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Stocks firm after Greenspan testimony

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Stocks remain firm, yet mixed as depicted by the major market averages as the Dow Industrials (INDU) trades down 25 points (-0.3%) at 8,612, while the broader S&P 500 (SPX.X) trades down a fraction at 916 (-0.1%) and the NASDAQ-Composite (COMPX) gains 22 points (+1.55%) at 1,404.

The tech-laden NASDAQ Composite and NASDAQ-100 Trust (AMEX:QQQ) $25.90 +1.40 remains bolstered as biotech giant Amgen (NASDAQ:AMGN) $34.30 +10.33% hovers near its session high of $34.63 and keeps the Biotechnology Index (BTK.X) 326.94 +6.52% as today's sector gainer.

Also showing gains today and rivaling the biotechs for some leadership is the Wireless Telecom Index (YLS.X) 48.72 +6%, boosted by gains in Nextel Communications (NASDAQ:NXTL) $6.45 +29% after the company reported Q2 diluted earnings this morning of $0.37 a share, which was a whopping $0.62 better than consensus estimates. Nextel (NXTL) said revenues rose 25.1% to $2.15 billion versus the $2.11 billion consensus. Nextel also raised guidance for domestic operating cash flow to at least $3 billion.

Both the biotech and wireless sectors have been beaten and bruised in recent weeks/months, and some positive news regarding two of the larger stocks in their respective sectors most likely has some sector bears covering some short positions.

Breadth is just about break-even as we roll to the last 1/2 of the trading day. With the NYSE Composite (NYA.X) 489.20 -0.31%, breadth is tilted slightly bearish with decliners outnumbering advancers at 159:151. Breadth over at the NASDAQ is positive with advancers outnumbering decliners by a 17:14 margin.

Stocks hitting new lows continue to be rather bearish with 88 stocks trading at new 52-week lows on the NYSE, compared to 16 stocks achieving new highs. NASDAQ has 190 stocks trading new lows versus just 16 new highs.

The above action still hints that bears are doing the bulk of the buying as the greater gains look to be coming from those stocks than recently trade 52-week lows where a bearish trader would be more apt to lock in a gain, then let it potentially evaporate on further short-covering.

Intel later tonight

After the closing bell, all eyes will be monitoring earnings and comments about forward outlook for semiconductor giant Intel (NASDAQ:INTC) $18.98 -0.69%. Analysts are looking for the company to earn $0.11 a share and a surprise either way could dictate trading tomorrow in technology stocks.

After being pummeled from the $26 level after its mid-quarter update on June6th to $22, the stock recently sank to a 52-week low on July 3rd at $16.26. Any "upside" surprise and a break above $20.18 could have shorts looking at risk to the $22 level. A disappointment may have the stock trying to retest its recent lows. As noted in past commentary, INTC's point and figure chart recently generated a double-top buy signal at $19.50 and turned the vertical count bullish to $26. While the stock remains longer-term bearish with trend above at $26, a trade at $16.50 would have the stock back on the defensive and looking weak yet again.

Recent action in the semiconductor group has the bullish % for this group reversing up into "bull alert" status at 17.18%, after recently falling to the 12% level.

The Semiconductor Index (SOX.X) 401.51 +1.6% is putting together some gains today, but looks to have found resistance at the 405 level, which we derived from a "fitted" retracement on this index.

Semiconductor Index Chart - Daily Interval

The SOX has managed to edge higher after yesterday's bullish gains, but look to be finding some resistance at our 61.8% retracement level of 405. Under current market conditions, we can imagine a more "neutral" stance toward the sector ahead of tonight's earnings from Intel (INTC) with shorter-term bulls perhaps locking in some gains, while longer-term bears from higher levels also reduce some risk in their accounts by locking in some gains in recent sessions, just in case INTC paints a rosy picture in tonight conference call when it releases earnings.

Jeff Bailey
Senior Market Technician
Option Investor

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