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Commentary

WEDNESDAY NIGHT, OCT 2, 2002:

Today's activity in the markets was just as we would have expected from yesterday's commentary.  The Dow and the QQQs both headed initially for the lower Attractor just below, which was 7796 on the Dow and 21.52 on the QQQs. The Dow got within a hair of the Attractor and bounced off of it, heading right back upward for the Attractor at 7958.  It surpassed that Attractor just slightly making an intraday high at 7969 and at the same time forming a pennant.  The pennant was broken quickly to the downside and the Dow continued on downward for the remainder of the day, leaving us with a -181.10 for the day, to close at 7755.

The Dow now sits on the lower Bollinger Band, with RSI back into bearish territory on the intraday chart.  On the daily Dow chart, RSI is just barely in neutral territory at 40.14, but showing some positive divergence--which is encouraging.

The market paused midday to run back up to the next upper Attractor at the downsloping trendline on the daily chart.  That makes today's chart overview a Type III down-up-down motion day.

The Dow did make an attempt to run for the Bollinger Band midline, but its attempt was foiled, sending it back into negative territory for the day.  

There are enough positive signs that still lead me to believe that tomorrow (Thursday) will make another attempt at a run upward, heading for the BB midline.

QQQs

Yesterday we advised all currently long to be suspicious of any pullback and take profits.  That is just what you should have done today, exiting your QQQ long position at 21.52, as suggested.  That move would have given you $2,500 on your long position from 21.12.

Now we are back again at the 21.12 Attractor.  (That's the way trading has been going for months--bouncing back and forth between Attractors.)  The actual close is 21.25.  RSI on the 15-minute chart stayed above 40, which is a very positive sign for tomorrow's action.  

The daily chart is still playing the bottoming formation tune, as we told you it probably would.  Higher lows continue to form along the bottom of the daily RSI--a very positive indication.  Average true range is still slowly climbing.

Thus, I expect tomorrow will continue this zigzag activity of bottom forming, within 2 ATRs of the main Attractor at 21.25.  With ATR currently at 0.81, that gives us a trading range from 22.87 down to 19.63.  We could continue in that range for weeks as we scrape out a nice hard foundation.

On an intraday basis, I expect tomorrow will show an attempt to run for 21.52 again, possibly making a try for the upper Attractor at 22.14.  If we can't successfully get above the 21.52 level, watch out below, as we will head back for 20.80 and then 20.51.

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