Market Analysis for Sep 25th, 2003

This has been a very interesting day so far, largely because the indices held yesterday's lows in overnight trading, came in and looked like they wanted to rally a little bit in the first hour of trading and then they got slammed.

Interesting, though, the S&P made new lows for the current decline that started last Thursday/Friday, and that new low was at 1002.75, which took out the September 12 low at the 1005.25 level. Originally, I was speculating yesterday that a break of that level might trigger extreme downside. It just so happens that the market was so oversold this morning in its first hour and had the correct look for the end of a minor downleg that in fact when the S&P broke the September 12 low there was very little downside follow-through, and then all of a sudden the market pivoted and took off and went up to nearly 1014.

That 1014 level is very important, a key resistance level. That 1014-1017 is probably the zone from where any recovery rally will have a real problem and should roll over. The question is since we've had a rally from 1002 to 1014, is the recovery rally over? That's a big question. Right now I'd have to say no. The recovery rally is partially complete -- it'll pull back maybe to 1010 or 1009, and then it'll probably try to go again later this afternoon

As far as Nasdaq goes, an interesting difference between the Nasdaq and the S&P is that while the S&P went to new lows and broke the September 12 low, the Nasdaq E-Mini did not. So 1330 from September 11 was preserved this morning and was not broken by the smash in the first hour, which pivoted at 1332 ,. That low led to a rebound rally to nearly 1360, and it's come off a little bit now. However, my suspicion is there's more backing and filling. Maybe there's some weakness early this afternoon into the 1348-46 area, and then another attempt to go back to 1360 before the market rolls over again.

The bottom line to all of this is that from last week up at 1405 in the Nasdaq and at 1039 in the S&P, the market is now stair-stepping to the downside in what I think is the intermediate-term correction that has a lot further to go to the downside. So these rallies are nearly recovery bounces ahead of what should be more weakness in the upcoming hours.

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