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The Morning Cup of Jo


1, 2, 3, 4.....


As the critters meet in the coffee shop for their moring get-together, Snapper and Daisy notice Boo, not quite being himself, flipping pages and counting to himself. "What are you doing Boo?" Daisy asks. "Counting the road signs." Boo replies. "I gotta see the probability of this downturn in the Nasdaq continuing and spreading to the other indices."

In yesterday's 'Jo' I stated, "Only time will tell." When referring to whether the Nasdaq will help pull the SPX and Dow down or if the other indices are strong enough to help pull up the bootstraps of the NDX. As the markets continue to consolidate sideways, it's becoming extremely evident that something's gotta break, and soon. Truth-be-told, you couldn't ask for a more exciting inflection point. As the SPX pushes against prior highs, the Nasdaq is retesting the break of its 11-month uptrend (Floors & Ceilings). So the question still remains, "Was the Nasdaq's break just a shakeout before continuing back on its upward way, or was it a sign of something bigger to come?" With an 11-month run in the markets, without as-much-as a 10% correction to take a rest, we have to ask ourselves, "How long will this last?

Posted below you'll see the Nasdaq ST and LT charts. Here's what Boo's counting. The ST shows a retest of the IT trend line bottom (ceiling), the ST downward trend, and - which may be hard to see on my graph - the 50- day moving average. Notice how the retest of the prior 3 was on less volume. Normally this could be used as a good "short" entry point. However; with the exuberance in the other indices it's gotta make ya cautious.

You'll also notice, on the LT chart, there is a Descending Triangle. Techies believe this can be indicative of a downward break. However, the weekly volume, on this pullback in the Nasdaq, has dropped off considerably as it retests the large volume breakout from the beginning of January.

WONDA Copyrith 2004 William O'Neil+Co. All Rights Reserved

Is it possible that so many investors missed the rally since March of '03 that they're having performance anxiety, which is helping the SPX to stay afloat, or is it just going to be a Bear Trap already set in motion? Boo believes the latter, Hoofy believes the former and Sammy, Snapper and Daisy (who is easily influenced by Hoofy) are sittin' tight to see what the market's volume is going to spell out for the next move.

Until next time...


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