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Stock futures show gains, bond yields rise

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Perhaps a collective sigh of relief from the bulls and a frustrated growl from bears is being heard this morning as stock futures show gains and bond YIELDS rise. Currently we're seeing S&P futures rise by 3.5 points, NASDAQ futures are up 22 points and Dow futures are higher by 26 points. Fair value for the S&P 500 today is $4.08. HL Camp & Company has their computers set for program buying at $5.43 and set for program selling at $2.39. Fair value for the NASDAQ-100 today is $9.28.

Yesterday we were watching the 30-year YIELD closely at the 5.504% level as that was a recent relative low on YIELD that the market had been having a tendency to sell this bond at. Yesterday's dip right at the end of the bond market's trading (03:00 EST) session of 5.502% may have had some equity bulls pulling the plug on stocks that lead to the selling in stocks we saw near the close of trading there. This morning's pop in YIELD to 5.524% in the 30-year YIELD ($TYX.X) should have some short- term bears frustrated and covering positions.

Merrill Upgrades several chip stocks

In a cautiously bullish note this morning, brokerage firm Merrill Lynch says "We think that a combination of stabilizing earnings estimates, reduced capital spending and bottoming year-over-year change should cause semiconductor stocks to begin outperforming, albeit slowly, over the next six to twelve months." Stocks that Merrill Lynch likes are (ADI, MXIM, LLTC, RFMD, TXN, MU, SMTC, STM, TSMWF, UMC and CHRT)

Throughout the day, we'll be displaying some of the above stocks and their point/figure charts to get a feel for how the MARKET views the above stocks. ADI does look promising as this stock just recently broke above bearish resistance and gave a triple top buy signal at $47. We've talked favorably here about shares of RFMD as that stock had recently tested bullish support at $19.50 and began giving buy signals at $25. Sometimes its nice to let the institutions do the fundamental work, then simply take their research and test it against the market to see if the MARKET is buying it. If you can get both sides (fundamental and technical) saying buy, then all the better.

Look for technology stocks to be active today. Yesterday there was a lot of head scratching taking place early in the session when the economic data wasn't all that bullish, yet stocks seemed to find buyers for the bulk of the session. We still have Cisco Systems (NASDAQ:CSCO) earnings on August 7th and something tells me that stock will cast some type of vote in how things play out. The way that stock has been acting recently may give hint to a somewhat bullish outlook. If that ends up being the case, all of yesterday's action then makes sense.

Jeff Bailey
Senior Market Technician

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