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Stocks trade higher despite lack of confidence

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Stocks had a tough time finding their gear earlier this morning as it looked like many traders were expecting the worst from today's consumer confidence numbers. When the Conference Board numbers were released at 10:00 EST, the number revealed that consumers had in fact become less confidence. Today's reading of 97.6 was well below economists' expected reading of 108. Nonetheless, stocks did see some selling briefly, but then powered higher.

The Dow Industrials went from down 28 points to up 66 to 8,669 and have taken out yesterday's intra-day high of 8,649. Telecom components AT&T (NYSE:T) are up 3% to $17.55 and SBC Communications (NYSE:SBC) are up 2.8% to $46.35. Both are stocks we've commented about recently in the "hot list" on OptionInvestor.com and in the daily commentary as stocks for bullish traders to be trading/investing in for favorable risk/reward characteristics. Both stocks have been holding their lows in past weeks and look to have some sponsorship.

SBC Communications (SBC) - last ten months

Shares of SBC have cleared the 38.2% retracement level at $46.25 and now have bullish traders eyeballing the 50% retracement level at $48.69. At that point, we'd expect some covered call writing by institutions to bring in some premium and raise some cash.

I'd still opt to try and stick with some of the bigger named Dow components at this time like an AT&T (NYSE:T) or SBC Communications (NYSE:SBC) in the telecom group. There are undoubtedly a lot of traders/investors that got caught up in the decline that are looking to sell rallies in stocks that got hammered, where they can reduce their portfolio risk by selling strength. My thoughts are that stocks like AT&T and even SBC have many traders/investors setting more comfortable as these stocks are either higher than they were before the terrorist attacks in the U.S. or are very near those levels found before September 11th. These then perhaps become "less worrisome" positions that traders/investors are less likely to sell as they've held up well relative to the market.

Jeff Bailey
Senior Market Technician

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