Market Analysis for Oct 29th, 2003

More Upside Likely
By Mike Paulenoff,

Not surprisingly, the markets this morning are pretty much sideways, but sideways at a pretty high level. Remember yesterday we experienced that powerful thrust that went through trendlines at around 1038 on the E-Mini S&P and about 1408-10 on the E-Mini Nasdaq. The markets then took off yesterday afternoon and went to highs of 1046 in the S&P side and 1426 in the Nasdaq. Off of those peaks we've had very orderly pullbacks today, which have retraced a very small percentage of the entirety of the upmove that started off of last Friday's pivot upside reversals at 1016 in the S&P and 1347 or so in the E-Mini Nasdaq.

Based on the way the market is acting here this morning, both the indices seem to be undergoing well-contained, near-term, micro, sideways digestion periods, and once those have run their course, the expectation based on these patterns and the underlying indices is that there'll be another spike to the upside.

The key levels for these pullbacks, which should not be broken, are as follows: In the E-Mini S&P that level is 1037. Below that my work will be telling me that there's a problem, that all bets are off on an upside spike and in fact that yesterday will have been a trap. But again that's only if 1037 breaks. On the E-Mini Nasdaq, if 1407 breaks, it will have the same sort of impact on my work. With a move below 1407, the probability of a thrust to new highs above yesterday afternoon's peaks is much less likely.

But, barring breaks of 1037 and 1407, what should happen is there should be another thrust to the upside that takes out 1046 from yesterday, which is the high of the S&P, and takes out 1425 or so on the E-Mini Nasdaq. It should take off to our next upside target, which would be 1050-52 in the E-Mini S&P and 1430-34 on the E-Mini Nasdaq.

If this thing is really powerful and we have extraordinary tailwinds that are sweeping the price action to the upside after yesterday's enormous upmove, then it's conceivable that by the end of today we will see upside that tests the October 15 highs. Those were the post-March 2003 highs at 1055 and change on the E-Mini S&P, and 1444 and change on the E-Mini Nasdaq.

Bottom line is as long as pullbacks stay well contained and above 1037 and 1407, there are higher prices to come. The question is how much higher. It seems to me that we will make marginal new highs at the very least, and if we close strong then I think we will have a test of the October highs by tomorrow.

For more of Mike Paulenoff, sign up for a FREE 30-Day Trial to his E-Mini/Index Futures diary at. Or try his new QQQ Trading Diary.

  • Action-Oriented Trade Set-Ups in Stocks & ETFs
  • Macro Analysis of the Broader Markets
  • Detailed Technical Guidance for each Trading Idea
  • Live Interaction w/ Mike & Our Member Community
  • And Much, Much More!
Join Now! - Special Offer!
Veteran Wall Street analyst and financial author, Mike provides detailed and timely analysis and trade set-ups on a range of markets. Read more...

Have Mike's “Out Front” morning analysis delivered FREE to your email inbox twice weekly!