Market Comment 04/26/07 - Nightly Update

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TradeStalker's
R.B.I. Trader's Update
4/26/2007
(Published Since 1996)
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Dateline: 7:12 pm Eastern time, 4/26/2007

I rarely "toot my own horn" so allow me this. Last night Iwrote:

"On Thursday morning, look to get short on early strength. If the market obliges and there is a selloff... look for a potential reversal back up if the downside reaches and stalls, around the 1497.50-1497.00 area on the SP futures. That should hold on a pullback, otherwise we could have more than just another dip in a strong uptrend."

We got exactly what we were looking for on Thursday morning. Early strength reversed from the 1502.75-1503.25 resistance area on the SP futures (from a 1503.25 high) and the market sold off quickly to the 1497.50-1497.00 support area. After a small bounce, the SP made a double bottom at that support,and then rallied back to the 1503.25 level on the SP futures. That turned into a little triple top at our 1502.75-1503.25 resistance area, and the market backed off again. The 1498.25 level on the SP futures was reached inthe early afternoon, and the market bounced back to token higher highs. however, the SP futures double topped at1504.50 and sold off 5 points before rebounding into the close.

The market is acting very top heavy up here and the end of month bias to the upside looks to be about over. The Dow has closed higher 18 of the last 20 trading days. The daily charts are very extended and could implode if there is a whiff of bad news. The RBI Sell gate is now closed. It's been a tendency for the market to slow upside progress after the signal and then the downside gets in gear. At this juncture, it might be safe enough for a swing trade on theshort side if given the right price.

The market has been getting hit with selling early and then has come back on every dip recently. The lows are occurring in the first hour and then the market battles its way higher throughout the day. When that first dip isn't bought aggressively (and instead we see a wimpy, small, rebound andthen more roll over), then things will be changing.

That said, the risk/reward should favor the short side up here, unless a good reversal occurs at a support zone. Even then, keep those on a tight leash. On Friday we get GDP before the open and Michigan Sentiment at 10 am. As long as the Thursday lows are not broken, nothing bad happens. If the market gets back to resistance areas and the movef izzles, that should set up a good shorting opportunity.

Good Trading,
Mike Reed

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