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Island Trap?

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Yesterday's open leaves a potential Island Gap in the Nasdaq. But the analog below warns that such gaps have proven more of a short-term trap than anything else. In fact, we saw the same pattern emerge twice in 2004. The first occurred just one day before the March 2004 low and the second just five days before the August 2004 low. As I always remind you, past performance does not indicate future results. But the argument for a near-term Snapper has some credibility.

The "average" returns above are clearly skewed by the volatility of '00. However, it's important to note that in each case the ND futures were higher three days later. And if the '04 occurrences (below) are any indication, we'll need a probe below yesterday's lows before any real rally attempt can unfold.

No positions in stocks mentioned.

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