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[alex01]

Market Force: Bullish/Neutral. Watch for potential early rally which, if occurs, we expect will hang up near highs until after 1:30 est and then sell off.
ESZ04 S&P500 E-mini Futures
Thursday, October 21, 2004
Prev Day - SP
Range: 10.40 Value Area
Range: 5.40 TCF Key Numbers for ES
1,114.40 Pit Bull MA
1,106.00-1,105.00 Sell Pivot
High 1,104.20
1,102.60
Close 1,101.80
Open 1,100.30
1,097.20
1,095.75-1,096.75 Buy Pivot
Low 1,093.80



Trade Setup Summary for Wednesday, October 20, 2004:
)b@1096.00/s@1094.25 -1.75....

2)b@1094.50/s@1100.50 +6.00....

3)B@1098.50/S@1097.50 -1.00....

4)S@1098.50/S@1101.50 -3.00....

5)S@1101.00/B@1103.00 -2.00...

6)S@1102.25/B@1103.75 -1.50....

7)S@1102.25/B@1102.25...Even

Recap of Wednesday's Action:
Good Morning and Welcome to Thursday's trading action.

LIVE TRADERS BE READY ON THE OPEN FOR POTENTIAL TRADE IN FIRST HOUR.

Our Headline Call and suggested pattern off an early lower move panned out beautifully but in the Live action it was more of a difficult read. The High 5 were showing Bearish characteristics including a TRIN above 1.10 consistently and Nasdaq refusing to rally.

Anyway, the underlying Market Force that we discover each day can override that when it is time for a market turn around off the lows as we have seen on Wednesday.

I've adjusted Live Monitors on the MFO accordingly and expect to be able to stick it out better next time. Here are my closing Wrap Up comments for Wednesday.

"We came in today primarily looking for the market to head lower and run below 1097.00 for us to look to buy. We got this type of setup as the S&P500 opened -3.00 lower and headed down.

We got our first signal just below the Hour One low at 1096.00 and got long using a tight stop at 1094.25 which got hit for a -1.75 loss.

Our 2nd trade was after lows were put in at 1093.75 and prices rebounded sharply. Our projected upside resistance was 1101.00 initially where we took +6.00 pts. profit on our long from 1094.50 (at1100.50).

We then elected to buy again at the projected pullback area of 1098.50 and got long at 1098.75. After the market attempted to move higher and kept pulling back we cut out with a -1.00 loss.

Prices ran up again and stalled and we got short reversing the bias at 1098.50 and got stopped out at 1101.50 for a -3.00 loss as the market took off sharply. I had been reading the MFO and chart interpretation wrong and ended up changing bias to short with 3 more attempts on the short side with tight stops as shown above. I can now see how in the Day to Day sequencing pattern in which today we read correctly as being an up day and sustained up day off the lows taking counter bias trades is a mistake. I am confident we can avoid this in the future. So on balance a day in the red but overall for our first week of using MFO and our new approach I am excited about what I expect to see in results going forward."

Today's Call & Briefing:
Today's Market Force is Bullish/Neutral with the Neutral designation due to the fact that we are still in a Sell Mode and have not fufilled the bottoming requirements for that.

Can the market take off anyway and go into aberration on the Sell Mode? Sure, but it is not likely at this point.

With this in mind we want to look to possibly get long early today for a run up towards the 1108-1110.00 area. We would look for the Hour One high to see a possible BreakOut attempt that fails a few points beyond the BreakOut and then see those highs sell off later in the session.

RECOMMMENDED SETUPS TO WATCH FOR TODAY:

If we get an early BreakOut off of the opening first 20 minutes then we would expect to see prices ramp up towards the 1108-10.00 area and then hang up there for some time stalled.

It would be one of those deals where if you didn't get long early and waited for the first hour the trade at the Hour One highs would give neither side any real trade satisfaction.

Now this is based on an early move up off the lows. We don't know for sure what the market will do off the open but this is an expected high probability.

INTRADAY LIVE UPDATE TRADERS BE READY FOR EARLY TRADE TODAY.

If we get a lower early drop and a Mega Bearish High 5 then CANCEL the Headline Call in your mind and expect a strong bearish sell off day down to 1092.00 area.

We would not expect to see the Hour One low get hit first but would look for the above mentioned scenario. We could see a very strong bullish day today but the key is to see how the High 5 look once the rally has stalled and spent it's early energy.

Value Area: 1,097.20 - 1,102.60
Trade holding above 1098.00 and above 1102.60 should move higher with goal up of 1108-10.00

Buy Pivot Target: 1,095.75 - 1,096.75
Watch out if the market heads this low early. Could be a Mega Bearish sell off in the works. If the High 5 is NOT Mega Bearish then this may form another bottoming area for a higher launch but we suspect the Higher move will start off the opening.

Sell Pivot Target: 1,106.00 - 1,105.00
Watch for trade to move above this area but also be on the lookout for a stalled price here on a Bearish High Five with TRIN above 1.10 or so.

+4.25 is 1110.25 which we would expect would stall any early push up.

If early move is stronger than expected with Mega Bullish High 5 (possible today) then we could see a move towards 1113.25-1115.25....PIT BULL AT 1114.40!

10 Day "Pit Bull" Moving Average: 1,114.40
Moving above the Sell Pivot stop/pivot at 1110.25 we could see a ramp up towards the Pit Bull for strong resistance or just slightly above it at 1115.25.

Pro Trader's Action
Today could be a bit tricky and if we don't see the early rally take off then we could be in for some more downside surprises.

I've laid out the scenario pretty carefully here in line with the Market Force prediction on the Headline Call.

If we see a huge gap up and Mega Bull High 5 then the rally could be larger than expected. This is possible as there have been some larger than normal accumulations of Call Options which could be insider buying for a "One Day Wonder" rally to clean out the excessive bears accumulated by Wednesday's early squashing.

If not, be prepared for some more downside pressure.

Good Luck today and I'll see you in the action. Mohan