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Stock futures show fractional gains

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Stock futures are showing fractional gains this morning with S&P futures trading higher by 3 points. Also higher are NASDAQ futures, which are up 1 point and Dow futures are showing gains of 10 points. Fair value for the S&P 500 for today is $8.42. Computers are set for program buying at $10.02 and set for selling at $7.12

Software stocks showing signs of strength

There are some promising looking point and figure charts starting to develop in the software sector that indicate that demand is beginning to outstrip supply. Traders might want to jump over to www.stockcharts.com and pull up some point and figure charts of Rational Software (NASDAQ:RATL), Adobe Systems (NASDAQ:ADBE), Citrix Systems (NASDAQ:CTXS) and Intuit (NASDAQ:INTU) to understand what may be developing there in each of those stocks. If we take a quick look at the group index and the GSTI Software Index (GSO.X) we see there is still some work to be done and I'd suggest that bullish traders only establish 1/2 positions in some of these stocks should they decide to do so as the GSO.X remains below downward trend and some key moving averages.

GSTI Software Index Chart - last eleven months

I'd be using the index chart to adjust my trading size for stocks I believe are looking bullish. While the four stocks I mentioned above do hold promise for upside moves and look to be showing some leadership, the GSTI Software Index tells us we should still show some caution until the long-term downward trend on the bar chart gets broken to the upside. Notice yesterday's close came right at the 50-day moving average. I'd be using the 222 level as an upside alert and then be monitoring downward trend at the 230 level to see if it can get broken to the upside. For the index to show strength, some stocks in the software sector need to show leadership and perhaps the four names listed above could be the ones. We'll be showing some point/figure charts on the above listed stocks throughout today's trading session in our commentary.

Jeff Bailey
Senior Market Technician

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