Here is the big picture of the e-SPU, which shows the Katrina upside reversal spike, as well as its predecessor reversal spikes from July 7, May 13, and April 18, all of which form a potent series of higher-lows (juxtaposed against higher-highs) into the July 29 peak at 1248.75. The big question is whether or not the Katrina pivot low was the start of a new upleg -- to new highs above 1248.75? Right now, my near-term work argues that the rally off of 1194 is nearing completion in the 1236-1240 area.. The subsequent pullback will provide us with clues about the underlying strength of the post-Katrina upleg. The ability of the index to hold support in the 1221-1218 area followed by a pivot to the upside will argue strongly for a run to new highs. A break below 1218 will argue that the Katrina rally should be labeled "recovery" within the development of a larger top formation.

MJP 9/7/05

Mike Paulenoff is a 25-year veteran of the financial markets and author of MPTrader.com, a real-time diary of his E-mini S&P and QQQQ technical analysis and trading alerts. For more of Mike Paulenoff, sign up for a FREE 30-Day Trial to his E-Mini/Index Futures diary, or try his QQQ Trading Diary.