Market Analysis for Nov 12th, 2003

Recovery Rally off Three-Day Down-Leg
By Mike Paulenoff,

For most of the session yesterday we were awaiting a turn in the indices that would establish lows from Friday morning's peak after the unemployment numbers came out into Tuesday. We mentioned on the site perhaps it would be a turnaround Tuesday, but if it was a turnaround Tuesday, it was sure a sluggish one as it was a very boring session.

Be that as it may, today we're getting the upside move, or the recovery rally, from the initial down-leg from Friday to Tuesday that we were expecting to start yesterday afternoon. In fact, the E-Mini S&P and Nasdaq are relatively strong. As we speak they're near the highs of the recovery, 1052 in the E-Mini S&P and 1428 or so in the E-Mini Nasdaq, both of which represent a 50% recovery of the entire down-move from Friday's high into Tuesday morning's low.

If my work is correct, over the next 2-4 hours the indices will run out of gas in the vicinity of 1052-54 in the E-Mini S&P. In the E-Mini Nasdaq perhaps we're headed a touch higher to 1432-34 before they run out of gas. We're relatively overbought on an hourly basis now, and it's closing in on 1 pm Eastern, so I would not rule out the ability of the bulls to keep the indices relatively buoyant into probably the last hour of trading. We'll see in the last 40 minutes or so of today's action whether or not the bulls have the power to keep the market up into the close.

As for the QQQs, they have recovered right into our secondary, or higher, recovery target zone at 35.50-.60, and that is where they are at the moment, 35.50 to be exact. I wouldn't rule out slightly more strength, maybe 35.65. As long as they don't move above 35.75, then we still consider this a powerful but nonetheless a recovery rally that is working off the oversold condition created by the move from Friday's high at 36.26 into Tuesday's low at 34.85.

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