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.