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S&P; 500 Commentary for Friday, November 30, 2001 S&P; 500  Dec  SPZ1 Pattern Signals - an automated pattern recognition process which identifies today's most likely market scenario based on recent price behavior. 2 Day ROC Buy 90-10 High Continuation: Morning follow through on yesterday's strong close is likely. Look for long entries Pivot System Support & Resistance Levels - used on the floor to determine relative value based on prior day price action. Significant shifts in market psychology often occur near these levels. R3·1165   R2·1158   R1·1151   DP·1138   S1·1131   S2·1118   S3·1111 Range Projections - This market will have a tendency to trade within the Normal High/Low Range today as noted below. If those levels are exceeded, use the Extended Range. Normal Extended High 1155 1162 Low 1135 1127          Most Recent Trading Day With Pivot System             Historical Volatility & Narrow Range Days            S&R; Levels and 5, 15, and 30 Minute 20EMAs.          Expect range expansion when HisVol is low. TODAY'S S&P; 500 COMMENTARY We have two Pattern Signals fired for today's trading in the S&P;, the first of which is the 2 Day ROC Buy. This signal is the Raschke and Connors way of quantifying the swing trading methods as taught by the Taylor Trading Technique. This technique teaches that there is a natural pattern to the sequence of buy and sell days. The 2 Day ROC Buy signal is telling us to expect today to be the "buy day" part of that pattern. The second signal fired for today is the 90-10 High Continuation. This signal originates from the 80-20s set-ups as described in "Street Smarts". But, rather than using the 80-20 guidelines, the parameters have been narrowed to 90-10, thus reducing the pattern's frequency of occurrence, but increasing its probability as a forecasting tool. The 90-10 High Continuation signal is fired when the day's close is within the top 10% of the day's range. This signal is telling us to expect morning continuation of the upmove. On the S&P; Half Day Chart, all three of our Cycle Indicators moved higher from oversold levels with yesterday's activity. Of greatest significance is the upturn in the 7 period %K. A turn of this indicator from its overbought or oversold zone is usually a good indication that a new trend has begun and at least several more bars of new short term direction should follow. Economic reports on today's agenda include Gross Domestic Product and the PMAC Survey, both released at 9:00CT. The ADX level on the 5 minute chart is above a value 30, indicating that the trend to higher prices is still intact in this timeframe (see ADX charts below). If we were triggered into a long position by a price reversal pattern and/or Oscillator Divergence near the 5 minute 20EMA, we would have the makings of a Holy Grail setup. A trade based in part on a Holy Grail pattern can take as its minimum profit target a return to the most recent swing pivot extreme. If the move to that level can occur on Momentum Confirmation, there should be even more upside in the making. ADX levels on 15, 60, and 120 minute charts are below a value of 18. When this occurs, we know that it is a good time to keep an eye out for any developing triangles, wedges, flags, or channels in the respective time frames. We can use breakouts from these patterns as either a trigger into a trade or to help determine directional bias. Both the 2 Day ROC Buy and 90-10 High Continuation signals are telling us to look for longs in today's early trading. The ideal setup would entail corrective action towards one of the support levels directly below yesterday's closing price, the most significant being that of the 1138.20 Daily Pivot. If price were able to reach this zone as higher timeframe 20EMAs came up to meet it from below, we'd have an extra reason to go long. A price reversal pattern and/or Oscillator Divergence can trigger us into the position with the 90-10 High Continuation signal telling us to expect yesterday's 1145.00 high to be exceeded. Use similar price and oscillator behavior characteristics to determine an appropriate exit point above this level. 20 PERIOD EXPONENTIAL MOVING AVERAGE AND 14 PERIOD ADX ADX<18 indicates ambivalence: use chart pattern breakouts to help determine directional bias. ADX>30 defines trend moves in that timeframe: watch for retracements to the 20EMA. The colored bar under ADX represents trend direction.

