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[Dwer]

Market Force: Bearish. Caution...Looks like a Bull Trap. Sell Rallies as we may be setting up for a Crash here anytime.


Trade Setup Summary for Wednesday, May 26, 2004:
B@1110.00/S@1114.25 +4.25

Recap of Wednesday's Action:
Good Morning and welcome to Thursday's action as we roll into the Holiday Weekend.

I realize the Headline Call today may be a bit of a concern but THIS IS WHAT OUR MARKET FORCE INDICATORS ARE TELLING ME NOW!

Those of you who have been with us a while know that I don't pull any punches when I make these daily calls. Sometimes they can be dead wrong but most of the time they are quite accurate. I make them based on 18 proprietary indicators that I have developed over the last 14 years of trading the S&P500 almost every day.

More below on today's Morning Call.

REMEMBER: No Headline Call or Live Trading Updates on Friday as we usually take this Pre-Holiday off from trading along with most of the larger traders, institutional traders, and commercials.

The Market on Wednesday played out almost exactly according to our script. Here are my closing Wrap Up comments on what we did in the Live trading action.

"Our overall approach worked well today as we came in looking for Bullish Market Force to be prominent.

We got long on an early pullback after the first hour just a few ticks off the low at 1110.00. We had pegged resistance at 1115.50 area and when we got a move up to 1115.00 we put out a message to sell out the long position and showed our official fill at 1114.25 for a +4.25 profit.

I wanted to get out and stand aside at that point even though I had mentioned they would most likely run up to our first goal up of 1117.00 which was mentioned last week in the Morning Call.

I had said then that once we got an Opening Day to start the new Buy Mode then that would be the first goal up. We later hit 1117.00 exactly, sold off to 1112 area and then closed em up right below 1117.00 again."

Today's Call & Briefing:
What I am seeing in the Market Force indicators today reminds me of that famous TWILIGHT ZONE episode where these 8 foot tall space aliens come with this special book called, "To Serve Mankind". They start loading humans on their craft with the idea that the humans are going off to a new land of harmony and happiness. At the end of the show a News Reporter somehow translates the Book which is written in alien language and he exclaims to the last batch of people getting aboard the spacecraft...."It's a Cookbook". They all rush to get off the craft but alas...it's too late.

This is what appears to be setting up for us in the markets. I know I have been talking about and waiting for an OPENING DAY in the markets to start a new Buy Mode. But that day was way over due in terms of the normal projection time for it to occur after I see the market start to roll from Sell Mode to Netural in the sequencing pattern.

I started considering after seeing this that something underlying the market was OFF BASE. Well, on Tuesday we got the big run slammer to the upside and today's follow through.... well sort of.

All I can tell you is that something is very ominous in the indicators and it is coming at a very unusual time when there is a high percentage degree of bullishness heading into the MEMORIAL DAY HOLIDAY.

At this time we also are seeing TOO MANY BEARS TURNING BULL with only a small jump in the market in an entirely new type of market that is turning conventional indicators UPSIDE DOWN.

Add to the mix all this surprise talk about a supposed "terrorist attack" that is coming and the whole picture becomes more murky.

So what does an open minded, unbias, astute and "only concerned with being on the right side of the market" professional trader do when they see all this coming together?

YOU TAKE A VERY CAUTIOUS STANCE.

I am willing to err on the side of Caution on today's trading and into Monday.

OVERALL I WANT TO BE SHORT TODAY IF THAT SETS UP PROPERLY.

Watch for today: An flat to higher opening showing initial exhuberance and a run up towards the 1117-1119.00 area to GO SHORT if NAZ (our nickname for the Nasdaq composite index) is not unusually strong. Watch for TRIN to move above 1.10 or higher and VIX up ideally but not required.

Also be on the alert for a SNEAK DOWN BEAR UGLY DAY where the market starts out looking OK but gradually starts to erode and does not recover.

BULLISH....if we see the High 5 looking strong and the numbers poping up in Trailblazer patterns that do not pullback similar to Tuesday's action. Not expected but we may still hold on to this traditional Memorial Day bullishness .

But just beware...Something is wrong with this whole bullish picture here.

Value Area: 1,111.20 - 1,115.00
Watch for the market to move above 1115.00 and then fall back into this Value Area zone for a Bearish sign. Moving below 1111.00-1109.00 especially is bearish.

Buy Pivot Target: 1,111.25 - 1,112.25
This is the bottom of the Value Area and trade down here will most likely find some support but if things get ominous as expressed above then watch out for slow erosion or a Sneak Down Bear Ugly type day.

Sell Pivot Target: 1,118.75 - 1,117.75
We want to look to Sell the market up here but not necessarily right off the open. Watch 1123.00 stop/pivot target.

Live Update Subscribers: I will be monitoring the market right off the open and will be putting comments on as to what to do with this pivot.

WE MAY GO SHORT HERE ON AN EARLY POP UP TO THIS NUMBER. NOT SURE YET. Be ready early to possibly go short if we hit this target.

10 Day "Pit Bull" Moving Average: 1,095.90
We are in a Buy Drops mindset above this number but if my projections for the possiblity of this rally being a huge FAKE OUT come true then we are going back below this number. We want to be a bit leary of this move higher until we get the holiday weekend out of the way and next weeks Monday and Tuesday so I can watch the Day to Day sequencing pattern.

Pro Trader's Action
Today I am just stepping back and looking at the whole picture that is being painted here and it does not ring like a True Bullish Bell.

It rings more like the thud sound of a RIG of some sort and my number one job here is to try and protect our subscribers who are trading in the "fastest game in town".

If I am wrong on this and the market merrily takes off skyward and rallies with a screaming Bullish High 5 then we can easily get long and catch that.

But if it pulls a number like on Tuesday and makes a mega leap out of thin air with practically no indications of a large move coming in our Market Force indicators then I WOULD RATHER ERR ON THE SIDE OF CAUTION.

As I have said many times before on these briefings...The Pros focus on Longevity and staying in the S&P500 trading game. Not on "making a killing" which is how the amateurs talk. We are more interested in making a steady living and not getting hurt in an uncertain market situation.

Look to trade on the short side unless the High 5 and other indicators are truly looking bullish. We can always stand aside if not clear and trade em next week (and the following week and on).

Good luck with your trades, please be careful today, and I'll most likely see you on the short side of the action if it sets up right. Mohan