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Banks decline while Semiconductors try to bid

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For the first time in recent memory, technology stocks as depicted by the NASDAQ-100 Index (NDX.X) 814.47 +0.28% are trading in positive territory, while the Dow Industrials (INDU) 7,354 -1.96%, S&P 500 (SPX.X) 784 -1.76% and S&P 100 (OEX.X) 395 -1.75% trade lower.

In recent months, weeks and days, it has been the tech-heavy NASDAQ that has lead declines.

Tech sectors has the Semiconductor Index (SOX.X) 218.67 +1.3% showing an early morning gain of 223.88, which was just shy of yesterday's high of 224.56. While this move is near-term encouraging for technology bulls, the rally after a 52-week low hints more of short-covering and locking in of gains by bears than it does anything else. It does make some "sense" perhaps as to yesterday's market monitor comments that according to Dorsey/Wright and Associates, their sector bullish % shows the semiconductor bullish % at just 8% and very "oversold." As a measurement of sector risk, BEARS carry the bulk of the risk and most likely has some institutional bears taking some profits off the table.

Yesterday's bullish financials are all pulling back today with the S&P Banks Index (BIX.X) 241 -2.7%, KBW Bank Index (BKX.X) 621 -2.75%, Securities Broker/Dealer Index (XBD.X) 328 -2.29% and S&P Insurance Index (IUX.X) 230 -2.52% giving back half of yesterday's gains.

This action weighs on the S&Ps in the early going and all eyes will be on some of these financial sectors to see if they can hold the lows found earlier in the week. If not, downside action most likely would be a signal that the broader market averages haven't found their bottom either.

The ability for some of the technology sectors to find some marginal gains today is hint that bears are looking to lock in some gains. This is not a bad idea. While the market internals as depicted by the bullish % charts are very weak, they are also at more "oversold" levels on a historical basis.

Airlines as depicted by the Airline Index (XAL.X) 28.18 -5.14% have broken to another 52-week low, while the Utility Index (UTY.X) 217.25 -4.3% does the same for a second consecutive session. The catalyst for the lower move in the utilities today is Northeast Utilities (NYSE:NU) $12.99 -14% guiding lower on earnings.

Jeff Bailey

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