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Market Updates

Stocks remain near session highs

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Stocks have held onto the bulk of this morning's gains as Fed Chairman Alan Greenspan told Congress that the economy is beginning to recover. "There have been signs recently that some of the forces that have been restraining the economy over the past year are starting to diminish and that activity is beginning to firm," said the nations chief central banker.

Current testimony and bullish undertones have many now feeling that the Fed will most likely put further rate cuts on hold. Treasuries are seeing modest selling as the YIELD on the 30-year rises to 5.463% and the 10-year YIELD ($TNX.X) trades above my key 5.0% level at 5.029%. The shorter end treasuries are also seeing selling with the 5-year YIELD ($FVX.X) higher at 4.328% and the 13-week ($IRX.X) higher at 1.68%. I consider the current bond market action as BULLISH for stocks.

Broader technology strength is being found today with the GSTI Software Index (GSO.X) trading strong with a 3.04% gain. In this morning's market monitor, I felt equity bulls could trade bullish in shares of Microsoft (NASDAQ:MSFT) at the $64.50 level based on bullishness found in the group. I liked the trade as the stock is sitting right on top of bullish support trend and offers a tight stop just under yesterday's low of $63.24. My feeling here to is that this stock needs to perform if the NASDAQ-100 Trust (QQQ) and broader tech are truly set for a rebound. I think bullish traders can limit their downside risk in shares of MSFT and have good near-term upside to $67 for traders.

For technology traders, I still think bulls need to be shorter- term focused with their bullish trades and willing to pay themselves for their efforts when stocks rally to their targets. Despite yesterday's 2.5% gain in the QQQ's, the NASDAQ-100 bullish % had a NET LOSS of 1 stock to a sell signal and further internal weakening was found.

Jeff Bailey
Senior Market Technician
Option Investor

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