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Sunday, May 20, 2012

SPX Update: Key Overlap at 1292 Leaves the Bulls Feeling "Facebooked"


Before I get into the update:

Please be aware that the real-time intraday and after-hours trading discussion section has moved.

We're in the process of transitioning to a new board, and while it's still a work in progress (I started this project about 3 months ago) -- it had to happen sometime.

If you haven't checked out the new board, feel free to join in the discussion there, although all new members must be approved by yours truly (for guidelines/requirements to join, please see this thread).  I'm really working hard to maintain a pleasant and collegial atmosphere, and a much higher level of security appears to be the only way to accomplish that.  Thanks for understanding.

The board itself can be found here:  http://deepwaveanalytics.com/forums/ though you can also simply navigate out of the thread I posted above -- it's da same place.

The daily market updates will continue to be posted here (for the time being -- there's another section of the new website that's still under construction, and eventually when I can find another seventeen hundred hours of "free" time, I'll finish the rest of the site and move the updates too).  But at present, only the real-time trading discussions have been moved.

We now return to your regularly scheduled update.

Market Update:

While I managed to get a great deal accomplished on the new site, apparently the stock market is still out there, lurking.  I checked my account and saw that the futures are, indeed, still trading.  Have they no decency?  Since I've only managed to get about 4 hours of sleep, I'm going to keep this relatively brief, though I still put together a number of charts.  (EDIT:  At least, that was my intention... fail!)

Friday was a smashing success, as the market opened higher and appeared ready to rally, but instead quickly collapsed back into the preferred count's target zone. 

But the big news is that a key overlap occurred on Friday, as the market overlapped the October high of 1292.66, thereby ruling out the ultra-bullish count that the October high was Wave 1 of a new bull market wave. 

Regular readers know it's been my opinion all along that this rally was just an extended correction in an ongoing bear market, and Friday's action has gone a long way toward vindicating my long-term outlook.  The market is now closing in on retracing almost all the gains of 2012's "monster bull market."

Considering that this came on the back of the much-anticipated Facebook IPO, the outcome of this situation has left me with the urge to coin a new term: 

Facebooked: [feys bookd] verb Facebooking noun Facebooker
To frustrate, trick, and deprive of something expected: 
"Dude, your boss totally Facebooked you out of that promotion!" 
Synonyms - swindled, tricked, cheated, bilked, screwed 

Without a doubt, the bulls definitely got Facebooked on Friday.

The first chart we'll examine is whichever one I upload first.  Let's see... oh yeah, this is a good one.  It's the SPX monthly chart, and shows how the market has now broken down through several solid support levels.  For some time, I've been talking about 1290-1310 as a level which I believe is critical to the bull case, and the market's there now.  Let's see if the bulls can get anything going beyond a quick bounce.

Bears should stay cautious, because if the bulls are going to manage some type of solid counter attack, this is the level from which they should try. 




Moving onto whichever chart I happen to upload next, we have... support and resistance!  The market has further broken down through a "theoretical' channel drawn by connecting the October/April highs and adding a parallel copy of the line at the November lows.  This breakdown is not a particularly bullish sign, and the bulls need to recover this channel quickly.

If all the market can manage here is a bounce back to the lower channel boundary before turning back down, that would be quite bearish.  This channel break is another potential sign which seem to verify my preferred outlook of an intermediate trend change.





Next up we have the intermediate targets, which have tracked nicely so far.  My first target was the low 1300's, and that's been reached.  The next target appears to be 1240-1260.  This outlook would need to be re-examined if the bulls can solidly reclaim the 1365-75 area.




Next up, I took a crack at deciphering the 5-minute charts, but it's a bit fuzzy.  These types of declines are similar to parabolic rises, in that the waves become so compacted that they're quite difficult to sort out.  At times like this, it's often better to focus on the intermediate projections and the larger key levels (such as 1337, outlined below).

