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[Figas]

Trade Setup Summary for Friday, July 25, 2003:
Buy 975.50-977.50/ Sell 985.50 +8-10 pts. (Buy B/D minus 2-4 pts)

Recap of Friday's Action:
Good Morning and welcome back from the weekend. I hope it was a relaxing one for you.

Our Headline Call for Friday was looking for further sell off and the possibility of a Bear Ugly day. We got the flat opening and with no associated bad news or strong gap lower we were cleared of a Bear Ugly type day. The market slowly eroded as we had talked about looking for in order to BUY the BreakDown if that was the first Hour One Pivot hit. That is what we got and in following our rules to subtract 2-4 points from the B/D low with a bearish High 5 we were able to grab the 975.50-977.50 price as shown on the chart above. The Market rallied nicely off those lows and gave us our 8-10 profit goal when prices ran up and hit 985.50 and stalled right below the BreakOut pivot.

Prices continued to hold below the BreakOut at 986.75 most of the early session until just 15 minutes before our trade cut off time around 1:30est when the market shot up to hit the B/O and continued higher. Prices pushed higher with excellent strength in the indexes and the rest of the High 5 showing a substantial rally on the Dow and NAZ.

So with this move our Headline Call turned out to be wrong but using our recommended TCF trade setup early we had already banked an 8-10 point trade for the day so continued trading at that late hour was not considered. Also being Friday we usually like to reduce risk when possible on these days.

Today's Call & Briefing:
Our Headline Call for today is going to be looking for further upside movement with consolidation in the upper third of the range most likely into the close.

There is a good chance that we could get a "Too Much Too Soon" type setup off the first half hour of trading in which the market rallies strongly on a HIGHER OPENING and then pulls back off that rally as it peaks and heads lower. It will be important for traders to really prepare for this and we will most likely look for the BreakOut pivot to assist us in getting short should this setup occur. You will be able to recognize this by the higher opening (and especially a larger gap up opening) combined with the Dow soaring strongly but seeing the NAZ (our nickname for the Nasdaq composite index) holding back only being up +10 points or less.

The Dow broke out nicely on Friday creating new Dow highs for the month but with too many bulls loading into the rally. This has us on a high Caution alert if the rally to gets too carried away early today.

Still, with mostly large cap issues leading Friday's rally this is a good sign of a bullish scenario building. Plus the simple fact that we had on Friday, as indicated by our Headline Call, a strong indication in the Market Force indicators of lower prices. When we get these Market Force indications and the bearish action doesn't follow through that is often a sign of a strong market. This market has had several really solid indications for getting hammered with a large sell off that have simply not manifested. As astute and completely flexible traders we have to be willing to look at this very simple evidence that the market is obviosly SHRUGGING OFF THE BEARISH REASONING.

Evidence for lower prices will now come into play if Tuesdays LSS Sell day kicks us back below the 975.00 area. This would be decent proof that this current rather surprising run up was just a fluke. The LSS Sell on Tuesday will largely be validated IF WE GET THE HIGHER CLOSE TODAY. What should keep the market bullish is to see higher prices today in which the Bears start doubting the rally and loading positions. So far it is the opposite with Bulls joining in the rally and we have to consider that the nature of the market is to clean out the excessive positions on the wrong side under most circumstances.

Sometimes there are periods where everyone is totally bullish and the markets just keep climbing. We may be in such a period now and these are associated with new pension money (billions of dollars) coming into the market and seeking a home in stocks along with the good old "climbing a wall of worry" understanding that higher markets always seem to thrive in. In other words, when "everything is just too bearish looking" the market responds by pushing higher. All great bullish market periods have found a footing in this type of environment. The question is ...are we really in this type of situation now?

Fortunately for us here at the Market Call all we care about is making our payroll for today and banking 8-10 points on the right side of the market. Here is how we plan to do that today.

TCF TRADE SETUPS TO WATCH FOR TODAY: First of all we will observe the opening action to see if we are setting up for a "Too Much Too Soon" type early rally. If so, we want to be careful in observing the stretch of the rally and it's relation to the Sell Pivot target at 1004.50 and the subsequent +4.25 stop/pivot at 1008.75. This 1008.75 area is the first place we are going to look for resistance on a large opening rally. Instead of trading directly here let's let the rally play out past the first hour and be confident that we will be able to take the appropriate action at the BreakOut if that is the first pivot hit. This reduces our chances of getting short only to find that the market may create a "Sell Pivot becomes buy support with a bull High 5" if indeed that is what occurs. By seeing this NOT occuring we can go short near the BreakOut at the best time. We will also be able to compare that price to the Sell Pivot Target and the relation to the 1008.75 stop/pivot.

