The plot thickens. In this morning's posting we discussed the likelihood of upside follow-through from yesterday's low at 1307.00 in the S&P 500 e-Mini contract, but that the index would have to hurdle and sustain above 1348.50 to trigger upside acceleration towards the op of the Feb-Mar range. As it turned ou, the e-SPH peaked so far at 1345.00 prior to its mid-session AMBAC swoon. More vital, however, is that the pattern carved out from 1307 to 1345 does NOT exhibit particularly bullish form.

This is a warning signal that the upmove is countertrend and when complete should resolve itself in another nasty decline. Wait! Before we run out and establish a new short in the S&P 500 Depository Receipts (AMEX: SPY) or long in the S&P 500 UltraShort ETF (AMEX: SDS), let's be aware that the countertrend rally itself looks like it has more room to run, and may hurdle 1348.50 on the way to 1365/70 -- prior to the downside pivot reversal that should be forthcoming. Patience, patience into late Thursday, or even early Friday, after the Employment Report!

By Mike Paulenoff

Mike Paulenoff is author of the MPTrader.com (www.mptrader.com) , a real-time diary of Mike Paulenoff's trading ideas and technical chart analysis of Exchange Traded Funds (ETFs) that track equity indices, metals, energy commodities, currencies, Treasuries, and other markets. It is for traders with a 3-30 day time horizon, who use the service for guidance on both specific trades as well as general market direction

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