i-Trader

Onward and Upward

The Rally Continues As this is being written midday on Wednesday, the expected reflex rally has booked 278 pts of the expected 200-300 pts rebound in the DJZ4. The DJ traded up to 9975 with the US dollar up to 8548 and the US T-Bonds down to 113'10. The markets are now approaching short-term resistance and support levels. One possible scenario I'm watching for is continued movement in the past two-days' direction into the US election on Nov 02, setting up a reversal to test last week's extremes. The maximum targets for DJZ4, FVZ4, TYZ$, USZ4 and DXC are 10075-125, 110'24, 112'24, 112'16 and 8640-80 respectively. Note that DJ10000 however is a key psychological level to watch as well as there being strong resistance at 10015-10035.

Reflex Rally - Right on Cue

The Bounce As this is being written midday on Tuesday, the expected reflex rally has booked 166 pts of the expected 200-300 pts rebound in the DJZ4. The DJ traded to 9697, inside the specified support area of 9620-9720 after tagging an overnight low of 9683. The US bonds, notes and dollar reversed as well. The US dollar traded down to 8473 and 75 on Monday and Tuesday, within 20 ticks of the intra-year low set in Jan and Feb 04.

To maintain the reversals, the DJZ4 needs a close above at least 9875 with 9900 preferable. The US dollar must recover 8620 on a closing basis with the FVZ4, TYZ4 and USZ4 closing below 111'04, 113'16 and 113'24 respectively.

T-9 Days and Counting - Reflex Rally Setup?

T-9 and New DJ 2004 Low Friday the sellers were out again, pusing the DJZ4 to new lows for the year while the broader SPZ4 and NDZ4 held up relatively well. The US bonds, notes and dollar continued their recetn trend moves as well with the interest-rate instruments testing or exceeding their intra-year highs.

This coming week is crucial for the US equity markets and I believe there are technical similarities now the the earlu-August 2004 time period. Recall at that point, on 08.15.04 I stated that the DJ was set up for a minimum 200-300 pts reflex rally. Once again the market is at or near a similar setup. Major support for DJZ4 is at the 9620-9720 area. Monday, 10.25.04, watch the tape for signs of decreased selling pressure (ticks, advance-decline, etc) as well as continued divergences with the NDZ4 and SPZ4. A break of Friday's 9741 low and reversal back through 9760 on improving tape action would be the first sign of stabilization.

Also, watch the US bonds/notes and US dollar for early signs of reversals. The positive action in the interest-rate instruments was rather muted Friday considering the performance of equities and the US dollar. The US dollar, with regards to a few currencies - especially the Euro - may be in a blow-off phase.

Bottom line, US equities are setup for at least a 200-300 pts reflex rally after setting a bottom that should occur in the next 2-5 days. The US dollar is also near an important short-to-intermediate term low and US bonds and notes, short-to-intermediate term highs.

10.21.04 - T-12 Days

Tick, tick, tick... The DJZ4 moved within 20 pts of its early-August lows yesterday and held. The US dollar continues to succumb to selling pressure while the Euro is at its highest level since mid-February after breaking out of a 7-1/2 month range last week. The US notes and bonds are also testing the 2004 high levels. So, with less than two weeks to go until the US Presidential election, will the US stock market break? That's not a constructive environment for the incumbents. Stay tuned, but it looks to me like an inflection point is very near. The DJZ4 needs a close above 9990 to stabilize, the USZ4 below 11216-11224 and the US dollar above 8740.

09.02.04 -College Football

No posts next few days - Labor Day weekend in the USA as well as the college football season gets kicked into high gear. All the parameters for the markets are in prior posts the past several days. Note: after the 0830et employment report numbers are digested Friday morning, the markets will settle into pre-holiday stagnation by mid-to-late morning.

09.01.04 - Window Dressing

Pre-Holiday The rally that began at roughly 1415et on Tuesday produced followthrough early Wednesday to DJU4 10210, 5 pts short of last week's high. In Wednesday's report I stated, "...(CLV4) continues to mark time as it is setup for a retest of the 4800-5000 level, again barring a close below 4100."

For the equity and bond markets, the wait begins for the Friday employment numbers. BTW, anyone shocked by the low volume in August - you shouldn't have been.

