This Pattern Is Still Intact
I hope everyone had a happy and restful weekend.
On Friday, the September
S&P futures (SPU and ESU) opened the monthly options expiration with
a 5 point gap to the upside. Merrill Lynch was a good seller of a couple
hundred SPU contracts right out of the starting gate. After the preliminary
Michigan Sentiment was reported at 90.3, and lower than the consensus of 91.0,
the futures chopped down to 983, which was the daily pivot, and filled 1/2 the
opening gap. The contract moved back up to give 3-min chart resistance in the
987 area a 3rd try before being turned back and officially closing the opening
gap. Price settled into a tight range before starting an afternoon options
expiration-related grind higher. Â
The September S&P 500 futures closed the session
with a gain of +9.75, posting an inside day, and finished out the week with a
loss of -6.75. The contract was able to close back above the previous week’s
low at 982 and its 20-day MA at 989. The previously established trading range
is beginning to contract into a symmetrical triangle (see chart).  Which way
will it break? I don’t know and don’t care (I’ll leave that up to the
“experts”), but the important thing, as a trader, is to be ready to react when
the SPU and ESU do tip their hands. On a weekly basis, the bearish Gartley
pattern is still intact with a 1st target area in the 950’s, unless we get a
weekly close over 1,015.75.
                                       
Looking ahead this week, earnings season comes to
a peak with more than 1,000 companies scheduled to play their own special
version of Show and Tell. One of the great ironies of the recent rally has been
the disparity between the performance of technology shares and blue chips. It’s
now turning out that many of the tech stocks leading the NASDAQ have limited
visibility and dismal growth prospects, not to mention their sky-high
valuations. Many of the blue chips, on the other hand, have been turning in
decent quarters and don’t nearly trade at the valuations most tech stocks do.Â
It’s true that currency gains have played a large role in the earnings of many
of the large multi-national names, but when you look at 2 companies like IBM and
CAT, which both benefit from a weaker U.S. dollar, the difference in their
results is staggering. The rotation out of tech may be in its early stages and
we may see the NASDAQ underperform for awhile. The economic calendar is fairly
light with the Leading Indicators report at 10 am ET on Monday and the Durable
Orders report on Friday, before picking up again next week.
Daily Pivots for 7-21-03
| Symbol | Pivot | Â Â Â Â Â R1 | R2 | R3 | S1 | S2 | S3 |
| COMP | 1704.05 | 1719.29 | 1730.07 | 1745.31 | 1693.27 | 1678.03 | 1667.25 |
| INDU | 9142.86 | 9233.44 | 9278.72 | 9369.30 | 9097.58 | 9007.00 | 8961.72 |
| NDX | 1257.24 | 1270.36 | 1280.82 | 1293.94 | 1246.78 | 1233.66 | 1223.20 |
| SPX | 989.76 | 997.81 | 1002.31 | 1010.36 | 985.26 | 977.21 | 972.71 |
| ESU | 987.08 | 996.67 | 1002.83 | 1012.42 | 980.92 | 971.33 | 965.17 |
| SPU | 987.90 | 995.80 | 1001.10 | 1009.00 | 982.60 | 974.70 | 969.40 |
| NDU | 1257.83 | 1270.67 | 1282.83 | 1295.67 | 1245.67 | 1232.83 | 1220.67 |
| NQU | 1257.83 | 1270.67 | 1282.83 | 1295.67 | 1245.67 | 1232.83 | 1220.67 |
| BKX | 892.50 | 900.80 | 904.95 | 913.25 | 888.35 | 880.05 | 875.90 |
| SOX | 381.59 | 387.92 | 392.12 | 398.45 | 377.39 | 371.06 | 366.86 |
| QQQ | 31.39 | 31.85 | 32.43 | 32.89 | 30.81 | 30.35 | 29.77 |
| SPY | 99.26 | 100.05 | 100.60 | 101.39 | 98.71 | 97.92 | 97.37 |
Â
Good luck with your trading on Monday!
Chris Curran