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Market Commentary Page
For the S&P; 500, Nasdaq 100, and T-Bond Futures Markets

S&P; 500 Commentary for Thursday, December 19, 2002 S&P; 500  Mar  SPH3 Pattern Signals - an automated pattern recognition process which identifies today's most likely market scenario based on recent price behavior. 2 Day ROC Sell 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. R3·907   R2·902   R1·897   DP·891   S1·886   S2·881   S3·876 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 897 901 Low 886 882          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 The only Pattern Signal fired for today's trading in the S&P; is the 2 Day ROC Sell. 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 Sell signal is telling us to expect today to be the "sell day" part of that pattern. On the S&P; Half Day chart, all three of our Cycle Indicators moved even lower from overbought levels with yesterday's activity, further confirming Monday's trading as having marked a short term cyclical high. Cycle Indicators imply lower to sideways trading for today. Economic reports on today's agenda include State Unemployment Initial Claims at 7:30CT, and Leading Economic Indicators and the Philadelphia Fed Index at 9:00CT. The ADX level on the 15 minute chart is above a value of 30, indicating that the trend to lower prices is still intact in this timeframe (see ADX charts below). If we were triggered into a short position by a price reversal pattern and/or Oscillator Divergence near the 20EMA in the 15 minute timeframe, 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, which would be yesterday's 886.10 low. If the move to that level can occur on Momentum Confirmation, there should be even more downside in the making. The ADX level on the 5 minute chart is 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. Although the 2 Day ROC Sell signal is suggesting further downside, it would be best to enter today's trading without a directional preference. Instead, pay close attention to market action relative to important support and resistance levels. In today's early going, pay particular attention to price behavior in relation to the 891.40 Daily Pivot. Significant activity above this level will imply further upside. Activity below will hint at further downside. 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 Thursday, December 19, 2002 Nasdaq 100  Mar  NDH3 Pattern Signals - an automated pattern recognition process which identifies today's most likely market scenario based on recent price behavior. 2 Day ROC Sell 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. R3·1056   R2·1045   R1·1035   DP·1022   S1·1012   S2·999   S3·989 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 1036 1044 Low 1013 1004          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 The only Pattern Signal fired for today's trading in the Nasdaq 100 is the 2 Day ROC Sell. 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 Sell signal is telling us to expect today to be the "sell day" part of that pattern. On the Nasdaq 100 Half Day chart, all three of our Cycle Indicators moved even lower from overbought levels with yesterday's activity, further confirming Monday's trading as having marked a short term cyclical high. Cycle Indicators imply lower to sideways trading for today. Economic reports on today's agenda include State Unemployment Initial Claims at 7:30CT, and Leading Economic Indicators and the Philadelphia Fed Index at 9:00CT. The ADX level on the 30 minute chart is very near a value of 30, indicating that the trend to lower prices is still intact in this timeframe (see ADX charts below). If we were triggered into a short position by a price reversal pattern and/or Oscillator Divergence near the 20EMA in the 15 minute timeframe, 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, which would be yesterday's 1010.00 low. If the move to that level can occur on Momentum Confirmation, there should be even more downside in the making. The ADX level on the 5 minute chart is 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. Although the 2 Day ROC Sell signal is suggesting further downside, it would be best to enter today's trading without a directional preference. Instead, pay close attention to market action relative to important support and resistance levels. In today's early going, pay particular attention to price behavior in relation to the 1022.50 Daily Pivot. Significant activity above this level will imply further upside. Activity below will hint at further downside. 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 Thursday, December 19, 2002 US T-Bond  Mar  USH3 Pattern Signals - an automated pattern recognition process which identifies today's most likely market scenario based on recent price behavior. NR4 Signal (narrowest range of the last four days) 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). 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. R3·110´26   R2·110´16   R1·110´05   DP·109´26   S1·109´15   S2·109´04   S3·108´25 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 110´06 110´14 Low 109´16 109´08          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 two Pattern Signals fired for today's trading in T-Bonds, the first of which is the NR4. This signal tells us that the market has gone through a period of contraction with yesterday's range being the narrowest of the last four days. If the market were thought of as a spring gradually being compressed, this signal represents a potential trigger point for releasing that pressure. A good clue as to if and which direction it might break can be determined by today's market action near yesterday's 110-04 high and 109-14 low levels. A break of either is a likely indication of the new trend direction out of this contraction period. An aggressive trader can enter on the break. A conservative trader 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 Momentum Pinball Sell. The Momentum Pinball Buy and Sell Signals originate from the book "Street Smarts" by Larry Connors and Linda Raschke. They 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 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 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 State Unemployment Initial Claims at 7:30CT, and Leading Economic Indicators and the Philadelphia Fed Index at 9:00CT. The ADX level on the 5 minute chart is below a value of 18 (see ADX charts below). 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. All things considered, the NR4 signal will likely be the real key to today's trading. Whenever a Narrow Range Day Pattern Signal fires we can go into the trading day with two key pieces of information at our side. 1) We know that in all likelihood, price activity should essentially trend in one primary direction. And (2) clues to the direction of the potential trend day breakout will most likely be determined by price action relative to the prior day's high and low, and to today's DP as described above. Also, keep in mind that the Momentum Pinball Sell signal is flagging potential short term uptrend exhaustion with a possible move in the opposite direction. If today's first hour low is breached we'd want to more seriously consider a bearish bias. The 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. As always, our most confident entries are accompanied by Reversal Patterns and/or Oscillator Divergence along known levels of resistance. 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.