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Novellus earnings have tech coming to life

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Last night's earning's report from semiconductor equipment maker Novellus (NASDAQ:NVLS) $52.86 +4.8% has the semiconductor sector and broader technology finding buyers this morning as the NASDAQ- 100 Trust (AMEX:QQQ) $34.94 jumps 3.4%.

NASDAQ-100 Trust (QQQ) Chart - Daily Interval

Yesterday's break above Friday's "inside day" looks to have triggered some extensive short covering and last night's earnings report out of Novellus (NVLS) has some upbeat news in the technology area. These combined events now has some bearish traders assessing risk to the $35.75 level near-term and most likely covering some positions as the QQQ looks to have firmed near retracement support at the $32.53 level.

Bulls looking for entry points aren't going to find any good ones today and may be establishing just partial positions currently. With MACD beginning to round out, one could envision MACD crossing above its signal should the QQQ get above the $35.75 level and then perhaps look for a push further to the $37 level, near our 38.2% retracement level.

We're also seeing a good round of selling today in the U.S. Treasuries. Earlier this morning (after trading began here in the U.S.) the Bank of Canada hiked their overnight lending rates by 25 basis points to 2.25% and that has put pressure on Treasuries. The action by the Bank of Canada is the first major bank to raise rates since the September 11th terrorist attacks and has many now believing that rate hikes will soon follow among other major banks in various countries.

This undoubtedly has bullish stock investors reading into things with the thought that global economic growth is starting to present itself. This is something we've mentioned multiple times since the Treasury YIELDS have been edging higher in recent months. Today's move by the Bank of Canada may be the first in a more prolonged policy of tightening should economies continue to firm and show some signs of growth.

With some of this morning's actions, I did mention in the market monitor that bears need to be careful in here. I did decide it best to close out any short/bearish trades (not option related) in share of Applied Materials (NASDAQ:AMAT) $54.22 +5.4% from last weeks profile as short/put in the market monitor near the $51 level. Applied Materials (AMAT) is scheduled to split its shares 2:1 later tonight and the Novellus (NVLS) earnings is just to strong for me to want to hold the stock short prior to this split.

Jeff Bailey
Senior Market Technician
Option Investor

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