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Pack Your Bags!

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I was just gettin comfortable in here!

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The closing ranges for both the daily and weekly charts have been confined for so long that we should be on alert for a larger than expected move. For the last three weeks, the SPH posted virtually identical closes. The three week closing range was 1143.70 to 1145.70 with Friday's close in the middle.

On the daily chart, the closing range is equally tight. Last week's closes were all confined to a 6 point range. The low close was 1138.50 and high close was 1144.60.

What's more impressive is the recent three day pattern in the NDH. The Nasdaq futures posted back to back outside days (higher high and lower low) with virtually no price movement from close to close (see chart). We've only seen five other occurrences of consecutive outside days in the futures contract and it's interesting to note that the next day's average total range (from high to low) was more than 3%. Of the five, all but one resulted in a next day close of more than 1.5% from settlement. The most recent occurrence was 1/5/04.

What does all this mean? The confined weekly range and daily range suggest the likelihood of a more significant price move this week. The fact that last week ended with back to back outside days in the NDH suggests that the move could come early this week. Now we just have to figure out which direction!


No positions in stocks mentioned.

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