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Stocks near session lows

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After a lower open, it has been a steady decline as stocks trade at intra-day lows. All of the major market averages are in the red with the Dow Industrials down 1.9%, S&P 500 off 2.06% and NASDAQ Composite lower by 2.6%.

Treasuries continue to see buying with YIELDS lower across the board. The benchmark 10-year YIELD ($TNX.X) stands at a 4.239% YIELD compared to yesterday's closing yield of 4.29%. Current shorter-term technicals have this bond YIELD sitting right on its 50-pd MA on its 60-minute interval chart. For equity bulls, key support needs to hold at the 4.15% YIELD level. Bears on the other hand would like to see YIELD break this level to signal further defensive posture.

Similar technicals are found in the major market averages on their 60-minute time frames and current action depicts that of profit taking.

Daily Interval charts still have the Dow Industrials (INDU) 8,888 trading above its 50-day simple MA of 8,800, S&P 500 (SPX.X) 944 above its 50-day MA of 926, NASDAQ Composite (COMPX) 1,386 above its 50-day MA of 1,367.

The lagging major market average never did see the smaller cap Russell 2000 Index (RUT.X) 403.65 trading its 50-day MA, which is still above at 413. Some market bears are pointing to this type of technical as proof the market can't sustain recent gains as some market theorists believe the smaller caps will lead an economic recovery as valuations should be relatively cheap to growth rates seen by smaller publicly traded company's.

Volume is rather light as we are better than half-way through the session. Volume on the big board is running a measly 640 million shares, while NASDAQ volume is approaching 1 billion at 906 million shares.

Market breadth is bearish on both major exchanges with decliners outnumbering advancers by a 2 to 1 margin at both the NYSE and NASDAQ.

New highs versus new lows is modestly bullish at the NYSE with 15 stocks hitting new highs compared to 11 stocks trading new lows. NASDAQ however shows a more bearish tone with 45 stocks hitting new lows versus 21 stocks at new highs.

Sector strength remains limited to the CBOE Internet Index (INX.X) 76.82 +1.42% and Gold/Silver Index (XAU.X) 63.92 +0.01% hovering near unchanged levels.

Sectors are weak across the board with standouts having the Semiconductor Index (SOX.X) -5%, Networking Index (NWX.X) -4.2%, Fiber Optic (FOP.X) -3.59%, Disk Drive (DDX.X) -3.79% and Wireless (YLS.X) -3.14% all leading today's decline.

From past observation and commentary, the Semiconductor Index (SOX.X) was perhaps the "weakest" technically as it relates to the 50-day MA. Traders may be monitoring retracement support at 332. Should that level be violated on a closing basis, round number and psychological support at 300 is possible and from there, the recent lows of 283.

Jeff Bailey
Senior Market Technician
Option Investor

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