Market Analysis for Nov 11th, 2003

By Mike Paulenoff,

Today's action is almost a classic Tuesday in that you had a one-directional move from the prior Friday into this morning, where markets appear to have found a level of stability after the decline from last Friday's high.

In the E-Mini S&P, we moved from last Friday's high at 1064 , into this morning's low at around 1041 ,-42, and the market's been trading between 1046 and 1048 for a while. My work suggests that we're going to grind still higher in the dreaded mid-day lull, and it wouldn't surprise me if the E-Mini S&P found a way to get above 1050 into the 1050-52 resistance area before it rolls over again.

The key is that the pattern carved out from last Friday's high into the Monday-Tuesday low area exhibits the form of a bearish corrective move that's not complete. If my work is correct, we'll grind a little higher against the dominant near-term trend, and somewhere around 1050-51-52 it will roll over again. This could drag out into late Wednesday or early Thursday, but roll over it will again and head for 1035 as an objective.

In the E-Mini December Nasdaq, it, too, declined from Friday's high at 1458 1/2 into this morning's low at 1403-04, and right now it's at 1410, grinding its way back to very serious resistance between 1412 and 1415. Even up to 1420 there is serious resistance, and I would say that unless it breaks above 1420, the 1412-20 area will contain the subsequent grind to the upside type of action before it rolls over and heads for our next downside target there, which would be a break of 1400 into the 1384 area.

As for the QQQs, we were short the Qs from late yesterday. Yesterday was a tricky day for me because the market never bounced when I thought it was going to bounce, and I was looking to sell strength. The strength never came and we ended up selling weakness, and it continued to be weak this morning, which gave us the ability to at least cover the position lower than when we entered it. It was not a home run, but it was a trend trade, and just goes to show you when the trend is strong and in one direction you can get away with lousy entry points and still live to talk about it the next day.

In any event the QQQs are doing the same thing as the other stock indices on the futures side, where the decline from Friday's high at 36.26 into this morning low at 34.88-.87 probably ended the first down-leg of what will be a much larger downside correction. Key resistance is at 35.15 to 35.30, and above 35.30 I think the Qs could continue to grind into the 35.50 area. Nonetheless, just like the stock index futures, the Qs should roll over, take out the lows near 34.87, and head for our next downside target, which would be 34.40 to 34.20.

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