Market Analysis for May 13th, 2004

Patterns Argue Against Upside Follow-Through
By Mike Paulenoff,

It was almost predictable that you'd get some sort of pullback overnight into the first hour of trading, and after the dip in the morning the question was what kind of rally would emerge.

Now we've seen that both E-mini indices went to new highs for the move that started yesterday afternoon. In the E-mini June S&P the move started yesterday afternoon at 1075 1/4. You had a new high in this afternoon's trading at 1102.50. That's an important level because the 1100-04 area represents key resistance that formerly represented support on the way down, which was broken at the end of last week on Friday particularly when we went to 1004.

So now you have a double-bottom between April 30 and May 7 at 1103.75 and 1104 1/4. That double-bottom broke down on Friday, and the market subsequently went to 1075 to complete the downmove.

Now we're rallying back to that breakdown point, which is very, very important. The ability or inability of the E-mini June S&P to get through 1104 on a closing basis will tell us a lot about the type of move we're in.

So far the move has a lid on it at 1102.50, and right now we're trading slightly below that at 1097

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