The current expectation is that, regardless of which wave degree this rally is, new lows will ultimately follow.

The chart below 2nd guesses the count I published on Friday, which expected blue (3) was nearing completion, and is slighly more bearish than that count.  As of the time of this writing, ES (the E-mini S&P futures contract) is up about 10 points, but I never give that too much weight in my analysis.  You'll recall that the futures were up 7 points when I published on Friday and everyone was excited about the coming Facebooking, yet the market still reversed back down and into the target zone.

I'm sure some of my readers were around for the 2008 crash.  In 2008, I was trading ES, but also holding overnight SPX put positions in anticipation of the crash -- and I recall several days where it looked like some type of bottom would be in (based on overnight ES action), and then the cash market would open and tank.  ES traders tend to be much more short-term oriented and technical, and focussed on things like "due" oversold technical bounces, which become self-fulfilling prophecies to a degree.  Cash market traders tend to consist of more "mom and pop" investors who are ready to call their broker first thing in the morning and say, "I can't stand this anymore, you blasted Facebooker -- get me out NOW!"

So we shall see who wins Monday's battle.  I consider this count at least somewhat speculative, and believe that it's crucial to pay attention to the market's behavior near the thrend channels and resistance levels to get a feel as to whether it holds any water or not.  I will outline some of the key short-term levels in a moment.




For contrast, below is Friday's preferred count updated with the current price action.  We're in one of those zones where we need to see another larger degree wave to really sort out the counts with higher confidence -- as I said, when the minute waves become this compacted, it's hard to sort out one very short-term option from another, so we'll simply have to watch how the market behaves at key levels.

Over the very short-term, the first key horizontal hurdle for bulls is 1300; if they can hold that, then 1307-08 is the next hurdle... above that 1310, and then 1312-13.  It's not enough to just break above one of these levels briefly, they need to maintain it.  At this point, I assume it goes without saying that the trendchannels are critcal as well -- but I'm trying to learn not to "assume it goes without saying."  So there ya have it.  :)

I view the black alternate count shown below as low probability, but I've been surprised before.  If a rally starts to grow legs here, then we might consider that count more seriously.  However, Friday's low is one of those lows that you would normally expect to see retested at the minimum.



In conclusion, the expectation remains for further downside, and the expectation remains that we've seen an intermediate trend change.  Over the short-term, there are a couple paths the market could take to get there, so on Monday it would be wise to pay attention to the key levels outlined.   In other words, pay more attention to how the market behaves around those levels than the blue lines I’ve drawn on the charts – this type of market can just keep right on grinding lower.    Trade safe.

Reprinted by permission, copyright 2012 Minyanville Media, Inc.

83 comments:

  1. In case you missed it, the new forum's up and running, so intraday and after hours discussions are now being held there.  Please join us!  :)

    http://deepwaveanalytics.com/forums/index.php

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  2. Pl i have been following you since the last few months and i must say that your knowledge of the markets and thinking is unique and one of the best out there.I would like to bring to your notice one interesting aspect.What does facebook,Goldmansachs,Glencore,Blackrock etc have in common? Answer they all did their IPO right at the market TOP.Is is a mere coincidence now that FACEBOOK could mark the TOP for NASDAQ as well as SnP.If yes then we are for on the cusp of a very very long bear market.Keep your thoughts coming.

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  3. Another interesting aspect which could give us a sign of things to come is the dollar which has gone up non stop for the last 2 weeks It has given a higher closing non stop for two weeks.Perfect sign that the markets are on the edge of a cliff.

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  4. Let me add one more thing to the last comment."is the dollar which has gone up non stop for the last 2 weeks.It has given a higher closing nonstop for two weeks".Well it might come as a surprise but this has not happened in the dollar index for the last 35-40 years.The last time it happened was 36 years back when the dollar moved nonstop for 10-11 days.While many might look at this as a mark of overbought dollar i would say it is a inherent sign of the dollars strength .

