Market Analysis for Sep 17th, 2003

Vulnerable to Pullback
By Mike Paulenoff,

It's been an interesting session, largely because in the pre-market action the indices pulled back a touch off of yesterday's late post-Fed announcement thrust, but by the time the opening bell range, within the first half hour, the indices had popped to new highs above yesterday.

What we're seeing, though, in a lot of my work is that on an intraday basis the marginal new highs that were achieved today in the S&P and in the Nasdaq indices have not been confirmed. That is to say that the most powerful part of the move occurred during the thrust yesterday after the Fed announced it was keeping rates unchanged for an indefinite period, and then even though the market sold off a little bit and went to new highs above yesterday's thrust, the momentum readings that we're getting now show that the bulls are running out of gas a little bit.

That doesn't mean the market has to turn around and implode. What it does suggest, though, is that at any time there could be a selling spree where people come in and take profits off the Monday-Tuesday near vertical up-move.

So this is a very tricky period. If I did not have positions -- in other words, if I was coming into the market for the first time this week -- I would be hesitant to establish long positions now. I think that within the next 24 hours we'll have a substantial pullback.

While the markets are holding up extremely well, I do think they're getting relatively tired. In addition, all the indices are approaching their September 8-9 highs, which have yet to be hurdled, so you have resistance from those highs from last week, you have problems with momentum readings, and the third thing I would throw in is that the market has been rallying since September 11, last Thursday and Friday.

So between all those elements I think you have the makings of a market that is more vulnerable to a pullback than it has been in the last several days.

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