Going into Wednesday's API report numbers, crude oil had been down 8 consecutive days since setting the contract high of 4837 on 08.20.04. The past two days tested to the mid-4100 area and rebounded each session to close baove 4200. Wednesday opened essentially on the session low and rallied to 4440, 300 pts off Monday's low, before settling the day up over 170 pts. The next hurdle on the way to the 4800-5000 target is 4450-4460. A close above 4770 would be a strong signal with a close below 4100 setting the top.

For the DJU4, nothing has changed. After the range expansion on Tuesday's late session reversal higher, the market consolidated Wednesday. Most of the session's action was confined to the 10165-10185 zone after early extremes at 10145 and 10210 on the ISM news. Then at about 1305et fear gripped the markets on news of a "mass casualty incident" in Washington DC. The DJU4 dropped nearly 75 pts in less than 5 mins before reversing as the news was changed to a prank release of pepper spray. Just as quickly as it dropped, the market rebounded to the pre-news level of 10170-10175, settling into a 10140-10175 range for the balance of the session. Continued closes above the key 10110-10140 zone will support the market but now the buyers must produce a close above 10225-10235 to resume the upward momentum. A close below 10095-10105 would be weak.

The breakout move in US bonds and notes that began on Monday after a 4-5 day consolidation continued into opening trade Wednesday with the ISM report results producing a drop through the prior day's high close. Flight-to-quality bids on the DC scare pushed the market back to close above Tuesday's close. For the 5-year note, a close below 110'100 is necessary to stem the upward momentum while a close back below 109'300, basis the Dec 04 contract, would be a weak sign. A close below 109'200 would confrim at least a short-term top. In the longer-term, closes below 110'24 and 108'28 basis TYZ4 and USZ4 would be the first sign of a possible top. Closes below 110'00 and 107'24 are required to turn the momentum lower and confirm a top. A FVZ4 close above 111 sets up another leg to the upside

The US dollar consolidated Wednesday, again closing below the key level of 8935 as well as 8900. A close above 8950 is necessary to turn the short-term momentum higher while a close above 8995 will solidify at least a short-term low. A close below 8870 will signal a short-term top for the greenback.

08.31.04 - Pullback to Support

Support Test In Tuesday's report I stated, "...10150-10175 now strong intraday resistance....support is at 10075-10100 on the expected pullback from the 10215 level..."

Tuesday the DJU4 tested up to 10152 early before failing and trading done to 10073 intraday. The buyers stepped in at this key support zone and produced a 102 pts reversal in the final 90+ minutes of trading. The result was a close back above the key 10110-10140 zone but now the buyers must produce a close above 10225-10235 to resume the upward momentum. A close below 10095-10105 would be weak.

On Monday the US bonds and notes broke out of 4-5 day consolidation and the buying continued Tuesday. For the 5-year note, a close below 110'100 is necessary to stem the upward momentum while a close back below 109'300, basis the Dec 04 contract, would be a weak sign. A close below 109'200 would confrim at least a short-term top. In the longer-term, closes below 110'24 and 108'28 basis TYZ4 and USZ4 would be the first sign of a possible top. Closes below 110'00 and 107'24 are required to turn the momentum lower and confirm a top.

The US dollar was weak on Tuesday, closing back beloe the key level of 8935 as well as 8900. A close above 8950 is necessary to turn the short-term momentum higher while a close above 8995 will solidify at least a short-term low. A close below 8890 would be weak with a close below 8870 signalling a short-term top for the greenback.

Crude oil is a key support with Tuesday 08.31.04 being the 8th down day from the contract high set on 08.20.04 at 4837. Recall that in the 08.25.05 analysis I stated, "...though the close below 4400 is weak, a close below 4100 is necessary to confrim a short-term top." Monday and Tuesday CLV4 spiked to session lows of 4140 but closed nearly 70-100 pts off the low. This market continues to mark time as it is setup for a retest of the 4800-5000 level, again barring a close below 4100.

08.30.04 - The Pullback

Short-Term Top The last update was on 08.25.04 for 08.26.04 and stated, ""...the upside may be overdone in the short-term...one more thrust higher to the 10175-10200 zone....close above 10225-10235 maintains the upward momentum...back below 10095-10105 would be weak. "

Monday the DJU4 failed at 10192 after setting a swing high on 08.27.04 at 10215, only 15 pts above the specfied top of the expected short-term range of 9900-9975 and 10125-10200. The close back inside the key closing area of 10110-10140 on 08.30.04 is a warning shot for the bulls with 10150-10175 now strong intraday resistance. Initial support on this pullback, per the 08.24.04 report is 9975-10000.

