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Stock's higher despite weak economic report

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After hitting their intra-day lows after late-morning economic news, stocks have staged yet another reversal higher as the Dow Industrials (INDU) 8,471 +1.7% reverse an earlier 91 point deficit, with shares of banking behemoth JP Morgan (NYSE:JPM) $20.26 +6.74% now leading the Dow's gains on rumor that Bank One (NYSE:ONE) $39.19 +0.79% might be looking at JP Morgan as a take- over opportunity.

In past weeks, similar market rumors circulated regarding Bank One possibly acquiring FleetBoston (NYSE:FBF) $22.29 +1.27%.

Earlier today, the Leading Indicators Index was released and showed a decline of 0.2% for September. That report marked the fourth consecutive month of decline. Many economists currently feel this data shows a still sluggish economic environment, but not necessarily indicative of a double-dip recession. At least not at this point with the data currently available.

After reporting earnings that were inline with analyst's expectations, Dow component 3M (NYSE:MMM) $127.11 +1.5% has reversed an earlier loss and once again threatens to test 52-week highs near $130.00. The company remained cautious on its forward earnings outlook, citing higher advertising costs, the impact of the West Coast dock strike, traditionally slower Q4 seasonality, and a challenging economic outlook. The conglomerate cut its Q4 capex spending by $100 million to $900 million, seeing sequential weakness in its telecom business, and expects volumes to be up just 1% YTD. The deep cyclical said its Q3 debt levels rose $295 million over Q2 levels.

Key technicals in the Dow Industrials (INDU) have this major market index breaking above downward trends on both its point and figure chart, as well as its bar chart. Current upside to resistance looks to be the 8,700 mark. With Friday's Dow Industrials Bullish % ($BPINDU) from www.stockcharts.com at "bull confirmed" and 43.33%, there's still some internal strength that can be found to late August's 60% level and perhaps 70%, which would then be deemed "overbought."

Dow Industrials Chart - Daily Interval

Also breaking above longer-term downward trend is the S&P 500 Index (SPX.X) 895.75 +1.17% on its point and figure chart. The trade at 890 triggered a third "double-top buy signal" at 890 (first was at 855) and the trade at 890 has the SPX now above its bearish resistance trend. Here too, the S&P 500 Bullish % ($BPSPX) and Friday's reading of 37.6% has some upside to late August's 58% level and perhaps this past spring's more "overbought" levels of 70%.

Per our Index Trader's Wraps at OptionInvestor.com, the NASDAQ- 100 Index Tracking Stock (AMEX:QQQ) $24.24 +1.8% has moved into the $24.21-$25.45 zone of retracement. Bullish traders looking to give some room to a bullish trade would follow with a stop just below today's low of $23.30, or take some partial profits off the table at current levels. Index heavyweight Microsoft (NASDAQ:MSFT) $52.52 -1.18% continues to trade lower on the heels of chief executive Steve Ballmer's comments from earlier this morning, regarding the company's recent jump in quarter revenues, citing that increase as a "one-time" occurrence and not necessarily an ongoing rate of increase to top-line performance.

Jeff Bailey

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