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Stocks continue gains in early session

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Could it be that stocks are "predicting" some good news near term? Last week, investors were hammered with bad economic data, but stocks held relatively firm on the week. Today we're seeing some upside present itself ahead of today's after-market earnings from Cisco Systems (NASDAQ:CSCO) and this week's FOMC meeting, where the Fed may give the market further interest rate cuts.

S&P 500 Index Chart -

The S&P 500 (SPX.X) chart shows a rather sharp move above the 50- day simple moving average of 1,082 and this sharp move may be enough for bulls to get some continued follow through to our 50% retracement level of 1,126. To get there, the market will undoubtedly need some bullish comments out of CSCO tonight and a positive response from the FOMC meeting tomorrow. Perhaps one of these two near term closely monitored "events" are what held things together last week.

THQ Inc. Chart -

On Friday, we were scouring the software sector for stocks that looked strong. One that came to our attention in the intra-day commentary was shares of THQ Inc. (NASDAQ:THQI). We didn't like chasing stocks that were up 7% in a single session, but thought the point and figure chart and triple-top at $55 was worth a bull's attention and possible 1/2 position long. Traders have been rewarded near-term as the stock is currently up 5% after hitting an early session high of $59.66. Retracement gives hint we're at the upper end of a range, but I like the MACD kicking higher and above zero level. Retracement of 100% was put in place back after a major run higher and MACD was rolling over. Trader's can move stops up to break even, but look for stock to pop above $60 and then sell into strength if shorter-term type of trader.

Jeff Bailey
Senior Market Technician
Option Investor

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