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Subdued Markets Despite Dramatic News
By Mike Paulenoff, MPTrader.com

If I had to describe today's action, I would just say it's uneven, and in general since June 8 the high in the E-mini September S&P on June 8 was 1142.50. We've pretty much been in a range since then. The low on June 14 was 1121.75. The high last Friday was 1139 ,, and since yesterday's attempt to get through 1139, the market rolled over and fell in the first hour of trading today to a low of 1123.75. That's where it's held so far.

Since that low, the pattern that's been carved out looks like it's the beginning of a rally that my work suggests will go to the top of the channel again, somewhere around 1138-40.

Given today's news about the beheading of the South Korean captive by al Qaeda and some other rumors that terrorist activities are heating up in New York City, the market under the circumstances is holding up pretty well.

Oil prices are up 22 cents, about 40 cents off their low. And gold is up $2, 3 , off its low. So you don't see significant moves in these normally dramatic news-oriented markets. Instead, you see subdued markets all around.

On the one hand, gold and oil aren't really rallying. On the other hand, the stock indices aren't really declining. They go down, they hit a level and then they stabilize. In this particular case, all eyes are focused on the 1123-1121.75 area on the E-mini S&P. If that support area goes, then I think we can take out a stamp that says "minor top" and place it on the entire chart structure from June 8 to the present.

But until that happens, my work is telling me is that all the action from June 8 is a sideways congestion area and not a top. If that proves to be the case, then the price structure will manage in the next several hours to find a way to get back towards the top of the congestion area, which is around 1140.

So that's where we are in the E-mini S&P. Once again, if it breaks 1121.75, then I think we're going down significantly and probably sharply right from there, probably at least 10 points initially, maybe 15 points. That will shake a lot of people out of the long side of the market.

As far as the QQQs go, the Qs unlike the S&P managed to hold right where they had to today, right at their 36 level. Actually, 36.01 is the low, and right now they're at 36.24. The Q pattern looks like something probably ended this morning at 36.01. If that level is preserved, even if it's retested and probed, as long as actually the 36-35.94 support area is preserved, then we can't label the pattern from June 8 in the Qs as a top yet, either. We have to look at it as a sideways congestion area, with the potential to take off again towards the 36.80-.85 area. That would be the key resistance area.

If it manages to take that out, then I think we're going to test the June 8 highs at 37.10.

If the Qs fall apart and take out 35.94, then I think it's a different story, and I think the Qs will go down to 35.50 minimum, probably 35.30 thereafter in the first leg down off of a break of 35.94.

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