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The Morning Cup of Jo


Finally Tickles, you're on my side!


Trademark Pending

Good morning from Ollie's Diner. It's good to be back. I realize I've been somewhat absent over the last few weeks, but I'm sure you understand. Also, before beginning, I would again like to say thanks for all the supportive e-mails I've received over the last couple of weeks. They definitely help keep spirits up and make my mornings very enjoyable.

Onto the market...

In my last 'Jo,' back on Sept 14th, I talked about the markets having a ST pullback and gave a technical explanation why it is too early to tell if the market is going to resume its downtrend. The aforementioned article talked about stochastic divergence (SD) and how the three prior efforts of busting through the current 10-month downward resistance level manufactured two attempts each time.

Going forward, if my theory is correct, there are a few technical levels we are going to have to watch closely over the up and coming sessions. Let's take a look...

Wonda Copyright 2004 William O'Neil + Co. INc., All rights reserved

First things first; if the SPX in going to retest the resistance level (1130) it first must move back above its 200 DMA (1118-1120). I believe if this happens, with the same volume levels we've been seeing over the past two days - above average accumulation - the probability is very high there will be a retest of the down trend.

Second, if and when this happens the key lies in not just a price breakout above 1130, it lies in volume and momentum. This is where technicians should focus their attention. A light volume breakout and SD could spell major trouble for the market once again. However, if the momentum and volume continue to increase as the market makes higher highs, well - you know the rest.

Thirdly, it's not over yet. If the prior two happen it doesn't mean Hoofy's out of the woods. Now don't get me wrong. I do believe the longer and more times a trend is tested the better the breakout. However, there is still quite a bit of resistance at the 1145 level. This would technically be a good place for another ST pullback to retest the Floors & Ceilings of the 10-month downtrend. "What was once a ceiling should become the floor."

If all abovementioned occurs, it would be an excellent sign technically for the remainder of the year.

I realize much of what I just said requires many things to transpire for the market to finally look positive. Nevertheless, I'm just trying to paint what I believe would be a picture perfect scenario for Hoofy - it obviously doesn't mean its all going to happen.

Until next time...

I hope this helped!


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No positions in stocks mentioned.

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