Market Analysis for Oct 31st, 2003

A lot more economic data came out this morning. However, none of it had much of a response from the market, not nearly like the response that occurred on Thursday morning after the GDP figures. However, the patterns carved out by the indices since yesterday's highs in the E-Mini S&P at 1054.50 and in the E-Mini Nasdaq at 1445 are slightly different. The more constructive pattern is the E-Mini S&P, which has carved out a coil -- a series of lower highs and higher lows -- just since yesterday, whereas the E-Mini Nasdaq has a more toppy kind of pattern that exhibits horizontal lows when the market's come down and a series of lower highs when it's gone up.

So if your inclination is to be short, you may want to be short the Nasdaq. If your inclination is to be long, you may want to be long the S&P. The two patterns are different and they should resolve themselves differently.

This is not to say that my work suggests we should be long either of the indices. If the S&P chart resolves itself to the upside, we're looking for one more pop into the 1056-60 target zone to complete the entire move from last Friday's low at 1016. The reason I think that could be probable is that the Nasdaq index made new highs from last March yesterday after the GDP figures, but the S&P did not. So if the S&P plays catch-up there's one more new high above 1054 , or so that will take out the 1055.75 October 15, high. Wherever that move ends -- - it could be 1056, it could be 1058 -- looks to me as though it will represent the final move up for the S&P since last Friday, and should then inaugurate a period of downside correction.

So there's not a lot of upside left and I think there's an awful lot of risk on the downside. On the E-Mini Nasdaq, I think it already made its highs, and the risk is with the downside.

As for the QQQs, they haven't done much today. They're trading in a toppy chart pattern from yesterday. The key level in the QQQs is 35.10-.05. If the market comes down and breaks those levels, we should go down into the 34.95-.90 area. If that breaks, I think we're looking at much more downside into the 34.30 zone.

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