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[Dwer]

Market Force: Neutral. After hitting projected upside target of 1142.00, market is neutral. Sell early rallies for pullback.

Trade Setup Summary for Monday, June 7, 2004:
1) S@1131.00/ B@1135.50 -4.50 pts.

2) S@1135.25/B@1137.00 -1.75pts.

Total: -6.25

Recap of Monday's Action:
Good Morning and Welcome to Tuesday's action.

In our Headline Call for Monday we had shown the Market Force indicators as Neutral as a clear bias was not shown after Friday's jump up open and recovery from Thursday's slam.

Over the weekend with the passing of former President Ronald Reagan a wave of U.S. honor and mourning went out with remembrances of him being one of the favorite U.S. Presidents. This created a very bullish atmosphere. The U.S. stock market got its first real taste of modern (1990 and forward) Bullishness under his Presidency.

Here are my comments from the Wrap Up on our Live Update Service.

"Today was expected to be a bit of a Wild Card as far as whether we would see the markets return to the Sell Mode or go into aberration and rally as discussed on the Morning Call today.

One factor I had not fully considered was the popularity of former President Ronald Reagan and the bullish affect his death might have on the markets. This was the case today as a moment of silence was held before the markets opened as is traditional as the market made a large +5 point gap up.

There were virtually NO PULLBACKS today especially later in the session except for a few early ones which were barely 2 points in range. This suggests that there was a bit of a "boycott of short trading" going on today as it would be considered "Un American" as is sometimes the case on the floor.

We followed our Market Force indicators looking to Sell a move up near the Hour One high with the market already gapped up and having rallied.

1132.50 was pegged as initial resistance and we initiated a short trade at 1131.00. As mentioned there were virtually no pullbacks and as the markets moved higher we monitored a tight stop. Prices got stuck right on our 1133.50 price area we were maintaining a mental stop. Finally after much patience and waiting prices jumped a bit higher and we cleaned out the short for a -4.50 loss at 1135.50.

After waiting some time I got another signal that gave impetus for re-shorting so we got short again at 1135.25 with a tight stop in mind just above 1137.50. Prices pushed up and we covered up the stop at 1137.00 for a -1.75 loss.

So on balance a -6.25 loss on the day with the market pushing higher still into the close. MARKETS WILL BE CLOSED ON FRIDAY IN HONOR OF PRESIDENT REAGAN.

Today's Call & Briefing:
Our Market Force indicators are showing a Neutral reading for today.

On yesterday's briefing I had stated (in reference to the 1133.00 projected resistance price holding)," Otherwise if they hold we should be on our way above 1133 to 1142-43.00 shortly after."

We hit the exact highs on the Emini S&P500 on Monday at 1142.00 so that fufilled an important counter rally phase of the Sell Mode we had entered...and it was a whopper reversal.

The key now is to see 1145.00 hold back the buying and we should then move into a consolidation lower phase which is expected to start anytime.

I am still carefully watching for an aberration on the Sell Mode and if any pullbacks today are shallow (expected) and prices move up again into the close then the aberration will confirm. This would project higher prices for another 2 days at least. So today becomes important for observing this reaction to Monday's rally.

WATCH FOR TODAY: If we are moving up towards the Highs again FIRST after the first hour has finished in trading then we want to Sell any Breakout attempts. Watch for a pullback off of those highs but not necessarily a strong sell off.

If we are skimming the lows after the first hour then expect to get another rally attempt to reach up towards 1142-45 depending on where the lows are.

Value Area: 1,128.00 - 1,137.10
The top of the Value Area should serve as support initially for today. Dipping into the Value area we would look at 1133-35 as next strong support.

Buy Pivot Target: 1,131.50 - 1,132.50
Just below the above VA dipping figure we have this Buy Pivot Target which will be good support. Watch this price compared with the Hour One low for a long sided trade IF we head to the lows FIRST in the overall trade off the open.

There is still one more projection towards 1145.00 to finish off the pattern.

Sell Pivot Target: 1,145.50 - 1,144.50
Here we have the Sell Pivot target right at this price zone which is expected to finish off the upper move pattern at least temporarily. We still need to determine if we are in a genuine aberration on the Sell Mode or just a "One Day Wonder...Ronald Reagan Rally". Today should give us more clues about this.

10 Day "Pit Bull" Moving Average: 1,119.30
We will continue to look to buy drops if the market drops off substantially down towards this pivot. We are looking to see how things pan out for today to determine more clearly where the underlying short term Market Force is heading.

Pro Trader's Action
Today will be interesting to see if we get more play in the prices on both sides of the market.

All this week is a memorial tribute to former President Reagan so we may get a continued 2 day up move based on an aberration on the Sell Mode. There will be more clues today as far as how the market opens and moves initially, closes and the overall relation of both of these to the opening price.

I have given you 2 trading strategies for both sides of the market so let's see how things set up and we will be ready for whatever occurs.

All the best of success today. Mohan