Nasdaq 100 Commentary for Friday, November 30, 2001 Nasdaq 100  Dec  NDZ1 Pattern Signals - an automated pattern recognition process which identifies today's most likely market scenario based on recent price behavior. Inside Day Signal This signal indicates that range expansion is highly likely. If, during the day, yesterday's high is exceeded then either buy the breakout (aggressive) or buy the retracement to the breakout (conservative). If, during the day, yesterday's low is exceeded then either sell the breakout (aggressive) or sell the retracement to the breakout (conservative). 2 Day ROC Buy 90-10 High Continuation: Morning follow through on yesterday's strong close is likely. Look for long entries Pivot System Support & Resistance Levels - used on the floor to determine relative value based on prior day price action. Significant shifts in market psychology often occur near these levels. R3·1658   R2·1640   R1·1623   DP·1590   S1·1573   S2·1540   S3·1523 Range Projections - This market will have a tendency to trade within the Normal High/Low Range today as noted below. If those levels are exceeded, use the Extended Range. Normal Extended High 1630 1649 Low 1580 1561          Most Recent Trading Day With Pivot System             Historical Volatility & Narrow Range Days            S&R; Levels and 5, 15, and 30 Minute 20EMAs.          Expect range expansion when HisVol is low. TODAY'S NASDAQ 100 COMMENTARY We have three Pattern Signals fired for today's trading in the Nasdaq 100, the first of which is the Inside Day. This signal refers to the fact that yesterday's trading range was within the range of the prior day. In many ways the parameters for trading the day after an Inside Day are very similar to that of trading the day after a Narrow Range Day. Inside Days (as well as Narrow Range Days) represent a contraction in price. If the market were thought of as a spring gradually being compressed, the Inside Day represent a likely trigger point for releasing that pressure. There is potential today for the market to break out of yesterday's range, and essentially trend in one primary direction. A good clue as to if and which direction it might break can be determined by today's market action near yesterday's high and low levels. A break of either is a likely indication of the new trend direction. An aggressive trader can enter on the break. The more conservative might want to wait until a return to the breakout level, which often happens before a sustained move begins. Some initial clues to breakout direction can often come from early rejections of these levels. If the high is approached, repelled, and price then moves through the DP, the likely breakout direction is the low. Likewise, if the low is approached, repelled, and price goes through the DP from below, the likely breakout direction is the high. Another clue can often be found in price action near the DP. If price is unable to move through this level, the likely breakout direction will be the same side as it originated. The second Pattern Signal fired for today's trading is the 2 Day ROC Buy. This signal is the Raschke and Connors way of quantifying the swing trading methods as taught by the Taylor Trading Technique. This technique teaches that there is a natural pattern to the sequence of buy and sell days. The 2 Day ROC Buy signal is telling us to expect today to be the "buy day" part of that pattern. The third signal fired for today is the 90-10 High Continuation. This signal originates from the 80-20s set-ups as described in "Street Smarts". But, rather than using the 80-20 guidelines, the parameters have been narrowed to 90-10, thus reducing the pattern's frequency of occurrence, but increasing its probability as a forecasting tool. The 90-10 High Continuation signal is fired when the day's close is within the top 10% of the day's range. This signal is telling us to expect morning continuation of the upmove. On the Nasdaq 100 Half Day Chart, both the 5 period Double Stoch and the 7 period %K turned higher from oversold levels, while the 10 period %K moved lower. Of greatest significance is the upturn in the 7 period %K. A turn of this indicator from its overbought or oversold zone is usually a good indication that a new trend has begun and at least several more bars of new short term direction should follow. Economic reports on today's agenda include Gross Domestic Product and the PMAC Survey, both released at 9:00CT. The ADX level on the 5 minute chart is above a value 30, indicating that the trend to higher prices is still intact in this timeframe (see ADX charts below). If we were triggered into a long position by a price reversal pattern and/or Oscillator Divergence near the 5 minute 20EMA, we would have the makings of a Holy Grail setup. A trade based in part on a Holy Grail pattern can take as its minimum profit target a return to the most recent swing pivot extreme. If the move to that level can occur on Momentum Confirmation, there should be even more upside in the making. ADX levels on 15, 30, 60, and 120 minute charts are below a value of 18. When this occurs, we know that it is a good time to keep an eye out for any developing triangles, wedges, flags, or channels in the respective time frames. We can use breakouts from these patterns as either a trigger into a trade or to help determine directional bias. Both the 2 Day ROC Buy and 90-10 High Continuation signals are telling us to look for longs in today's early trading. The ideal setup would entail corrective action towards one of the support levels directly below yesterday's closing price, the most significant being that of the 1590.50 Daily Pivot. If price were able to reach this zone as higher timeframe 20EMAs came up to meet it from below, we'd have an extra reason to go long. A price reversal pattern and/or Oscillator Divergence can trigger us into the position with the 90-10 High Continuation signal telling us to expect yesterday's 1608.00 high to be exceeded. Use similar price and oscillator behavior characteristics to determine an appropriate exit point above this level. 20 PERIOD EXPONENTIAL MOVING AVERAGE AND 14 PERIOD ADX ADX<18 indicates ambivalence: use chart pattern breakouts to help determine directional bias. ADX>30 defines trend moves in that timeframe: watch for retracements to the 20EMA. The colored bar under ADX represents trend direction.

