Quiet Riot

October 18, 2002
Derrick Hobbs

This 80s
Heavy
Metal group has a song that is very fitting for the daily charts of the
S&P
500, Nasdaq, and many sectors of the market.

After a very impressive
and jolting two weeks of trading, the markets have rallied up into significant
and critical Fibonacci price resistance zones. At different times, different
chart time frames are more critical. Sometimes it is the weekly chart, sometimes
the daily, or even the 60-minute time frames.

At this point, we are very focused
on the daily charts. As you look at the charts below, if these indices are unable
to clear these resistance zones, we are likely to see more of the same thing
we’ve seen this entire bear marketâ€¦a continuation of the decline.

In fact, I have time cycles on the daily charts coming into the mix between Oct.
22 and 25 for a possible reversal to the downside. If these markets rally through
price resistance and past these critical time frames, it is my translation of
these charts that we have broken the daily downtrend that has been in place
for months and that we should begin looking to buy pullbacks into Fibonacci
support zones.

That is obviously an optimistic view for long traders. The reality
is, we are in a downtrend facing key daily price resistance mixed with time
cycles that are pointing to a reversal to the downside. So, the “high probability”
trade right now is to consider shorts against these resistance zones.