This Is The Path Of Least Resistance

September 29, 2004
Chris Curran

Stock
index futures opened Tuesday’s session slightly higher after a
volatile overnight session and crude oil hitting the magic $50 number. The
futures were sluggish ahead of the 10:00 Consumer Confidence report and were
pressured further on the news of an unexpected drop for the 2nd straight month.
A nice 50% retracement move was stopped dead in its tracks by a 2nd bigger wave
of selling, only to form textbook bullish Butterfly patterns on the YM and ES
and post the lows of the session. The program trades were active throughout the
afternoon to help the futures break their range and close Monday’s gap and then
some.

The
December SP 500 futures closed out Tuesdayâ€™s session with a gain of +4.50
points, while the Dow futures tacked on +72 points. Looking at the daily chart,
the ES expanded the range off of Monday’s NR7day, and reversed off of its 38%
Fib retracement support to settle back above its 100-day MA. The YM posted a
key reversal up as it rebounded off of support marked by its 62% Fib retracement
support. On an intraday basis, the bullish wedges were broken on the ES and YM
60-min, 30-min, and 13-min charts and I’ll be looking for early weakness off of
completed 13-min AB = CD patterns. In the small-caps, the ER2 also posted a key
reversal, but still faces its 200-day MA just overhead at 567.70.

The
Banking Index (BKX) is continuing to play a game of ping-pong between its
200-day MA resistance at 97.49 and 50-day MA support at 96.86. The SOX couldn’t
find any friends while the broad market rebounded, and while we may get a
technical bounce here, the path of least resistance remains to the downside.

Wednesday morning gives us a look at final Q2
GDP, which is expected to show growth of 3.0%. I’m still looking for another
day or two of overall upside from here into the end of the quarter. Regardless
of what the market throws at us, the main thing is to be in CONTROL of what
you’re doing.