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The ProTimer Market Report
Sunday, February 1, 2004

ProTimer Market Report
Market Timing Services for Active Mutual Fund Traders

Current Market and Timing Analysis for the
S&P 500 Index & Nasdaq 100 Index


S&P 500 Index - SPX

last week we wrote:

"...the probability (is that) the SPX will have a tough time reaching 1160 to 1163, which is the 50% retracement of the entire bear market decline. The expectation is that traders, expecting a reversal, will start taking profits "before" we reach this level...we are looking for at least a few more days of selling, or at the least continued consolidation of the hefty gains that have been made in a very short time."

On Monday, the SPX rallied and closed at 1155.37 (see daily SPX chart below), just about 1/2 % short of the 1160-1163 target that we have been watching for months.

The market reversed from this rally high, and spent the rest of last week declining. The result was a bearish outside reversal week. A bearish outside reversal week is created when a new high is reached, followed by a lower low than the prior week, and closing with a loss for the week.

Bearish outside reversal weeks are usually followed by continued selling, and often mark the beginning of corrections.

Since March of 2003, the SPX has shrugged off such bearish indicators, and after one to two weeks of selling, resumed its march higher. So far the selling has been minor, and we are now in an oversold condition which could result in some positive days early next week.

However, substantial corrections (50% or more) usually start with minor ones, so we will be watching next week's trading closely.

Even with last week's declines, the SPX chart (see daily SPX chart below) is still bullish. This week may be decisive in determining whether the SPX makes a run for the next target at SPX 1255 (see weekly SPX chart below), or whether we will see continued consolidation (or continued correction) for the next several weeks.

A decisive close above SPX 1163 would be a bullish event, paving the way for a possible run to SPX 1255.

This is a momentum rally, and it is difficult to project how high a momentum rally will go before finally running out of steam. When it does finally stop and reverse, it will likely occur at one of the major resistance levels, such as SPX 1163 and SPX 1255.

We also have our previous upper trend line marked in green now (see daily SPX chart below). It will likely act as support now, and as you can see, it coincides with our short term fib support levels.

Our wave analysis remains unchanged.

Over the past several weeks we have been looking at a possible bullish 5 wave pattern, with waves 1, 2 and possibly 3? marked on the daily SPX chart below. Once we complete wave 3, a declining wave 4 could bring us down to SPX 1093 to SPX 1078 (updated support levels from last week). After this, the expectation would be for a bullish wave 5 to begin which would complete the pattern.

Nasdaq 100 Index - NDX

The Nasdaq 100 Index - NDX did not make new highs this week, and is the weaker of the two indexes we cover in the Pro Timer report.

After a loss in the previous week, the NDX rallied with the rest of the market this Monday, but was unable to reach new highs like the SPX did. It then turned lower and by Friday's close, had lost an additional 2.5 %.

The NDX is also quite oversold, and due for a bounce here. We have included a short term chart this week (see 60 minute NDX chart below) for the NDX, which appears to have either bottomed with a 3 wave ABC decline, or is in the process of completing a larger 5 wave decline.

Because the NDX has not reached even short term fib support levels, our best guess is that it has more downside before reversing to the upside. That does not mean we can't see some positive days early next week, only that support levels are usually reached eventually.

On December 29, 2003, the NDX broke above long term resistance (see daily NDX chart below) that had held it in check for three months. That resistance is now support (line is green). Notice that this support line also coincides with short term fib support levels.

Last week we wrote:

"The NDX chart (see daily NDX chart below) clearly shows that we pulled back right when we hit the upper trend line. This is not necessarily bearish, but does up the likelyhood of more downward pressure over the next several days."

Last week turned out exactly as expected. Next week is more likely to be mixed, though still with a downward bias until at least the short term support levels are reached.

Our wave analysis remains unchanged.

Over the past several weeks we have been looking at a possible bullish 5 wave pattern, with waves 1, 2 and possibly 3? marked on the daily NDX chart below. Once wave 3, is completed, then a declining wave 4 should bring the NDX down to "at least" short term support levels at NDX 1467 to 1445.


S&P & Nasdaq Current Timing Analysis

The (big picture) wave analysis for both the SPX and NDX remains bullish.

We are in long positions in both the SPX and NDX. The market has a great deal of momentum going for it, and though the market corrected last week, it does not necessarily mean we are at the end of the rally.

The NDX was unable to make new highs this week, and closed Friday with another weekly loss.

The SPX hit new highs, but then reversed to the downside, and ended with a bearish outside reversal week.

The charts are still bullish, the trend indicators remain bullish, and though we may see additional selling next week, the path of least resistance is still up.

Positions for the ProTimer strategy are listed below, as well as current positions for our Small Cap Timer, Bond Timer and Gold Timer.

Current Positions
For ALL of our timing strategies, not just the NDX & SPX discussed in the above analysis.
These positions are current as of the date of this report.
Buy & sell signals are sent real-time to subscribers.
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Pro Timer: S&P & Nasdaq
Bullish 100% Bullish S&P & OTC Funds
Small Cap Timer:
Bullish 100% Bullish Small Cap Funds
Bond Timer:
Bearish 100% Bearish Bond Funds
Gold Timer:
Bearish 100% Bearish, (money mkt funds)



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Charts


S&P 500 Index (SPX)
Daily Chart




Nasdaq 100 Index (NDX)
Daily Chart




Nasdaq 100 Index (NDX)
60 Minute Chart




S&P 500 Index (SPX)
Weekly Chart