Market Analysis for Mar 8th, 2004

Tale of Two Markets
By Mike Paulenoff,

After Friday's wild price action that saw a 35-point range in the E-mini March Nasdaq and 10-point move in the E-mini March S&P -- which is a very wide range on an intraday basis -- today we have ranges that are one-third of that. So the market is resting and digesting and in fact coiling for seomthing. The question is, Which way will it break out?

Over the weekend, when I updated the site on Sunday, I mentioned that the S&P and Nasdaq are analogous to a tale of two cities that have completely different profiles. The S&P on one hand is perched at 1155-56. That's just a few points off Friday's high at 1163 ,. Since mid-February, the range has been about 1160 to 1130, so you can see that it's right near the top of its range.

So one wonders if it can't do some damage to the support areas, which right now are at 1155-54. If it gets through that then we'll expect it to grind toward Friday's lows, with the next important support being about 1151-52.

The important point, though, is that unless the E-mini March S&P grinds to the downside and takes out Friday's low at 1146 1/2, then really there has been no significant damage to the micro or near-term chart pattern in the E-mini S&P. For that reason, and no other, we would expect it to take off again and try to move to another marginal new high, the range there being 1165-75.

The March Nasdaq is a different story than the E-mini. That market has been in a sideways range for six weeks. The range really has been on the high side at about 1490 and on the low side 1460. As we speak, the E-mini March Nasdaq is at 1463, getting very close to doing some probing of the 1460-55 area.

The key level in our work is 1458 to 1456. If that area is taken out, then I think we'll see a plunge in the E-mini March Nasdaq to the 1430-20 next target zone. If that doesn't happen, we'll just stay in the range, but it's a much more bearish and compromising pattern than we find in the E-mini March S&P.

With regard to the QQQs, they are a trading more a function of the pattern exhibited by the E-mini Nasdaq. Since around February 19, the Qs have been trading between 35.07 -.10 on the one side and 36.10 on the other. Right now we find ourselves at 36.38.

If the Qs do break down a little bit further, the key levels for us would be 36.21. If that breaks, we think there'll be a downside acceleration to our next target of 35.80-.70.

If that does not happen, just like the March Nasdaq, the Qs will remain in the sideways range, and move within the range for several more days.

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