The US bonds and notes broke out of 4-5 day consolidation and are trading higher, inversely to the US indices. For the 5-year note, a close back below 109'300, basis the Dec 04 contract, is necessary to stem the upward momentum with a close below with a close below 109'200 a weak sign. In the longer-term, closes below 110'24 and 108'28 basis TYZ4 and USZ4 would be the first sign of a possible top. Closes below 110'00 and 107'24 are required to turn the momentum lower and confirm a top.

The US dollar manitained closes above the key 8935 level in four of the past five days. Recall that this key closing level confirmed a short-term bottom in the US dollar. To maintain the upward pressure, the buyers must now produce a close above 8995. A close below 8930 would be a warning sign with a close below 8890 confirming at least a short-term top in the greenback.

Crude oil is a key support with Monday 08.30.04 being the 7th down day from the contract high set on 08.20.04 at 4837. Recall that in the 08.25.05 analysis I stated, "...though the close below 4400 is weak, a close below 4100 is necessary to confrim a short-term top." Monday CLV4 spiked to a session low of 4140 but closed nearly 100 pts off the low. This market continues to mark time as it is setup for a retest of the 4800-5000 level, again barring a close below 4100.

08.25.04 - The Real Test

Key Tests for Markets No time for a detailed update tonight. Quick recap:

1. DJU4 broke out and as this is being written set a session high at 10196, 421 pts off the 08.13.04 low and above the 08.02.04 pivot high of 10188.
2. The expected short-term range was now 9900-9975 and 10125-10200 and in last Friday's Outlook I stated,"...the upside may be overdone in the short-term...one more thrust higher to the 10175-10200 zone."

This upside area is now being tested and the close above 10110-140 solidifies the 08.13.04 low at 9775. A close now above 10225-10235 maintains the upward momentum. A close back below 10095-10105 would be weak. The market broke out of a 3+day range consolidation with upside targets on the DJU4, NDU4 and SPU4 at 10225-10250, 1400-1410 and 1110-1115 respectively.

3. The US bonds and notes are nearing a possible reversal point. Wednesday they tried to breakout of a 3-4 day consolidation and potentially failed, completing yet another interday compresssion pattern. Thursday (08.26.04) is setup for a range expansion. For the 5-year notes, a break below 110'200 or above 111'030 will be an early warning sign for the impending move with a close above 111'060 strong and below 110'260 weak. In the longer-term, closes below 112'16 and 110'16 basis TYU4 and USU4 would be the first sign of a possible top with a close below 112 and 110 a sign of weakness. Closes below 111'04 and 108'28 are required to turn the momentum lower and confirm a top.

The US dollar closed 8935 confirming a bottom in that market and also possible top in bonds. (see other data).

4. Crude oil retraced for the fourth day Tuesday into support. The market is now set up for a retest to the 4800-5000 level, though the close below 4400 is weak, a close below 4100 is necessary to confrim a short-term top.

08.24.04 - Nothing's Changed

Consolidation A quick update today. The outlook for both equities and bonds is unchanged from the prior two days' analyses.

As stated in Monday's report, barring a close above 10140 required to solidify the 9775 low, a short-term pullback to the 9975-10000 level is likely. The major indices are now up against signficant resistance levels and the DJU4 has retraced roughly 50% of the 06.23 to 08.13 selloff. The expected short-term range is is now 9900-9975 and 10125-10200. A close back below 10015-10025 would be an early warning sign for the buyers with a close below 9965-9980 signaling a short-term top.

The buyers have been in control of the interest rate instruments. However, the US notes and bonds are at major resistance levels at the late-Mar 04 lows and breaking through this area will require substantial effort. Also the major players are showing signs that they believe a top is near. The US dollar also closed above 8935, reversing the damage from the 08.06.04 employment report. Friday and Monday may have been a warning shots for the longs with Tuesday consolidating to produce the third consecutive range compression day. Wednesday (08.25.04) is setup for a range expansion. For the 5-year notes, a break below 110'200 or above 110'300 will be an early warning sign for the impending move. Closes below 112'16 and 110'16 basis TYU4 and USU4 would be the first sign of a possible top with a close below 112 and 110 a sign of weakness. Closes below 111'04 and 108'28 are required to turn the momentum lower and confirm the commercials positioning.

Note that crude oil retraced for the third day Tuesday into support at 4375-4475. The market is now set up for a retest to the 4800-5000 level.