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.