Market Analysis for Apr 27th, 2004

Very Top Side of Rally Phase
By Mike Paulenoff,

Late yesterday when the indices finished their mid-day correction, both indices pivoted to the upside in the last 20 minutes of trading and triggered micro signals that the mid-session downside correction from yesterday was complete and that a new upleg had commenced. In the E-mini June S&P we're talking about 1131 -- that's where it pivoted. Right now we're trading at 1143 ,.

As it turns out, our work is showing in both indices that we are still in the rally phase that started on April 20 down at 1113 1/4, but our work is showing we're at the very top side of that leg. We still have upside projections into the 1149-53 area, which is just 5-8 points away from an exact measured move based on our work.

If that turns out to be the case and that scenario emerges somewhere in the vicinity of 1150, the E-mini S&P should peak and pull back again for a correction. It could be a fairly potent correction, too -- we could go down 20 points or so. We just don't have any signals for that yet. At this time with about two hours left in the session, all our micro work suggests that we still have higher prices forthcoming.

The E-mini Nasdaq also pivoted yesterday from the 1476 level and ran up late yesterday to 1488. Today it extended those gains to 1498, but it has not made a new high beyond yesterday's high of 1502. The pattern being carved out today suggests a high-level coil pattern that should break out to the upside and take out 1502 on the way to around 1510-15.

Similar to the E-mini June S&P, such a scenario will end the move from the April 20th lows of 1435, and we should have a pullback and a fairy potent one, perhaps from 1510 to 1480. That would be worth participating in, but until we get some signals the long side still is the right side.

As far as the Qs go, they're trading like the E-mini June Nasdaq as always. The coil pattern is evident also in the Qs. The Qs should break out to the upside above this morning's high at 37.19 through yesterday's high at 37.27, into our projected target zone of 37.50-.60.

At this point only a move below 36.66, which was yesterday's pivot low in the afternoon, would invalidate the upside projections to new highs. Should that scenario unfold, and we go to, say, 37.45-.55 in the Qs, that's where we think this move will end -- the move that started on April 20 at 35.63 -- and here, too, we should embark on a pullback which gets you down around the 36.60 area again.

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