Thursday, March 06, 2008

The Plan

Top Line: The market closed right on top of the support line created a couple of days ago. That is the beauty of the market, it never really wants to tell you what it wants to do. On Friday morning we get the Real jobs' report for our review. This will not have much of an effect on the market, although it may appear to be doing so.

As we were writing our post last night (Wednesday evening) we had mentioned the strength in the overnight futures. But, before the market opened there were several news items, all credit market related, that managed to change all of that. We aren't going to go into all that news this evening as we try to keep this brief again.

We want you to concentrate on the positioning of the market this evening and over the weekend. After the jobs' report on Friday, the market is free to go where it wants to go. We normally say that the jobs' report is the key report of the month and represents the end/beginning of the month, even though it always comes out on Friday morning.

The stock market has a tough road from here. As we look at the pattern, we see a hard drop coming very soon. We talked about the possibility of a modest rally to 12,400. With the move down to this week's low near 12,000, we have more reason to believe that the market is ready for a fall. It seems the world is thinking that the 12,000 level is a floor due to its "round number" support. We think the market can break through this time.

Our favorite index, the NASDAQ 100 (NDX), has a pattern that looks very much like a possible strong move. The first move down from the highs from last Friday has been about 100 points and then there was a bit of a rally of about 60 points (for those of you that are paying attention, the Fibonacci ratio for a normal retracement is 61.8%, not bad).

These moves suggest that the next move should be at least 160 points which would put the index down another 100 points from here, about 5%. Remember that's the projected minimum move and it could happen extremely fast.

FSI: 69.36 (new low)

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