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Market Force: Bearish/ Neutral. We want to keep selling any rallies today but watch for fast, early drops as a sign for support to start coming in as a bit of panic sets in and drives market lower.

Trade Setup Summary for Thursday, July 8, 2004:
1) S@1115.00/B@1116.75 -1.75

2)B@1117.00/S@1117.50 +.50

3)S@1117.50/B@1113.25 +4.25

4)B@1113.25/S@111.50 -1.75

TOTAL:+1.25


Recap of Thursday's Action:
Good Morning and welcome to Friday's action.

Our Headline Call on Thursday was looking for a potential bullish day if we got a lower opening, a bounce off of that support, and A BULLISH HIGH 5. The price action was all there but the High 5 indicators were very bearish with TRIN above 1.30 and Nasdaq weak.

We had to experiement a bit on the early rally to determine if we wanted to be long for an improvement in the High 5 or get short. Getting short turned out to be the answer as prices moved below the opening and held below it confirming what we had mentioned in Thursday's Morning Call.

Here are my Wrap Up comments about the days live trading action.

"We came into the market today looking for an early drop to rally up and potentially BreakOut of the highs later in the session with a Neutral/Bullish Market Force.

We got the early drop and higher move but the High 5 was very bearish. We hit the Hour One High as the first pivot and got short as the 1116.75 was tapped. Prices dropped instantly and our fill at 1115.00 was not to my liking.

We held short and later determined that the market could start breaking out to new higher ground so we reversed and got long taking a small loss on the short.

After running up yet still experiencing weakness we got short again reversing at a higher level around 1117.50. It was a patient hold but prices finally cracked and moved below the opening price of 1114.75. We used Trailblazer to attempt to measure the market range and on a 4th and 5th Level move below a clear 3 Level move pattern we coverd the short and got long at 1113.25.

Shortly after we got long prices got hammered for another round of selling taking em down to 1111.00 and then dropping again MISSING OUR STOP BY 1 TICK at 1109.25 low. Who says there isn't a lot of luck in this business.

Anyway, just after missing our stop at 1109.00 by a tick I lowered it to 1108.00 but prices had taken off to the upside already. They punched em up to the 1113.50-1114.00 area but they kept pulling back.

I recognized the weakness and got out of the trade at 1111.50 for a 1.75 loss. Trade balance is shown above with a small overall profit."

Today's Call & Briefing:
Today should be interesting (what day trading the S&P500 isn't) in that we have the Buy Pivot target right at 1106.25 and subtracting our -4.25 stop/pivot that gives us our exact goal lower of 1102.00.

Will we get this final bearish washout today that will (finally) spark some panic amongst all the Bulls we've been seeing lately buying the dips? If so we could start bottoming and get a rising market into next week and the seasonally strong period we are in.

We got a strong washout on the close Thursday almost hitting the exact 1107.25 I had projected on Thursday's Morning Call with the 1108.00 drop near the close.

There was some very strong buying interest Thursday Morning and I was a bit surprised that did not continue later in the session near the 1111.00 area we had tried to buy. Main reason was simply that the High 5 was really strung out with 1.40 TRIN and Nasdaq faltering.

FOR TODAY: Here is exactly what we want to watch for.

If we get a higher opening above 1110.70 and an early press higher then it appears we are going to get squashed lower again down to the 1106 area or possibly even hitting our projected first strong support goal of 1102. As mentioned above, this is EXACTLY at the Buy Pivot Target -4.25 stop/pivot target.

If we open flat to slightly lower and we run down to hit the BreakDown Hour One low FIRST then, depending on how low that takes us, will be looking to BUY. It could be a bit scarry with heavy panic starting to show up but that is where we would get the best opportunity to buy em and hold for an eventual recovery setting up Monday for an up day.

Both these scenarios could occur in sequence with the first one occuring, then the squash lower towards 1102-1106, and then the recovery into the close above the open setting up bullish Monday.

Either way it should be exciting to watch and trade em.

Value Area: 1,110.20 - 1,116.00
Holding below the Value Area and then moving back up towards the top of VA is going to be a bullish projected move for Monday.

Early trade up to 1116.00 is most likely going to be near the top for the next level down move to create the panic. The idea is that 1116 fails, more seling comes in, and then those committed Bulls start throwing in the towel after they cross below the 1108.00 low hit Thursday driving em down to 1102-6 and creating the washout.

Buy Pivot Target: 1,106.25 - 1,107.25
We can look to buy this area after comparing it to the Hour One low and High 5 to see if we can correlate this area with an Hour One low buy or slightly below there.

Sell Pivot Target: 1,117.25 - 1,116.25
here is the Sell Pivot Target right at the top of the Value Area forming double resistance for moving above this today in the early session.

If we pullback from here after hitting it early then we can most likely expect the move down to the Buy Pivot target area if the High 5 are Bearish.

10 Day "Pit Bull" Moving Average: 1,128.00
We are still quite a ways below this but the gap is closing which means if we start finding support near the 1104 area then we should close up the gap next week as prices start lifting.

Remember, last Friday we were trading at this price of the Pit Bull today.

Pro Trader's Action
I've outlined the scenarios that we are expecting the market to follow today. The main thing to focus on will be to see if we hit the lows first after the first hour and if we can get aboard a price level where we can turn around and head higher above the open setting up a bullish Monday.

If that occurs then we will be able to get a nice trade location and good run up. We can short the early action IF the High 5 is still showing signs of bearishness.

We have to be open that we put in a bottom at 1108 on Thursday and they could rally today. I am rather expecting one more panic move as we just don't have the PANIC built into the market yet at these lower squash prices which is ODD considering the weakness.

I'll see you in the action soon this morning. Mohan