I am almost sure we will be hitting the B/O today as the first Hour One pivot but in case that is not going to occur it is important to know that if the first pivot hit is the BreakDown then we could be in for a Bear Ugly setup. It would certainly be an odd mix of back to back days to have this occur because rarely do you get a day like Friday where you are able to buy the B/D on a slow erosion of prices and have the next day hit the B/D again FIRST as the first Hour One pivot. Anything is possible though in S&P500 trading and we COULD see a repeat performance of the same action as Friday with the B/D getting bought up, but it is highly unlikely. Usually it is OPPOSITE when this occurs and that would be a SEll the BreakDown or a Bear Ugly situation. I hope this explains my logic on this.

Ideally we will just get a blow up early rally and will be able to select a precision point for going short after the rally plays out some. Monday's are the most bullish day of the week so if we get such a rally or even a slow move towards the Breakout then let the rally play out some until perhaps the 11:30-12:00est time area. Be sure to add 2-4 points to the BreakOut if the High 5 are showing Bullish characteristics.

Value Area: 976.00 - 992.80
We have closed nicely above the Value Area and this should create more early bullish action. If we rally and then pull back into this VA again after higher prices with an associated deteriorating High 5 then look to go short into this zone (if we are not already short from higher levels) and look for a possible retracement of this zone of up to 75%. This would be equivalent to 12.60 points or 980.20 area. That alone would be a highly decent trade if we get that action. If we are short from higher levels on a deteriorating High 5 then look for this 980.00 as strong support.

I get the feeling that we are going to find support higher today and will let Tuesday's LSS Sell day show us how much lower they want to go OR if we are going to stall the LSS Sell day on Tuesday for continued higher action through Wednesday and Thursday.

Buy Pivot Target: 982.25 - 983.25
If we get a LOWER OPENING and an early drop down here let's buy this Buy Pivot target. Use a 5 point stop. This is not expected to occur for today however.

Sell Pivot Target: 1,004.50 - 1,003.50
We had discussed this above at length. Please read the overview for this number in the TCF TRADE SETUPS TO WATCH FOR TODAY.

10 Day "Pit Bull" Moving Average: 990.90
We moved above the Pit Bull strongly on Friday but the closing price still leaves us in CROSSOVER ALERT with the chance of moving back to find support here. If we do end up getting short today and prices pull back to this level after getting inside the Value Area be highly aware of the support factor here if we are going to move higher over the next few days. As astute traders we have to be aware of how a surprise, strong bullish move like we saw on Friday is not to be taken lightly especially if support comes in and at that support we start hearing lots of bearish reporting. We will keep you posted on the effects of this and the reaction.

Pro Trader's Action
Overall today we are going to be looking to trade the reaction to Friday's strong rally. We will do this by first watching for a "Too Much Too Soon" setup as described in the Trading Handbook based on a HIGHER OPENING ABOVE 996.80. We will be attempting to use the BreakOut as our pivot point to see where we can get a precision trade off. Compare this price at the B/O with the Sell Pivot target and the +4.25 stop/pivot at 1008.75 and this will give us nice clues.

If for some reason we hit the BreakDown first then we are going to have to consider that a Bear Ugly day is possible but we are not expecting this.

As you can see I often use this section for repetition of the previous sections to simplify the overall instructions. Sometimes, like today, I like to add various commentary about the possibilities for the market just to keep our perspective in view. Because I am never really a "bull or a bear" so to speak I like to look at the various possibilities that the TCF Market Force indicators could be calling on in the short term.

If you recall we had made a call last Monday for a Bullish Week. Do you remember? If not, check the archives. I don't do this every week but only when I get some stronger notion from the indicators. Oddly enough the market did not do anything spectacular until the strong move on Thursday up to 998.00 which fizzled out only to find a return to that price after lower early erosion on Friday. This was shown in the Market Force indicators early in the week. Just remember again, plain and simple this is the market shrugging off bearishness.

This week looks like more of the same kind of flip flopping towards gradual higher prices with the reminder that many of the large mutual fund managers are vacationing through August. Great for us day traders so let's just keep perfecting our practice.

Let's see if we can get a short off at higher levels above the BreakOut in relation to the Sell Pivot numbers either stalling off the higher move or showing us a reversal point if things are going to continue higher. Either way we have the dynamite in place with our TCF trade setups to guide us on the right course.

All the best of luck and successs today and I'll see you in the action, Mohan

[Figas]

Market to move higher today and consolidate near upper third range. CAUTION: Watch out for a "Too Much Too Soon" type setup with an early rally on a higher opening that fades out early.