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Dow Industrials build gain to 300 points

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The early morning reversal looks to be holding as the Dow Industrials (INDU) 8017.95 +4% leads the major market averages higher and currently looks to test some resistance from the September 21, 2002 low of 8062.34 as a key near-term level of resistance. Should the Dow Industrials be able to build further gains, then bulls might be able to make a push for the 8,430 level.

Dow Industrials Chart - Daily Interval

The bond market is close, but the "riskier" 30-year Treasury YIELD ($TYX.X) 5.3% finished right near its session high close and hints of willing sellers into the close of that market. Should the Dow Industrials (INDU) be able to push higher and finish above their September 21st relative low, this could have bears a little jittery tomorrow morning as risk is assessed back to our 61.8% retracement level at 8,430.

Dow gains are being boosted by shares of JP Morgan Chase (NYSE:JPM) $23.28 +15.93% and Citigroup (NYSE:C) $29.05 +7.59%. Both stocks were hammered earlier in the week on concerns of both company's involvement regarding Enron. As noted yesterday, both stock achieved their bearish vertical counts and downside probabilities from Professor Davis' study, and a nice rebound is found today.

Shares of Wal-Mart (NYSE:WMT) $47.50 +5.12% have started to pack on some weight had begin to have bulls looking for any type of pullback below the $46 level and bullish entry points, with stops firmly set it place at $43. Half positions can be taken here as the stock recently achieved its bearish vertical count of $46, but stops at $43 on the underlying stock are recommended.

While not a Dow component, HMO stock Oxford Health (NYSE:OHP) $40.94 +4.25% is at a session high. This was a stock I profiled for bulls near the $40 level this morning with a short-term trader's target of $43. Bulls need to see some follow through in selling from the Treasury markets today, but I will note from my attempts to buy stock at the $40 level, there didn't seem to be a lot of size at that level. More risk averse bulls that took the trade can raise stops from profiled $38 to $39 near-term.

Shares of International Business Machines (NYSE:IBM) $69.10 +3.05% gave a spread-triple-bottom sell signal this morning at $66 and this is a stock I profiled for 1/2 short/put positions. I'm noting here that the stock is lagging the Dow's gains on a percentage basis as it looks like overhead supply is helping hold the stock back a bit. Should we not see a follow through in Treasury selling tomorrow morning, bears should still be in decent shape here.

Jeff Bailey
Senior Market Technician
Option Investor

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