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Holding gains, but off best levels

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After a strong open, stocks are off their best levels of the early morning session as the Dow Industrials hang on to a 70 point gain, after trading higher by as much as 250 points earlier in the day. After 7 sessions of consecutive losses, it was perhaps time for a bit of bullish reprieve in this widely quoted market average.

The more volatile and tech-heavy NASDAQ-100 Index (NDX.X) 1,033 +2.10 continues to show some signs of improvement and leads the major market averages. Near-term resistance continues to loom just above at the 1,075 level and has been in place since June 21st.

Technology stocks are still looking for some type of leadership group and having a tough time finding it here. The Semiconductor Index (SOX.X) once again challenged retracement resistance at the 405 level, but sector bulls were not able to muster a sustainable move in the early going. It will most likely take a close above the 410 level to really get sector traders attention. Sector bellwether Intel (NASDAQ:INTC) $19.60 +6.75% and Applied Materials (NASDAQ:AMAT) $18.88 +2.6% are key stocks for traders to monitor.

As discussed in recent commentary, it would take a trade at $21 in AMAT to get this stock point/figure chart back on a "buy signal" and trigger a triple-top buy signal. With less than spectacular earnings from Intel last night, bulls just don't look overly aggressive today.

Bears need to advise caution. I'm seeing some comments in the market monitor that concern me. Talk that today's giving back of gains early in the session has some thinking the market is "irrationally exuberant." I'd suggest traders and investors get a better feel and understanding of the bullish % charts, which are KEY for understanding risk in the market.

To say that today's action is "irrational exuberance" is to say that the levels of bullish % back in September, which are very similar to levels found now, had bears thinking that the markets were "irrationally exuberant" just after the terrorist attacks.

Thoughts that the current market environment is "irrationally exuberant" sound to me like some complacency coming in from the bear camp.

Stay disciplined with your trading and don't get complacent. Constantly assess risk/reward in positions you hold and monitor your account risk.

Jeff Bailey
Senior Market Technician
Option Investor

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