Market Analysis for Oct 21st, 2004

Well, it pays to play chicken sometimes, doesn't it? My work warned me not to trust this AMs rally, and to treat it as a counter-trend move, because it could reverse at just about any time, and sure enough the E-SPZ peaked and reversed right in our projected recovery target zone of 1107-1109. Having said that, however, the noon-time "swoon" from 1108.75 to 1100.50, while negative, does not necessarily tell me that the counter-trend rally is over. In fact, unless the E-SPZ takes out 1098, my preferred scenario calls for another rally effort that revisits 1109. Will I take chance on going long to participate in that move? Nope! Why? Because if my work is correct, when THAT rally ends, the E-SPZ will plummet to new lows beneath 1093.75 -- and that could happen so quickly that we are unable to get into a short position other than by selling into some nasty weakness (always a hazardous exercise) . . . So, let's be patient, and see what develops in the final couple of hours of today's session prior to committing funds to the short side.

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