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The Morning Cup of Jo

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Which way do we go, which way do we go?

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Since Monday's break of the prior relative lows, the markets have been held hostage by Hoof and Boo fighting over the SPX 200 DMA. Like anything else, this will be resolved sooner than later. Cisco's (CSCO: NASD) earnings and the PPI data didn't lend much downside action to the markets yesterday. If anything, Hoofy has been showing some relative strength and stabilization. However if we are to see a countertrend rally, retest of the prior supports broken, he's got to get his butt in gear.

Boo, on the other hand, is more interested in seeing what Dell (DELL: NASD) is gonna do to the techs today. However, there is one last wild card left in the deck today, the CPI (The NON-INFLATION Index). It will be very interesting to see how the market reacts to this in a few hours.

That being said let's take a closer look at the uber ST levels to be focused on.

The DOW

Horizontal suppport is at 9,850 and re-test resistance is at 10,300 (about the same location as the 50 DMA)

WONDA Copyright 2003 William O'Neil + Co., Inc. All rights reserved

The SPX

The support here is very obvious, or as Toddo says "The easy trade." This has converging support at the 200 DMA and bottom side of the downward channel. Resistance is a little more tricky. The levels above are not quite converging and somewhat unclear. The bottom side of the IT trend is 1,115 and this is where I believe the brick wall lies.

WONDA Copyright 2003 William O'Neil + Co., Inc. All rights reserved

The Nasdaq

Here the resistance is a little more clear. Although, with Dell's earnings last night, investors should be more concerned with a CLOSE below 1900.

WONDA Copyright 2003 William O'Neil + Co., Inc. All rights reserved

The Russell 2000

The R2K is an animal of a different color. This hasen't been running with the pack for quite some time. As a matter of fact, it almost retested its prior break yesterday. Investors should keep their eyes on this index because of the liquidity concerns within the equities that make up this index. It is very possible a further downside break could lead Boo to the watershed.

WONDA Copyright 2003 William O'Neil + Co., Inc. All rights reserved

However today pans out, have your trades ready, have a plan and be prepared for ANYTHING. Inflections points of this magnitude have a tendency to catch investors off guard!

Until next time...

The KAT

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No positions in stocks mentioned.

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