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Tight range into the weekend

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Stocks continue to hold a tight range as depicted by the major averages with the Dow Industrials still holding with a 100 point decline at 8,279, as the S&P 500 Index (SPX.X) remains unchanged at 886. Even the more volatile NASAQ-100 Index (NDX.X) 919 +0.51% and actively traded QQQ $22.82 +0.17% has provided little volatility in the afternoon session.

I've had a tough time finding any really compelling entry points for trades today as it relates to options and perhaps this is indicative of other traders ahead of the weekend, which just don't want to commit funds to stocks (long or short) and taking a wait and see approach until Monday morning.

With stocks holding up rather well on a broader scale (excluding JDEC, HON, GE, LU) bears may be sitting some bids on the thought of any "lack of terrorism" or "attacks on Iraq" might find the markets with a slight bid early next week and then looking for more attractive entry points.

In last night's Index Trader's Wrap, we discussed one subscriber's observation of some potential head/shoulders tops in the Dow, SPX and OEX and other traders have commented today that they see similar pattern in many stocks they're watching. As it relates to today's action, the ascending necklines continue to hold as support, which most likely keeps bears rather cautious as mentioned in last night's wrap.

However, traders that are monitoring some stocks with similar patterns that do get the break of the neckline, then a partial bearish position to the downside is warranted, but an understanding of how helpful a follow through break lower in the major indexes would help the cause. Kind of like a sledge hammer helping to drive the post (stock) into the ground.

About all I could come up with this afternoon was a day-trader's short in shares of Agilent (A) $14.79 -3.14%.

Agilent Tech Chart - 60-minute intervals

It's been a rather slow afternoon and sometimes I'll look at some 60-minute charts of stocks looking for what might be a near-term level for a quick shift in supply/demand. Agilent has shown some little "pennants" from the 60-minute charts and when the stock has been in a very short-term downward trend, breaks to the downside have been good little day-trades to the downside as the stock seemingly seeks out a daily low into the close. While the trending higher 50-pd presents some support, it appears a willing seller has been sitting on the stock this afternoon at the $15.00. Thought here is if he/she is a big seller and wants to get out of the stock before the weekend, then the little break of the pennant at $14.78 might provide a downside move to a target of $14.25.

Jeff Bailey
Senior Market Technician
Option Investor

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