US T-Bond Commentary for Friday, November 30, 2001 US T-Bond  Mar  USH2 Pattern Signals - an automated pattern recognition process which identifies today's most likely market scenario based on recent price behavior. 90-10 High Continuation & Reversal: Look for morning follow through on yesterday's strong close and then a likely reversal. Low Breakout Continuation Setup: If yesterday's low is taken out today, the trend lower is likely to continue for the rest of the day. Momentum Pinball Sell: If price action is weak enough to break the first hour low, then a bearish bias should be assumed. Look to either sell the breakout (aggressive) or sell the retracement to the breakout (conservative). Pivot System Support & Resistance Levels - used on the floor to determine relative value based on prior day price action. Significant shifts in market psychology often occur near these levels. R3·105´06   R2·104´24   R1·104´11   DP·103´18   S1·103´05   S2·102´12   S3·101´31 Range Projections - This market will have a tendency to trade within the Normal High/Low Range today as noted below. If those levels are exceeded, use the Extended Range. Normal Extended High 104´16 104´31 Low 103´10 102´27          Most Recent Trading Day With Pivot System             Historical Volatility & Narrow Range Days            S&R; Levels and 5, 15, and 30 Minute 20EMAs.          Expect range expansion when HisVol is low. TODAY'S T-BOND COMMENTARY We have three Pattern Signals fired for today's trading in T-Bonds, the first of which is the 90-10 High Continuation & Reversal. The concept behind this signal originates from the 80-20s set-ups as described in "Street Smarts". But, rather than using the 80-20 guidelines, the parameters have been narrowed to 90-10. This reduces the pattern's frequency of occurrence, but increases its probability as a forecasting tool. The 90-10 High Continuation & Reversal signal is fired when the day's open is within the bottom 10% of the day's range and the day's close is within the top 10% of the day's range. This signal is telling us to expect continuation of the upmove in the morning, and then a reversal sometime during the day. The second Pattern Signal fired for today's trading is the Low Breakout Continuation. This one is a little different than the bulk of the signals that we normally incorporate. Rather than creating a directional bias for the trading day, it points to a likely market development IF an additional condition is met. The setup for the Low Breakout Continuation signal includes (1) the signal day's low is within the middle 20% of the prior day's range, and (2) the signal day's high is higher than the prior day's high. If on the day following the signal day (today's trading), the low of the previous day happens to be taken out (yesterday's low) then the probabilities of a continuation trend move downward is very high. This signal is NOT setting up a directional bias for today's trading. Rather, it is indicating that if yesterday's low happens to be taken out, we want to be on board the downward move because odds are it has further to go. The third Pattern Signal fired for today's trading is the Momentum Pinball Sell. The Momentum Pinball Buy and Sell Signals represent an attempt to identify potential periods of very short term buying and selling exhaustion so as to capture a possible move in the opposite direction. Before any action is taken, however, the Momentum Pinball Sell signal requires a breach of the first hour low for confirmation. Because Momentum Pinball Buy/Sell signals are intended to flag the potential end of a short term trend, it is not unusual to see, on the same day, other Pattern Signal firings which indicate likely movement in the opposite direction. When this occurs we know that a break of the first hour high/low represents a market bias in the opposite direction as originally indicated by other Pattern Signal firings. On the T-Bond Half Day chart, all three of our Cycle Indicators moved higher into overbought territory with yesterday's activity. This does not necessarily mean that we should expect them to soon turn. If short term cyclical patterns have returned to normal behavior, we should see a period of topping action develop before they launch their next cycle lower. Our first clue will come from a downturn in the 7 period %K. A turn of this indicator from its overbought or oversold zone is usually a good indication that a new trend has begun and at least several more bars of new short term direction should follow. Economic reports on today's agenda include Gross Domestic Product and the PMAC Survey, both released at 9:00CT. ADX levels on 5, 15, and 30 minute charts are either very close to or below a value of 18. When this occurs, we know that it is a good time to keep an eye out for any developing triangles, wedges, flags, or channels in the respective time frames. We can use breakouts from these patterns as either a trigger into a trade or to help determine directional bias. The 90-10 High Continuation & Reversal signal is telling us to expect more upside in the morning. Whether that might be tradable or not is difficult to determine, but we should regard a pullback prior to yesterday's high being broken as a possible long entry point. Watch for a price Reversal Pattern and/or Oscillator Divergence on a retracement move towards any 20EMA or the 103-18 Daily Pivot level. Yesterday's 104-00 high would be a potential target, but that doesn't negate the possibility that price may go higher, and we should be prepared to take advantage of the move if it should occur. From there, keep a sharp eye out for price reversal patterns and/or Oscillator Divergence on potential lines of resistance above this level. Possible reversal zones include any of the three Pivot System Resistance Levels, the Normal High Range Projection level of 104-16 and the Extended High Range Projection level of 104-31. The aggressive trader can try to catch the initial reversal turn itself, should it occur. The more conservative might be better off just letting it happen, and then attempt to get in on the retracement. Holy Grail patterns are particularly effective for this. Pay special attention to the 5 min. 20EMA. Another technique is to draw an uptrendline line along the lows on a 5 or even 15 minute chart and use the break of that line as your trigger into the trade. Just make sure that you have a logical place to put your stop, and that it is within your preferred limits of tolerance. Going into trading today, we have a signal implying more upside with the possibility of a strong reversal. However, such signals should never be interpreted in mechanical fashion. They are to be used as a "heads up" for the day's trading . . . not as a strict set of rules, but only as an aid in the creation of a strategy. Pattern Signals are an indication of what has happened on a fairly consistent basis in the past, but they make no guarantees of the future. Always let price be the ultimate determining factor in all your trading decisions. 20 PERIOD EXPONENTIAL MOVING AVERAGE AND 14 PERIOD ADX ADX<18 indicates ambivalence: use chart pattern breakouts to help determine directional bias. ADX>30 defines trend moves in that timeframe: watch for retracements to the 20EMA. The colored bar under ADX represents trend direction. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ YESTERDAY'S T-BOND TRADING