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  5. Though its very difficult to say to what levels we might go to in this correction, i think we would very likely get a final big pullback which could lead either DOW or Snp to make a newer high before things collapse.

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  6. Registered as asjones.
    [The security question was: How many letters are there in the word 'Beard'?]

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  7. registered as Doppa73

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  8. Just registered over at the new site as zabolots and am awaiting approval :)

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  9. Hi, PL.  I've tried several times to register at your new site, but keep getting this error message: 
    Your details match those of a known spammer, therefore you have been disallowed registration.
    I've tried registering with 2 personal email addresses that I use regularly, but both seem to get me bounced off with the same error.  Wondering if perhaps the spammer in question has previously been granted the same IP Address I'm using now, because we're using the same ISP/Proxy? Thanks for your help.  

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  10.  Interesting observation!

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  11. Regitered as magicman on new site.Found this site last weekend,im impressed

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  12. Registered as yogi69

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  13. paragraph before 4th chart.......thrend channel....

    PL,

    I am making an assumption that you want to know about these little typos, but you know what they say about making assumptions!

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  14. Registered as Lapwolf.

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  15. Yep, I recognized your email, you should be active already there.  :)

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  16. Registered as dillzs

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  17. Registered as greggw2gs.  Been a quite student of everyones work here for a few months.  Thank you.

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  18. Hi PL - remember me from last year?  Took a break from trading to work on other things.  Trying to keep up with the market so I can get back to trading in the fall.  Registered at your new site as B0B.

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  19. Yep, recognized you -- activated.  :)

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  20. Wondered what happened to ya!  Good to see you again.  :)

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  21. Pretzel, I can't begin to tell you how much  I've learned a lot from reading your articles.
     I'm a much better trader thanks to your ongoing instruction-- I actually make
    money now!  During the past few years, I've given the market so much of my money that I
    wondered if I was cut out for this gig at all.  But now I realize  I didn't know
    how much I didn't know.  I was truly flying blind.  Today, I seldom (if ever)
    listen to tv commentators, and I only read headlines to keep up on
    employment data releases, etc.  I recommend that readers study your lingo
    and pay close attention to your market 'road signs.'  It took me a while. 
    At this point, I still know just enough EW to be dangerous, but my knowledge
    is constantly expanding.  It seems each week I have an EW epiphany.  All this makes
    my monthly donation a very small price to pay for tuition to the Pretzel
    University of  Marketing Analysis  or PUMA as I call it.  If  you're
    a daily reader but keep under the radar (I did this for 5 months,)
    just think how much your trading account would miss Pretzel's posts if they stopped. 

    Pretzel, I've registered at your new blog as dcawoo1.  Also, I need a donator badge.   Thanks!

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  22. Hi PL.  I just saw on the Forex futures page that the bears and bulls are evenly balanced at 50/50.  Guess everyone is in a wait and see market position.

    Just regestered on the new web site, do you know if it is cell phone friendly?

    Thanks for all the great work.  I have sat out the market for a while but it looks like it is time to dip my toes back in and see if there are opportunities too great to miss.

    Great Taliske

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  23. LOL... I doubt PL will recognize you.  I registered as Albertarocks and he didn't even recognize my boat, let alone me, lol

    Just kidding... he recognized ma boat.

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  24. Did you get the answer right?  Just in case... it's 5.  lol

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  25. Hi GT, good to see you again.  :)

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  26. You're all set over there!  Thanks, dcawoo1.  :)

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  27. Wait, who are you again?  dillzs was approved immediately.  You on the other hand... hmm.  Seems like I've seen you around...

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  28. Hello!    I think I followed the signup correctly, but I got hit with "known spammer".     The donation already kicked in, but I realize this may take some time.     My new user name is "blago", if that works for you.

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  29. Sorry, my spam blocker there is a bit over-the-top at times.  Gimme a minute and I'll create an account for you...

