Market Observations 11/03/06

In our top story tonight, the leader of al-Qaida in Iraq, Abu Musab al-Zarqawi, is STILL dead and someone else has taken his place.

Everything is going wavy gravy.... after going parabolic for over a week bonds DOWN BIG 2 straight days, 10yr off 30 ticks today, largest selloff since July 2005. Disturbing, the 2 day pullback did not help stocks.

Oil sold off 5.6% in two days, only to rebound by weeks end. Irking, the pullback, nor the rise helped stocks. Early week the dollar was sinking, rallying Friday to outgain the Euro & Yen, again no help for stocks.

Gold started at $599 with a small pullback at $615, then rocketed to $627. Observing a chart of TLT & GLD, the small pullbacks in bonds and gold this week are a sign that further upside may be coming, this would not bode well for SPY or stocks.

The 1st 6 day selloff on the DJIA since June 2005. DJIA, SP500, OEX, TMWX, NAZ, NDX all resting on 25DMA, RUT & MID hanging from. A glimmer? Higher lows FRI on the DJIA, MID & RUT. Or dark shadows? TMWX, OEX & SP500 went to lower lows.

Is it a topping pattern with major consolidation downside? Or is it just another pullback before the next runup? Should we breech 1355, the SP500 will retrace towards the 50DMA @ 1335, which would reincarnate 07/03 - 07/18.

SP500 1405? NDX 1795? Not unless the election goes to the Repubs or there is a split. We have gone to MAX PAIN SP500 1362 far too early and rather than being a shake out, record short positions are very happy. Speaking of which, will they cash in and buy some "bargains" on the dip?

On that note, we could see a bull trap before heading up in earnest to 1405 by headfaking to 1377, then failing and falling to 1335. Or before Santa shows up in Dec, the market may just consolidate in earnest for the month of November on a Demo victory.

Of note: Massive afterhours volume spikes THU NYSE 1.1B; TUE & FRI AMEX 83M & 58M; WEN, THU & FRI Nasdaq 444M, 416M & 213M. Hummm wonder whats coming Monday? Lets see.

Keep it tween da ditches, we take it day by day and keep our eyes peeled to the sky, because it could be a name brand that pancakes us. Just my opinion, I could be wrong, this is The Nattering Naybob and your NOT!!!

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