10,600 to gain its health
back. As the retracement continues, we will start looking
for new, lower Long entry points.

Thanks for listening, and good luck in your trading!

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