Market Analysis for Mar 29th, 2004

Today is surprising as we didn't expect the market to start off that strong. Friday's last 20-minute decline (which in the E-mini June S&P went from 1114 to 1105) set the tone into today, and while we didn't think there'd be much pullback, perhaps maybe to 1100 from 1105-06, it turned out just the opposite happened. Friday's last 20 minutes turned out to be a headfake and today we rocketed to the upside.

Our original scenario was a pullback followed by another sharp rally into the 1123-27 target zone. So, in fact, Friday was the pullback and today we've rocketed from a low in overnight trading at 1106 into the 1122.50 high. That is right near the beginning of our next target zone, 1123 up to 1127. It looks like for the last 1 ,-2 hours the E-mini June S&P has been consolidating between 1122 and 1119, give or take a couple points. Maybe we get down to 1117, but it looks like we're still incomplete on the upside. We need one more pop to the high end of that target range, 1127.

That 1127.50 zone is an important level. That is the prior major rally peak within the downtrend we've been in since March 5. That countertrend rally ended March 19 at 1127.50. From there we went down to 1084.75. So you can see the 1127.50 level is very important. If that is taken out on the upside, that establishes a very interesting situation, because, in effect, you've taken out a rally within the downtrend from 1101 to 1127.50. If you do take that out, then it neutralizes the near-term downtrend. The micro downtrend was neutralized last week when we went over 1100. The near-term downtrend is neutralized if we got over 1127.50 and stay there.

So the next pop this afternoon or early tomorrow morning, we're going to try to get through that level, and we'll have to see who prevails, the bulls or the bears. Right now the bulls have an awful lot going for them in terms of momentum from last Wednesday's lows. Right now we would be taking profits into 1127 rather than establishing new positions. But for now we'll see how it goes in the next little upmove.

As for the QQQs, they had the same sort of scenario where they opened on a 30-cent up-gap at about 35.50 and they proceeded to move to 35.96. Our target zone was 35.90-36.05, so we're right on the doorstep of meeting that objective.

It looks like for the last two hours or so, the Qs have consolidated at a high level between 35.80 and 35.90 with one more upmove to come. That upmove I think will propel the Qs to the 36.05-.36.20 target zone. That should complete the entire upleg from last Wednesday's low at 33.97.

Confirmation that the upleg is over, however, will not occur until we come down and break below 35.70. So we'll see how the Qs trade up above 36 when they get there, but confirmation that the move is over won't be given until 35.70. Having said that, our work says that anybody long the Qs should be taking some profits above 36.

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