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S&P 500 continues to hover at 1,082

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The S&P 500 Index (SPX.X) continues to hover around that 1,082 level defined by our retracement bracket, but stocks continue to hold tough and bulls don't seem to be giving in. One thing I am liking for some continued strength is that we're finally getting some selling in the bond market.

In the past couple of hours, we've seen the YIELD on the 10-year Treasury ($TNX.X) jump from 4.45% to 4.51% and the 30-year YIELD ($TYX.X) is now near unchanged levels at 5.303%. Cash from the sale of these bonds may begin finding its way to the stock market.

We're keeping an eye on currencies too. The US$ is showing fractional weakness against the major foreign currencies, so it doesn't look like money is leaving U.S. shores. Traders/investors need to remember that we have yet to see any type of U.S. military response to recent terrorist attacks so we need to keep an eye on currencies to try and sniff out any defensive moves by the markets.

Precious metals are showing some gains, but not a sign of defense at this point. December Gold (gc01z) is up $0.10 to $291 and has been hovering in the $287-$296 range since the terrorist attacks. December Silver (si01z) is up $0.03 to $4.66. Silver has been in more of an upward trend than has gold since the terrorist attacks, with the high of $4.76 on September 19th having found some selling.

Ten most actively traded securities are CSCO, QQQ, GX, SUNW, INTC, DELL, NXTL, ORCL, JDSU and JNPR.

Supply/demand play?

Recently, consumer have seen many car dealerships offering deals on 0% financing or attractive rebates to move some cars off the lots as the economy slows. Incentive from General Motors (NYSE:GM), Ford (NYSE:F) and DaimlerChrysler (NYSE:DCX) to the dealerships have helped, but some say it will come at the expense of the bottom line.

Subscribers know that I'm a big fan of supply and demand (point and figure charts) and that has me wondering if their might not be a way for bullish traders to make some money from this. Cars need tires right? Perhaps an increase in auto sales at the manufacturers expense doesn't necessarily come at the tire-makers expense. Yes, the tire maker has undoubtedly seen a drop off in sales due to slower auto sales, but I haven't seen any 0% financing deals on tires.

It's also the onset of winter driving here in the United States and at least 1/2 of the county might be looking at snow tires in the coming months.

Goodyear Tire - last nine months

Shares of Goodyear Tire (NYSE:GT) have been consolidating over the past 10 trading sessions. On September 24th, we saw volume spike to 2.4 million shares as the stock traded between $17.60 and $18.75. There's an old trader's axiom that says, "Volume proceeds price action." A trader/investor that believes in the scenario outlined above may want to test that scenario with a bullish trade after we see a close above the $18.55 level. During the consolidation phase, we have NOT seen a close above the $18.55 level so I'm thinking a close above $18.55 is bullish. Three day's ago, GT did set up an "inside day" and a trader long at $18.31 with a stop just below the previous day's low would still be holding long the trade here at $18.40. Should the stock be able to put together a move to $21.50, that would make for a nice 15% gain.

Jeff Bailey
Senior Market Technician
Premier Investor

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