Market Analysis for Jan 9th, 2004

Bears Again Can't Muster Momentum
By Mike Paulenoff,

Today has been a prime example of just how bullish this market is or has been in the past weeks.

You may remember the markets were waffling around at the end of last week and then on Monday they took off on all the indices, pivoting off of Friday's lows. In the E-mini Nasdaq, for instance, last Friday's low was from 1460 , and today's high is 1541, and in the E-mini S&P last Friday's low was 1103 , and although it has not made a new high today, yesterday's high was 1131. In the QQQs, last Friday's low was 36.22, and today's high is 38 25.

Given that -- what I consider to be a vertical blow-off type of move attached to an already very powerful advance from December 10 -- today's action has been very interesting. The non-farm payroll figures were a huge disappointment. The Street was looking for 150,000-200,000 additions of workers to payroll, and the addition turned out to be only 1,000. The initial reaction this morning to the non-farm payroll employment report -- - pointing to a jobless recovery -- was a plunge in the indices. Once again the bears had a chance to do some serious damage to the near-term trends, and I take the near-term trend to be from last Friday's low in the indices, which was just discussed. In the E-mini Nasdaq, for instance, which has been a leader on the upside, the decline this morning took it to almost exactly the same place as the decline from yesterday, and that is 1515.

Then the selling pressure dried up within the first 40 minutes of trading, and the bears had no more muscle to push the index lower. The E-mini Nasdaq reversed and took off and made a new high at 1545, which is our next target. Our next target was 1540-50, so we're right at the next target in the E-Mini Nasdaq.

The E-mini S&P has not made a new high today but it, too, pivoted off of 1121-25 (critical support being 1122) and has so far hit a high of 1130 ,. Yesterday's high was 1131, so we're very close, and as we speak now with two hours left in the session, both indices have come off their highs a little bit and look like they're consolidating perhaps for another loop to the upside into the close.

Remember, this is Friday, and the bears can't get any relief today. Chances are they'll cover into the final portions of the session.

The key levels on the downside should the bears generate any selling pressure at all are this morning low's at 1125 in the E-mini S&P and 1514 , on the E-min Nasdaq. If those levels are taken out, then we will have the first minor damage to the Dec-Jan upmove that really we've seen in the last week and perhaps longer. That will be our first indication perhaps that the entire Dec-Jan advance is starting to roll over. Every time it seems to get there the selling dries up and the bulls take over. So we'll see what happens this time if it gets there.

If the market loops around at the end of the day and takes off, the S&P will have to play catch-up. If it takes out the high at 1131, then our next target is 1135 and perhaps 1140 intraday. If the Nasdaq takes out 1545, then our next target is 1560.

Over in the QQQs, just to give you some parameters, as long as this morning's pivot low holds at 37.60, there will be no change in trend -- no dramatic damage done to the uptrend from last Friday, in particular, where it was a 36.22 low. The high-level consolidation that appears to be emerging now up in the 38.10-.25 area. If it loops around takes off again, the next target is 38.50-.60 in the QQQs.

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