Market Analysis for Aug 15th, 2003

Yesterday's blackout triggered a sell-off overnight between Thursday afternoon when the blackout was initiated and Friday morning before the open -- until the market was convinced that there was no terrorist activity related to the blackout. As it turns out, they discounted terrorist activity totally, and the market by the opening on Friday morning had recovered all the lost ground from the overnight trading in the electronic market. That's pretty significant, because just purely on a technical basis the sell-off overnight broke some key technical levels that would have suggested to me the week-long rally was over and that the indices were heading back towards the August 5-6 lows, which were critical lows at around 958-59 on the S&P.

However, as it turned out, the market has rallied from pre-opening through the first 90 minutes of trading. In fact, the indices are perched in what purely from a technical perspective looks like launch mode to the upside. In effect, what we could be looking at is a false breakdown based on the blackout followed by a pivot reversal using the E-Mini S&P from the 973 1/2-974 level. Right now the index is trading at 990-91. If the index can get through 993-94, my sense from my work is that the index is going to rocket and retest the July 31 highs, which were established at 1004.

What this means is from the August 5 low at 958