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

S&P; 500 Commentary for Friday, December 13, 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. 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 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. R3·921   R2·914   R1·908   DP·901   S1·895   S2·889   S3·882 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 907 912 Low 895 890          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 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 908.00 high and 895.20 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 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, Cycle Indicators continue a period of mixed behavior. We should wait until they've had a chance to normalize and return to more normal short term cyclical behavior before using them to help determine any sort of directional bias Economic reports on today's agenda include the Producer Price Index and Business Inventories at 7:30CT, and the Michigan Consumer Sentiment Index at 9:00CT. ADX levels on 5, 15, and 30 minute charts are all 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. The Inside Day signal will ultimately be the real key to today's trading. Whenever this signal is fired, 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 a potential trend-day breakout will likely be determined by price action relative to the prior day's high and low, and to today's DP, as described above. 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, December 13, 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. R3·1080   R2·1068   R1·1056   DP·1044   S1·1032   S2·1020   S3·1008 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 1057 1066 Low 1033 1023          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, Cycle Indicators continue a period of mixed behavior. We should wait until they've had a chance to normalize and return to more normal short term cyclical behavior before using them to help determine any sort of directional bias Economic reports on today's agenda include the Producer Price Index and Business Inventories at 7:30CT, and the Michigan Consumer Sentiment Index at 9:00CT. ADX levels on 5, 15, and 30 minute charts are all 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. 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 1044.00 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 Friday, December 13, 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. 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. R3·112´01   R2·111´21   R1·111´09   DP·110´25   S1·110´13   S2·109´29   S3·109´17 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 111´11 111´22 Low 110´15 110´04          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 The only Pattern Signal fired for today's trading in T-Bonds 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. Historical Volatility levels moved sideways with yesterday's activity, and remain below trigger value (chart above right). Historical Volatility is a measure of the degree in which price has fluctuated over a particular period of time. Generally, when a market has gone through a period of contraction, there will be a tendency for volatility levels to increase. And sometimes that increase can be very sudden and dramatic. These kind of low Historical Volatility readings have us on lookout for the development of wide-range days which trend in a single direction - the kind of days that are well-suited for capturing large profits. 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 the Producer Price Index and Business Inventories at 7:30CT, and the Michigan Consumer Sentiment Index at 9:00CT. ADX levels on 15, 60, and 120 minute charts are above a level of 30, indicating that the trend to higher prices is still intact in these timeframes (see ADX charts below). If we were triggered into a long position by a price reversal pattern and/or Oscillator Divergence near the 20EMA in any of these timeframes, 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 111-05 high. If the move to that level can occur on Momentum Confirmation, there should be even more upside in the making. 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 110-25 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.