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Stocks off highs and now mixed

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Traders are once again experiencing some volatile intra-day trading as the major market averages are well off their highs and showing mixed results.

After jumping to an intra-day high of 8,854, the Dow Industrials (INDU) 8,718 -0.28% have given back roughly 136 points after today's release of the Philly Fed Index showed declines in the manufacturing sector, marking the first decline for this index since last December.

The August Philly Fed Index, fell to negative -3.1 from July's +6.6 reading, revealing declining factory activity in the area. Economists were looking for a much more robust reading 7.8.

The new orders index fell to -2.7 from 6.6.

The Philly Fed report differed markedly from this morning's 09:15 AM EST Industrial Production numbers for July which was a bit better than expected, showing an increase of 0.2% versus the consensus of unchanged. June Industrial Production was revised down a tenth to a +0.7% increase.

Economists remain rather uncertain on what this economic data is saying and appears to still have investors mirroring that uncertainty. Economists cite that a lull in manufacturing doesn't necessarily a sign of double-dip recession. Throughout the early 1990's recovery, the economy grew at a 2-3% pace but the manufacturing sector struggled, with the ISM sometimes falling back below the 50% and the Philly Fed Index actually plunging to -18.8 in December 1991, a quarter in which the GDP grew 2.2%.

Intra-day internals are interesting as we see some similarity to past trading session as it relates to internal breadth and today's action really ties in with this morning's 09:00 Update and comments regarding the Bullish % as it relates to the broader NYSE and NASDAQ Composite. Currently, NYSE breadth is positive with 18 stocks higher for every 13 lower. NASDAQ breadth is negative with 14 stocks higher versus 17 decliners.

Some improvement is found in the new highs versus new lows. On the NYSE 32 stocks have achieved new highs versus 46 stocks trading new lows, while NASDAQ shows 39 stocks at new highs compared to 88 stocks hitting new lows.

Sector gainers currently have the Dow Jones US Home Construction Index (DJUSHB) 322 +4.14%, Oil Service (OSX.X) 86.32 +4.4%, Gold/Silver Index (XAU.X) 66.53 +2.9% and Retail HOLDRS (AMEX:RTH) 80.34% leading gains.

Sector weakness is found in the Networking Index (NWX.X) 120 -2.74%, Fiber Optic (FOP.X) 36.20 -2% and Airline Index (XAL.X) 40.61 -1.83%.

Jeff Bailey
Senior Market Technician
Option Investor


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