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  30. Okay, you're all set.  username blago -- your password is the first portion of your email before the @ symbol -- change it as soon as you log in.  And thank you for the donation!  :)

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  31. Great analysis as usual! 

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  32. I want to ditto woolie's comment.

    Registered as gert3.   (Thats' a 4th iteration of disquis reregistrations)

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  33. PL, great update! Just registered at the new site under user name "arnie"

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  34. Hi dguer, please read the guidelines and requirements page, thanks!  :)

    http://deepwaveanalytics.com/forums/forumdisplay.php?selectall=&fid=6&sortby=lastpost&order=asc&datecut=1

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  35. Thanks arnie, approved ya right away.  Like I wouldn't recognize ya!  :D

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  36. Wouldn't dweem of it!   :)

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  37. PL

    I registered on deepwave a few minutes ago.  Waiting to hear back if ok.  What is the difference in the content between this thread and what is on deepwave.

    Is there another way to donated other than PayPal.  I have had lots of problems with them.

    Thanks

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  38. PL
    I am registered as davezarling on the new board if you'll have me.

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  39. Donated as Kmoney

    Thanks

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  40. Thanks!  :)

    Your account was activated earlier. 

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  41. Pretzel

    I've been trying to settle on a name - think this is the last one I used

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  42. Hi PL.  I read all of your available posts about registering on Deep Wave.  Then I tried to register and got the "known spammer" notice.  I posted to your site within that past few months.  My email address is John.Hinds@Sprint.com and I would like the user name JohnH.  Thanks. 

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  43. Hey PL
    Is there a problem why I am not approve at the other site?

    Trying to change the order for last posting first, but won't let me.
    I hope old cheeseburger was not a bum. My emails are different, but the domain and format is the same at other site, I am worried about Spam as everyone else is. I keep track of where I signed up for emails received.
    If there is a problem, please let me know.

    I signed up as "cheeseburger" since it was available. 

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  44. lol, i knew you would, just wanted to make sure I wouldn't miss out on your new blog and features! I think it's a great idea and that it will grow into something big and beautiful. Give it time; good things take time.

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  45. Hi PL.  I have posted once in the past under Wolvie29 and would like to keep the same name of the new site.  Thanks.

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  46. Hi PL, no word on "Tonto" having access to your new site yet?  I'll  pardon the wait, you must be swamped. Tx,

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  47. Hi, have you read the new members requirements page?

    http://deepwaveanalytics.com/forums/forumdisplay.php?selectall=&fid=6&sortby=lastpost&order=asc&datecut=1

    I have no record of your email in my database, so I've been unable to verify and approve the account.  Sorry for the inconvenience... unfortunately (for all of us, especially myself) there's security and there's convenience, and I've felt somewhat inclined to choose the latter over the former.

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  48. Looks like you posted back on 2/01, so I was able to verify you -- account's activated.  :)

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  49. Ronnix, I don't do all the sign-ups by hand -- I only do that if someone can't get through the spam wall.  Otherwise just go register and then post here that you did so and what your new username is.

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  50. Nope!

    Duh, yeah, you were approved a while ago.   :)

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  51. Hi bantryt.  I really don't have another format for donating.  What username did you register?

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  52. I registered as bantryt. The deepwave members button shows me as not yet activated.

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  53. Don't ya just love it when people are congenial......friendly, affable,miable,pleasant,agreeable,good-natured, hospitable. Where did Iput my "peace"emoticon.

    Hello Boss.....check'n in here. Bob_E........Ok to enter

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  54. Yeah, approved you as soon as I saw it come through. 

    Stil waiting on the good doctor (UKDNY) to register.  It really helps when you guys post here so I know to look...

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  55. I'll hit em with an "old style" message or alert. Do they still work on/off the old threads?

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  56. Now those are "good" records!!!!

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  57. Was reading kinda quickly and thought for a moment  he "donated his kidney"........next step up from "an arm and a leg".

