Zeev, during this bear market, lows have normally been tested to within 1-1/2% to 2%. The one exception that stands out is April 2002 (6%) due to the strong gap support at around 1700-1710. That level was tested 3-times before we moved up, however. Even last fall we had a successful re-test a couple days after the Sept. lows.
We had a gap at 1163-1179, but we've never really gone back and tested that gap. That's one difference between this rise and the one in April 2001. We have not tested the first gap support. Normally when the COMP does a greater than 50% re-trace off a high, a re-test of the lows is on.
If that is the case, the gap at COMP 1221.60-1229 should be no more than a way-station on the way to a full re-test of the lows. We could bounce off that gap support for December expiration, but I highly doubt it will be a springboard for a run at the highs.
Ideally I'd like to see a rise off a possible low in the NDX 880-900 to NDX 1000 to take care of Max Pain for December. However, if that happens, I think the rug should get pulled out, and we do the full re-test of the 1108 lows.
The flip side of that argument could be that the Dow futures enter December way underwater and they just take this thing down in December to delta hedge those positions, which have been behind the last two futures expirations.
Anyway, just looking at the 1220 COMP level and finding it to be attractive as a near term target, as it satisfies a H&S, but not real attractive as a bottom that could hold for more than 2-3 weeks.
AI
