10/02/99 – The S+P & DJIA are reinforcing the intermediate scenario and are capable of declining into mid-November with an intermediate objective of 9300-9400 and critical support at 9063-9100 (including the low of 1999).

If you have not yet read the October INSIIDE Track, I would strongly urge you to take a couple minutes and review the section on Stock Indices, including the description on this decisive squaring of time and price objectives.

A couple of short-term factors could produce another 3-7 day rebound in addition to what has transpired. The first was the S+P monthly close, barely avoiding an intra-year neutral signal (which would have taken place if SPZ had closed below 1294.20 on 9/30… see 9/25/99 Weekly Re-Lay for details). Though this does not preclude a strong chance of it occurring on 10/29/99, it did provide a breather for the near term.

As I conveyed last week, short-term cycles began to bottom on September 29th. Keep in mind, these cycles still allow for another decline in the coming week. This is why it is so critical to watch the market action to ascertain whether it is intact... or still to come.

If the S+P spikes above 1298.80/SPZ on Monday

and breaks below 1287.00/SPZ, it could be in store for a final decline (with DJIA support at 9959--9975) before a 5-7 day rebound. If it opens and rallies above 1304.00/SPZ (or gaps above this level), it is more likely to continue rallying into mid-week and possibly into October 11/12th (with initial DJIA resistance at 10,549--10,610 & SPZ resistance at 1341.50 - 1349.50).

As I conveyed last week, I do not want to overemphasize the short-term if it means losing sight of the high probability for a continued decline into mid-November. As a result, trailing stops are the most important factor at this time.

Trading Strategies: Intermediate traders should have taken profits on ½ their position in October 1280--1300 put options on 9/28 & on the other ½ on 9/30, and be looking to reenter (in Nov. or Dec. puts) in the next 7-10 days.

Short-term traders should be short ½ of a normal-sized position from 1348.80/SPZ after taking profits of almost $14,000/contract on the first ½ at 1293.50/SPZ. Lower remaining buy stops to 1304.30 OCO a daily close above 1298.80/SPZ. If the S+P drops below 1276.50 after the first hour of pit trading on Monday, lower buy stops to an hourly close above the intraday high OCO 1293.60.