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  58. I registered as SilverRob yesterday PL as an fyi :)

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  59. My friend echen at Humblestudent blog has been providing great cycle work on the markets for years. Please see his work at

    http://humblestudent777.blogspot.com/

    marketcycles79

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  60. PL - I registered  yesterday as BCBK and was able to login right away, but for some reason my account was not activated.  I also sent you an email this afternoon.  Thank you.

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  61. THANK YOU -- I wish everyone would chime in and tell me, makes my life SOOOO much easier. 

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  62. I don't think people are getting this, despite the two posts I made about it on the board... 

    IF YOU DON'T MEET THE CRITERIA LISTED BELOW YOUR ACCOUNT WILL NOT BE APPROVED. 

    Sorry, but this is how it has to work.  Please read this thread to further understand what the criteria are:

    http://deepwaveanalytics.com/forums/showthread.php?tid=784

    I also apologize if you have met the criteria and your account isn't approved yet.  Please *post a reply* on this thread if this is the case -- there's a lot going on right now and I'm aboslutely swamped.  Again:

    **PLEASE** POST A REPLY HERE IF YOU HAVE MET THE ABOVE CRITERIA BUT ARE STILL AWAITING ACTIVATION.

    Your patience during this transition is appreciated.   :)

    If you have met the criteria above, but are unable to register because the board software labels you as a "known spammer" please post here and I will create your account by hand. 

    If you have *not* met the criteria outlined in the link above, then *that's* why your account has not been activated.  Thanks!

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  63. Hi, bcbk -- please read the post above.  Thanks!  :)

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  64. Neverrrrrrr got your note... Tough getting used to the new forum, kinda lacks the beautiful spontaneity here.

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  65.  Hi, PL.  I just signed up to the forum under "TurtleHermit."  I think my first (and only post) was when you switched to Disqus heh.

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  66. Yeah, feeling the same.  I'll play around with it, see what I can do.  I'm going to have my cat start working on the update while I do that...

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  67. bwaaaah, haaa, hhh, oh, rats, choke, retch--- hairball.
    If u can get your cat to work- catstitution is not work - you will never have to blog again....

    Catstitution - see my lovely furry belly - just for you - purrs just for you....

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  68. Not surprisingly, she has refused.  Probably feels overworked, considering she *did* just bring me a half-eaten rat yesterday -- which she left on the doorstep and I almost stepped on in my bare feet, so that was nice...

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  69. Hmmm. u are in the conundrum regarding the blog - control, security versus spontaneity and artistic expression.
    As for the half-eaten rat - well, the uneaten half was for you...

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  70. A 16th note PL - you are a musician, a photographer, an artist.
    Rhythm is essential to communication - it creates amplitude for sync.
    The new forum has not yet found a rhythm...

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  71. We'll figure it out, I'm sure.  I do want to make some changes to the skin, I think there are ways to make it more... something. 

    As to the rat, yeah... tempting as it was, I didn't eat it.  Trying to quit rat, don't need the cat tempting me back to the "dark side."

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  72. Thanks bcbk, your account's active.  :)

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  73. My account is activated now. Thanks.

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  74. Your details match those of a known spammer, therefore you have been disallowed registration.

    what did i spam i think i only made 3 or 4 posts but it was a short of apple over 600 i remember a while back. followed you from minyanville. i signed up as tarantula55 which was my handle here. thanks

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  75. Hi PL,

    registered at DWA as mnykn9, TIA

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  76. Hi PL,
    I signed up at the new board under "cheeseburger"
    I have posted here before, recently.
    I joined here a few weeks ago
    Thanks

    4th request.

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  77. PL, I registered as 4Runner on the new board.

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  78. tarantula55. cant login

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  79. Are you getting the "known spammer" message?  I have no record of that account being registered.

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  80. known spammer message is what im getting. it wont letme register

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