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Semiconductor and Gold stocks post gains

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With the broader-market averages showing red this morning, the Semiconductor Index (SOX.X) 382.56 +1.42% and Gold/Silver Index (XAU.X) +0.93% are showing early morning relative strength.

While weak at the open, I mentioned semiconductor stock NVIDIA Corporation (NASDAQ:NVDA) $20.27 +1.85% that might be starting to show a near-term shift in supply/demand and the stock gives some bears an "eye popping" sign of strength again this morning. Also showing some semiconductor-related strength are shares of Intel (NASDAQ:INTC) $18.24 +1.38%, which also shows its point and figure chart having given a "buy signal" at $19.50 last week.

Late Friday night, we noted in the market monitor that the NASDAQ-100 Bullish % ($BPNDX) had shown a bit of internal strength as this indictor slowly crept higher at 21% bullish from Thursday's reading of 15%. Helped in part by Friday's "buy signal" in NVIDIA (NVDA) at $21.

Of the major market averages, the NASDAQ-100 Index (NDX.X) 996.20 -0.46% shows a lesser amount of loss than the broader S&P 500 Index (SPX.X) 905 -1.74% and gives some hint that market makers continue to cover some bearish inventory on weakness, using the more bearish market sentiment to provide liquidity to cover.

Today's sector loser has the Utility Index (UTY.X) 255.73 -6.17% getting hammered after Morgan Stanley downgraded Duke Energy (NYSE:DUK) $20.30 -17.89% to "equal-weight" from "overweight," saying they feel it is difficult to recommend over weighting DUK in the near-term due to the 4 pending federal investigations regarding "round trip" energy trades.

Duke Energy Chart - $1 box

Since it was discovered that Enron (ENRNQ) $0.09 was performing some "round trip" trades in its energy trading business, the SEC has started looking into other companies where such trading may have been common place. In past commentary, we sniffed out Aquila (NYSE:ILA) $6.85 -3.65% and Williams Co. (NYSE:WMB) $5.51 -3.16% as good short/put candidates. I believe we even mentioned Duke Energy's (DUK) triple-bottom sell signal as a sign of weakness back in June. Today's trade at $23 has the stock achieving the point and figure bearish vertical count of $23, while the trade at $23.87 had the stock achieving Professor Davis' study of the triple-bottom-sell signal being profitable for the bearish trader 93.5% of the time, for an average gain of 23% in 3.4 months time. From $31, a 23% decline would have had a bear targeting $23.87 and that was also achieved this morning.

As such, subscribers short/put shares of DUK can institute some risk management in their trades, lock in partial gains here as targets are met.

I will note that EP exceeded its bearish vertical count of $28 and has yet to generate any type of "buy signal", as has WMB (bearish count $11.50) and Aquila (ILA) (bearish count $22).

Very powerful sector/business association that has really shown up in the supply/demand charts.

Almost just the opposite of what we've started to note in the Semiconductor sector in the past week! Time will tell.

Jeff Bailey
Senior Market Technician
Option Investor

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