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Stock futures fractionally red

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Stock futures are fractionally red this morning as S&P futures trade lower by 1 point to 1,143. NASDAQ futures are down 4.5 points at 1,550 and Dow futures are lower by 5 points at 9,900.

Bond YIELDS are snapping higher this morning and bond bears are at it again. YIELDS on both the 10-year ($TNX.X) and 30-year ($TYX.X) are moving above the recent highs found late last week and yesterday, giving hint that cash is coming out of the longer- end maturities. In my opinion, this is what equity bulls want to see.

YIELDS are also higher in the shorter maturities this morning. The 13-week ($IRX.X) is at 1.92%, while the 5-year ($FVX.X) YIELD is at 4.259%. Neither of these bond YIELDS have broken above last weeks YIELD highs at this point. This perhaps gives hint that there's still some "hesitant" money staying in the bond market and looking for perceived safety.

Bullish percent updates

The NASDAQ-100 bullish percent ($BPNDX) remains in "bull confirmed" status at 75%, but is also the most overbought of the market indexes. After having recently shown 78% bullish, yesterday's action had a net loss of 3 stocks in the 100 giving a sell signal on their point/figure chart. Would be "cautiously" bullish here, but avoiding stocks that look overextended on their charts.

The S&P-100 bullish percent ($BPOEX) is also in "bull confirmed" status at 62%. Yesterday's action saw just 1 stock revert back to a sell signal on its point/figure chart. In the past two years, the S&P-100 bullish percent reached the 70% level, only to turn level. 70% or higher is considered "overbought" on the bullish percent charts. In early October, the S&P 100 bullish percent reached the 16% level before the recent turn higher. Would be cautiously bullish here.

The broader S&P-500 bullish percent ($BPSPX) stands at 61% and remains "bull confirmed." In May this indicator reached a level of 74% bullish before following the NASDAQ-100 and narrower indicator lower to a level of just 16% bullish. On November 14th, this index turned "bull confirmed" and would be the area for equity bulls to focus the bulk of their efforts. My stance here would be "bullish" and be looking for stocks that are giving "buy signals" on their point/figure charts and look to be breaking out of bases.

The broader NASDAQ-Composite bullish percent ($BPCOMPQ) is in "bull alert" status at 48%. Yesterday's action saw a 2.3% gain is the number of stocks giving buy signals. It would take a reading of 58% to achieve the "bull confirmed" status and achieve a higher level of bullishness than found in June of this year, before the long reversal lower to early October's reading of 22%. I like to combine the NASDAQ-100 bullish percent along with this indicator to get a good feel for both the bigger capitalized and smaller capitalized stocks that we find in the NASDAQ Composite. As long as the NASDAQ-100 bullish percent remains in a column of X's, I'd be "bullish" the NASDAQ, but would prefer looking for stocks that are breaking out of bases.

Finally, the "true market" and that of the New York Composite bullish percent ($BPNYA). Yesterday, this market achieved the "bull confirmed" status with 44% of stocks now showing a supply/demand "buy signal" on their charts (according to www.stockscharts.com). This is a level not seen during stockcharts keeping of this indicator.

Domino theory in grocers?

On November 14th, grocer Whole Foods Market (NASDAQ:WFMI) reported that pro forma income rose 17% in its September quarter and the stock jumped 8% the next day to a "wholesome" 52-week high. This past Friday, Lehman Bros. cut their rating on the stock to "buy," but that didn't keep the shares from surging another 6% yesterday to yet another 52-week high of $43.14 and has us rolling up retracement as the stock continues to defy gravity.

While WFMI has my attention, another stock in the group looks equally interesting and one that might benefit near-term from a potentially unfolding domino theory in the grocery sector.

Shares of Kroger (NYSE:KR) have been trading sideways to fractionally higher since a recent relative low dating back to September 21st and hanging around a sideways trending 200-day moving average. An action point for bulls looks to be the $25.31 level and a close above that level could spark a rally to the $27.93 level. Should similar action take place in KR and traders find the stock breaking above the $28 level, that would then have the point and figure chart giving a quadruple top buy signal at $28, with no overhead supply nearby.

Kroger Company Chart -

Bullish traders looking to sit on the sidelines in technology might find some near-term upside action in shares of Kroger (NYSE:KR). The relative strength chart of KR vs. the S&P 500 (SPX.X) is on a buy signal, but currently in a column of O's. The point/figure chart of KR shows the stock sitting right on its bullish support trend at $22. Short-term traders can look long on a trade at $25.31, with a stop just below yesterday's low of $24.35, with a bullish target of $27.75. Longer-term investors will look for entry above the $25.31 level and then watch the stock for a trade at $28, which would be a quadruple-top buy signal, putting the point/figure chart back on a buy signal, with a preliminary longer-term bullish price objective of $39. First sign of trouble on the point/figure chart would be a trade at $21, which would be a double-bottom sell signal below bullish support.

Jeff Bailey
Senior Market Technician
Option Investor

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