Market Analysis for Dec 29th, 2003

Micro Direction Remains Higher
By Mike Paulenoff,

Right now, at shortly after noon Eastern, the markets are basically at new highs. When we left, on Friday, December 19th, at mid-day the indices were considerably below they are now, but our projection was that 1099-1102 would be the objective in the E-mini S&P, and in the E-mini Nasdaq we were looking for approximately 1470-80 or so.

As it turns out, over the period that we were on holiday the S&P continued to zigzag higher, and when we woke up this morning and began analyzing the market we saw that sure enough the S&P hit our target right on the button and is trading around 1100 now.

The question is: Where does the E-mini S&P go from here? My sense is there probably is another little pop, probably to 1103-06. But as long as 1095 contains any pullback during today's intraday trading action, the micro direction for the E-mini S&P will remain up.

Anyone long or watching the trend action from December 10, when the E-mini S&P was 1051 1/2, should know that our work is telling us that 1089 , is the line in the sand. If the E-mini March S&P breaks below 1089.50, then our work will tell us that the upmove from December 10 is complete and that the index is already in a corrective mode. And that correction could take it considerably lower as it retraces part of the enormous move from December 10 to the end of December, which would be roughly 50-60 S&P points

The E-Mini Nasdaq is a slightly different pattern and projects to higher highs than we are at now. We are at 1457 as we speak. My target range is 1470-80. That doesn't mean it has to get there. What it does mean, though, based on our pattern is it has to make new highs, and that's the minimum upside requirement.

The prior highs in the E-mini March Nasdaq was 1455.50 on December 3. Today's high so far is 1461.50, so the E-mini Nasdaq has made new highs, which is the minimum requirement for this pattern to be complete. The question is: Will it go higher into our preferred target zone of 1470-80? I don't know if it'll go higher, but it has the right structure to go higher, and no significant micro or near-term support levels have been broken.

So all roads point higher still. However, if the e-mini March Nasdaq breaks below 1450, then the current upleg starts to waffle a bit and our work will start to tell us that perhaps the upmove from December 15 at 1387 into the 1460 area is complete, and that a correction already is underway.

As for the QQQs, as I always tell you, they trade just like the E-mini Nasdaq, and our preferred target zone is 36.50-.60. However, today's high so far is an exact test of the prior high, which occurred in November at 36.26. When we left you back on December 19, we projected that the sideways triangular type pattern that has been chiseled out since early December ended at 35.20, and that the measured twin targets for the upmove would be around 36.50-.60.

So far the high is 36.26, and the minimum requirement for this pattern is a new high. In that today's high is the exact prior high of 36.26, there probably will be another push later today to a minimum of 36.30-.35. Whether it gets to 36.50-.60, I don't know, but right now all roads point higher, and unless and until 35.80 is taken out on the downside, all roads still point higher.

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