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Stocks hold positive bias

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Stocks continue to hold gains as we approach the final hour of a trade-shortened session.

After a pullback near the unchanged level, the Dow Industrials (INDU) 8,647 +0.51% held above their still trending lower 50-day simple moving average at 8,614, but remain rather range bound and collared by a rolling 21-day SMA at 8,692. Dow breadth is decidedly positive with 23 stocks up versus 7 down.

Lagging the Dow's gains are shares of Honeywell Intl. (NYSE:HON) $28.79 -4.63% after Bloomberg reported that the company faces trial in lawsuit claiming that auto mechanics contracted lung disease by breathing asbestos dust while working on brakes. The five plaintiffs claim that the asbestos dust came from breaks made by former Honeywell unit Bendix Corp. The suit seeks $100 million in damages.

Dow gainers have shares of telecom service provider SBC Communications (NYSE:SBC) $26.03 +4.62% bolstering the North American Telecom Index (XTC.X) 400 +2.54%, while shares of semiconductor giant Intel (NASDAQ:INTC) $16.87 +2.48% has the Semiconductor Index (SOX.X) 305 +2.45% leading technology sector gains.

The NASDAQ-100 Index Tracking Stock (QQQ) $23.76 +0.54% is the most actively traded stock today on rather light volume of just over 58 million shares. A quick look at breadth in this rather narrow based group of larger cap NASDAQ stocks has gainers at 78 with 22 decliners.

Shares of NASDAQ-100 component Sun Microsystems (NASDAQ:SUNW) $3.36 -4.01% trades at a fresh 52-week low after yesterday's comments from Merrill Lynch saying that enterprise hardware company's are facing the following industry trends: 1) hardware is quickly commoditizing, 2) customer cautiousness forces vendors to focus on cost-cutting, 3) Linux and open source are for real, 4) Intel's (INTC) Itanium architecture could fail, 5) services storage are in the undershoot while operating systems and Unix servers are in overshoot, and 6) ore industry consolidation is likely. Merrill ranks suppliers base on their strategic positioning as follows: DELL, IBM, EMC, HPQ, SUNW, UIS and NCR.

Broader market breadth is slightly positive at both the big board and the NASDAQ. Breadth is positive at the NYSE by a 3 to 2 margin, while breadth is fractionally positive at the NASDAQ with 8 stocks advancing for every 7 stocks declining.

New highs versus new lows continues to hold up at the NYSE as 45 stocks hit new highs versus 17 stocks hitting new lows. While NASDAQ still acts like a soggy cardboard box as 48 stocks hit new lows versus just 21 stocks hitting new highs.

Jeff Bailey
Senior Market Technician
Option Investor


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