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Stocks holding gains

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This morning's stronger than expected labor report has stocks holding onto the bulk of the morning's gains as the Dow Industrials (INDU) trades near its session high at 10,643, the S&P 500 (SPX.X) continues to battle with resistance at 1,175 and currently trades 1,170, while the tech-heavy NASDAQ Composite (COMPX) breaks above its 200-day and 50-day moving averages of 1,900 and breaks higher at 1,933.

Leading the NASDAQ charge are shares of Applied Materials (NASDAQ:AMAT) $54.16 +5.47% after recent breaking a triple-top at $50. AMAT's gains are also bolstering bullishness in the Semiconductor Index (SOX.X) 636 +4.2% and finds a near-term technical break above retracement at $620.

Semiconductor Index Chart - Daily Interval

The SOX.X has broken above my 80.9% retracement level of $619 and that should have some bears in the sector looking for cover. With the bullish % reading from Dorsey/Wright and Associates for the semiconductor sector at 56%, the group was not yet at "overbought" levels and could still push higher with bulls targeting the 685 level. The next hurdle to clear will be near the 657 level, a relative high dating back to August 2, 2001.

Sector weakness is found in the Gold/Silver Index (XAU.X) 60.91 - 2.47% as "fears" of banking failures may be subsiding in recent sessions with the stronger-than-expected economic data. Today's action has the XAU.X breaking just below its 50-day moving average. Looking for support at the 58 level here. With little sign of inflation the sector also is under some selling pressure.

However.... that doesn't mean inflation wont be a concern in the future. I've got my eye on this group and we did turn more "neutral" and suggested bulls in the group tighten up stops in the mid-to-high $60 levels. Now looking for a pullback and entry points near $57 level and buy from the late-comers that will most likely be looking to sell for a loss if they didn't use disciplined stops.

While the broader market is trading bullish today, I'm having a tough time finding any stocks other than General Electric (NYSE:GE) that offer favorable risk/reward entry points. GE continues to find sellers just under the $52 level and this action may hint that buyers just aren't being very aggressive. This could be an important observation for those bulls holding some stocks in recent weeks that have made some nice runs higher and looking short-term overextended.

Jeff Bailey
Senior Market Technician
Option Investor

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